COMMENT: SABMiller puts its house in order
SABMiller hopes to boost Miller Genuine Draft, Pilsner Urqell, Peroni and Castle sales in the UK by creating a new company that will focus exclusively on these four premium beers. The beverages have the right flavour profile to succeed - and UK premium lager sales are growing - but the market is so competitive that SABMiller may still find it hard to make headway on its own.
UK-based brewer SABMiller has announced plans to create a new beer distribution and marketing subsidiary in its home market. The new division, Miller Brands, will take over the rights for Miller Genuine Draft and Peroni Nastro Azzuro from their current UK owner, Scottish & Newcastle. It will also distribute and market SABMiller's Pilsner Urquell and Castle brands.
Although SABMiller is headquartered in London, it has not historically been involved with UK brewing. The low-price Miller Beer brand is popular in Scotland, while Miller Genuine Draft has had some sales success as a premium US beer, rivaling Anheuser-Busch's Budweiser. Meanwhile, imported Pilsner, Peroni and Castle have acquired niche status among connoisseurs.
Creating Miller Brands should allow SABMiller to improve its UK marketing strategy. This should enhance sales, as there is strong demand for new premium beers - especially ones consumers perceive as different, but which do not have a challenging or overly exotic taste profile. Miller Brands' four beers fit this bill well: they are all clean, smooth lagers, differentiated more by their ethnic origin than their flavor profiles.
But while the UK beer market is one of the world's largest, it is also a tough environment in which to make money: on-trade sales of beer are declining, while prices in the growing off-trade premium beer market have plummeted as brewers attempt to dislodge InBev's Stella Artois from the number one slot.
SABMiller may run into problems in the on-trade in particular. Within this sector, the major brewers can provide pub companies or landlords with a package including bitter, regular lager and premium lager, which both saves the landlord effort and guarantees volume for the brewer. Since SABMiller can only offer premium lager brands, there will be less incentive for pubs to grant its drinks bar space, no matter how appealing they may be in terms of taste and branding.
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