SAB Miller Current Strategic Position - Case Study Example

SAB Miller Brewery SAB Miller Brewery Current Strategic Position Key Trends The year looks promising for SAB Miller Plc in the UK market as statistics reflect growth of its overall performance in the region. In comparison to the overall beer market, Miller Brands UK’s (MBUK) lagering rose by 5 percent. Now British fans of Italian Peroni Nastro Azzuro buy the new 250ml bottle of Piccola, a drink aimed at pre-dinner occasions. Piccola is also being showcased at the House of Peroni, a curated collection of Italian design, art, photography, music, and fashion (Drink Stuff South Africa 2014). The managing director of Miller Brands UK (MBUK) is confident about the success of Peroni as he states that consumer preferences for their beer demonstrates their taste for great beer and amazing experiences. Earlier in the same year, SAB Miller also introduced its freshly brewed, unfiltered, and unpasteurized beer, Pilsner Urquell, in the UK market. Being the first international unpasteurized drink, SABMiller held several tasting events where people were familiarized with the new taste of beer which was being offered at select pubs only. With its innovative strategy, SAB Miller is tapping emerging markets with its novel offerings, including Peroni which attaches occasional experience and Pilsner Urquell, which brings a new taste to the British beer fanatics. Trends across the UK and Europe from 2012 show pleasing performance by Peroni which helped buck the trends with volumes increasing by 8 percent. A report published in 2012 also showed that sales had gone up by 10 percent with 12 percent rise in the first half profits (Wright 2012; Goodway 2012). In 2013, an agreement between SAB Miller and Kopparberg provided MBUK will the license to sell Kopparberg’s fruity ciders in regions where the Swedish cider making company did not operate yet. This provided MBUK will the exclusive license to distribute the Swedish ciders to the regions in which it operated thereby offering British consumers with new alcoholic products (Mileham 2013). Today, Peroni sales figures from 2014 represent the success of the new Italian market offering with a sales hike of 9 percent observed in the UK. Although the quarter had been disappointing in Europe for SAB Miller, the UK did fairly well in terms of sales performance raking in huge revenues with the sale of Peroni Nastro Azzuroand and an added 3.5 percent increase in the annual earnings (Yeomans 2014; Hwang 2014). An important reason for their growing success in the current year, as SAB Miller’s CEO affirms, is due to their strategy to enter emerging markets with novel market offerings that are premium yet affordable. Competitive Landscape Being the largest brewing company in the world, SAB Miller Plc has its own competitors worldwide among which the largest include the Japanese Asahi Breweries Ltd., Belgian Anheuser-Busch InBev SA/NV, and the Danish Carlsberg A/S (Hoover 2013). Figures for net income, revenues, and market capital display the Belgian brewery Anheuser-Busch InBev SA/NV outperforming SAB Miller Plc (Yahoo Finance 2013). However the landscape in the UK is pretty less because of MBUK’s good performance in the region as compared to its Latin American, European and African counterparts. The possibility of new entrants competing SAB Miller on a comparable level is not likely due to its large consumer base and an established market with superior brand equity among its customers, particularly in the British region. Therefore, all in all, SAB Miller faces tough competition from its European competitor including the Danish and Belgian breweries mentioned. Also, the taste and preference of individuals may have a great impact on SAB Miller’s sales and revenues as people shift from beer to wines and other alcoholic spirits thereby hurting its annual income. PEST Analysis Political Having its presence internationally, SAB Miller is exposed to global political trends which may impact its operations such as licensing, documentation, and so on. Domestic and global operations have various legalities that must be fulfilled with changing political and legal landscape. SAB Miller often observes partnerships and deals with foreign brewing companies for which the political landscape becomes a critical factor for success or failure. Economic Due to its international operations, SAB Miller cannot escape the international exchange rate which is highly dynamic in the current financial environment. With products like Pilsner Urquell, Fosters and Grolsch, SAB Miller was expected to rake in revenues of around GBP 15.4 billion however experts had their eyes on the operating margin expansion due to increased raw material costs, advertising costs, and other central costs (Chiou 2011). Although the UK economy showed poor performance in the London FTSE index, SAB Miller Plc managed to increase its full year earnings by 3.5 percent. With its 200 brands of beer, SAB Miller continues to diversify and innovate adding to its current portfolio of high end premium beer which is now being targeted towards consumers with low affordability thresholds (Wiki Invest 2010). Social The consumption trends in the UK have been pleasing for SAB Miller as consumers are enjoying the Pilsner Urquell as well as the Peroni. SAB Miller bucked the trend with its introduction of new market offerings suiting the taste and preferences of beer fans. SAB Miller is tapping the consumer preferences of beer taste in order to target newer market segments thereby helping it to expand its market and share of consumer’s wallet. Trends in population growth implies an increase in the rate of beer consumption hence providing newer opportunities for SAB Miller Plc. Technological Technology is an important factor in assisting SAB Miller remains the market leader in beer brewery. Technological advancement has allowed SAB Miller to cut down inefficiencies from