just On Call - CAGNY 2013: SABMiller CEO talks up local approach in global markets
SABMiller's Graham Mackay will step down later this year
SABMiller has prospered by taking a “bottom-up” approach in local markets instead of “force-fitting” a standard corporate model, according to the group's outgoing boss.
CEO Graham Mackay, who steps down from the role this summer, said that the company has a footprint in favour of emerging markets, which had come about though the group's ability as “turnaround practitioners” for brands. “Our approach is essentially bottom-up,” Mackay told the Consumer Analyst Group of New York Conference in Florida yesterday (19 February).
“It's an approach that assesses what local people really want ... rather than force-fitting a standard approach from a global HQ. For us, this means renovating businesses and products with a strong focus on cost efficiencies.”
On emerging markets, Mackay said there is the opportunity for per capita consumption to grow “well beyond current levels” as more consumers turn away from informal to commercial brands. He added: “Consumers' tastes are staying resolutely local and, in some situations, becoming even more so, as living standards rise.”
On beer pricing in the US, where SABMiller runs a JV with Molson Coors, Mackay admitted there is a lot of “complexity” as the growth is all at the top end of the beer market. “Prices are rising because of mix,” he said. But, he added: “There is some action with the introduction of more affordable crafts in the above premium space. And, that may change the mix dynamics, if they take off any further.”
Mackay, who will be replaced as CEO by Alan Clark, also reflected on the reason for the high level of M&A in the beer sector in the last 15 years. He said that buying brands, instead of building them, was always a better approach. “Mounting a ... beach-head attack on a new market with mainstream style beers has always been extremely unsuccessful," he said. "Beer is capital intensive, and you need high utilisation through the plants to compete. If you simply enter in a full frontal attack, it's a very expensive thing to do. Because of that, M&A has been the dominant form of entry.”
However, Mackay remained downbeat about Europe's on-going prospects. "There is hard to see much light at the end of the tunnel,” he said. “It's not a volume problem anymore, it's a price compression problem, with consumers willing to trade down and that being exacerbated by the discount retail model. I would like to think we have hit some kind of low, or we will hit it this year, but I can't guarantee it with any real confidence.”
Earlier this month, SABMiller agreed to acquire China's Kingway Brewery for US$864m.
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