its various processes and enhance the supply chain and production. SAB Miller, in its pledge to reduce water consumption, makes use of sustainable and efficient technology in order to reduce wastage of water (Hackley 2009). In a 2014 sustainability report, SAB Miller admitted that changing technologies with augment the development and economic dynamics (SAB Miller 2014, 4). Internal Environment SABMiller understands the need for an internal audit system that calculates the resources owned by the brewing company in the wake of cut throat competition around the world. Steve Humphries in the Chief Internal Auditor for SABMiller and globally, the company has employed over 140 auditors. The internal audit revolves around key stakeholders and an assessment of the ongoing projects and to advise on the possible risks involved in project change. Before beginning to work on any project, it is necessary to ensure if there is availability for enough recourse that could fund the endeavors (National Audit Office 2012, 15). Throughout the life span of any project, internal audit is carried out in order to ensure efficiency, effectiveness and generally a productive investment so that no resources are wasted. In an auditory analysis by Quirk, the results showed that SAB Mille Plc has transformed its approach to digital and social media marketing by using its market intelligence and web 2.0 in order to advance its corporate mission. SAB Miller has senior digital marketing positions at local and global levels so as to manage all the digital roles for marketing, promotion, and advertising (2010). An analysis of the internal environment at SAB Miller Plc enables us to know that its dominance in the brewery field has allowed it to expand rapidly to become the second largest brewing company of the world and it leads the market in terms of its expertise in the field. Also, this has put high barriers to entry for new market entrants. However, its focus on its portfolio of diverse beers has allowed it to have a wide yet less premiumized portfolio. SAB Miller’s own internal department scans the projects and self assesses them in order to evaluate the feasibility in letting a project run which may be of potential value to the company. The internal audit department works closely with the project management department in order to identify opportunities and make relevant managerial actions. Because of SAB Miller’s company size, it possesses the required finances in order to afford expensive advertising and other marketing events which helps it to introduce newer brands of beers as it operates primarily on the basis of emerging markets. This means that SAB Miller must continuously diversify and innovate in order to offer new products to its consumers. With the product being beer, it is always a tough decision to introduce a new beer flavor to suit consumer tastes and preferences. Ultimately, for continuous innovation, there is a need for the availability of ample resources which can fund successful delivery of project goals. Simultaneous and seamless working of project management and the internal audit allows SAB Miller to continue delivering its objectives and catering to the needs of its huge customer base. Ansoff Matrix Existing Product New Product Existing Market Market Penetration SAB Miller could distribute and supply its premium quality beers to more pubs and bars. It could also consider opening its own retail stores or pubs in order to penetrate the beer market further. Product Development SAB Miller continuously experiments with new products and offerings in the market with novel tastes. The company primarily operates through emerging markets by targeting newer market segments through innovation. New Market Market Development SAB Miller operates on the basis of emerging markets by targeting new markets and so far this strategy has worked successfully in the UK and Europe, although not back in home – South Africa. Diversification SAB Miller could consider investing in pubs, casinos, hotels, malls, and so on. This is because such sites are usually compatible with beer consumption and hence could generate high amounts of revenues. Conclusion SAB Miller is committed to ongoing innovation thereby enabling it to succeed in emerging markets with their offerings of wide varieties of beer. Diversification strategy could allow it to enter new markets with newer market offerings that are consistent with the brewery business they have in place. Examples of such offerings include pubs, malls, casinos, and the like where SAB Miller products and beers could be sold along with other new offerings relating to tourism and hospitality. Bibliography Chiou, B. (2011). Week ahead: Eurozone GDP, Burberry, SABMiller. [online] Yahoo Finance UK. Available at: https://uk.finance.yahoo.com/news/Week-ahead-Eurozone-GDP-digilook-447756388.html [Accessed 14 Jul. 2014]. Drink Stuff South Africa, (2014). SABMiller brands outperform UK market with innovations. [online] Available at: http://www.drinkstuff-sa.co.za/innovation-and-npd/innovation-hard-stuff/beer/439-sabmiller-brands-outperform-uk-market-with-innovations [Accessed 14 Jul. 2014]. Goodway, N. (2012). SABMiller profit rise bucks trend. [online] The Independent. Available at: http://www.independent.co.uk/news/business/news/sabmiller-profit-rise-bucks-trend-8344821.html [Accessed 14 Jul. 2014]. Hackley, R. (2014). SABMiller to Reduce Water Use by 14% in Sustainability Pledge. [online] Bloomberg. Available at: http://www.bloomberg.com/news/2014-07-09/sabmiller-to-reduce-water-use-by-14-in-sustainability-pledge.html [Accessed 14 Jul. 2014]. Hoovers, (2014). SABMiller Plc Names of Competitors. [online] Available at: http://www.hoovers.com/company-information/cs/competition.SABMiller_plc.d1cecca417bf0b93.html [Accessed 14 Jul. 2014]. Hwang, I. (2014). U.K. Stocks Little Changed as SABMiller Gains, Royal Mail Falls. 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