Annual Report - SABMiller India

In South Africa, where SAB Ltd beganthe year with the loss of a major premiumbrand to a competitor, overall volumesremained level while mainstream volumesgrew satisfactorily by mid-single digits.The decline in premium volumes waspartially mitigated by the successfullaunch of Hansa Marzen Gold andgrowth in excess of 100% for PeroniNastro Azzurro. Soft drinks grew 4%despite tough comparatives in the finalquarter. EBITA declined by 7%, reflecting aweaker currency, rising costs in distributionand brewing raw materials and investmentin our marketing and sales activities.Exploiting our strengths ina challenging marketplaceAs the Chairman has indicated,economies in general and the brewingsector in particular face tough newchallenges. Against the background ofa global economic slowdown and risingfood price inflation, the current growth incommodity prices means sharp increasesin the cost of our brewing and packagingraw materials. At the same time, thebrewing industry continues to consolidate,intensifying the competition within eachmarket. The retail environment is alsogetting tougher as stores and supermarketsclaim more of the market from barsand restaurants where brewers’ marginsare higher.Meanwhile, as the global beer marketreview on page 6 explains, consumersare seeking more choice and variety intheir repertoire of drinks – a further trendto be factored into our strategy.Succeeding in this challengingenvironment requires a broad, globalspread of businesses, a full portfolio ofbrands, outstanding operational capabilityand talented people. As a result ofsticking to the group’s strategic priorities,discussed on pages 10 to 17, I believeSABMiller is unique among the globalbrewing companies in having all theserequisites in place.Our business portfolio, for example,gives us wide geographic coverage andadvantageous exposure to emergingmarkets with above-average economicgrowth. Other brewers have followedour lead into emerging markets and, as aresult, competition is increasing betweenthe global operators. However, we havewell established positions and a longtrack record of success in these typesof markets.As time moves on, the opportunitiesto expand into new territories throughmergers and acquisitions are becomingfewer. This means that while growththrough territorial expansion remainsimportant, our priority, increasingly, isto identify the most valuable segmentsof the markets we already serve and tomake sure we capture a higher valueshare of these than our competitors.We call this process ‘owning the growth’.Owning the growth has to begin witha thorough analysis of consumer trendsand marketplace dynamics. Before wecan identify the opportunities, we needto understand the evolving tastes andpreferences of different groups ofconsumers. Trends such as premiumisation,fragmentation and the increasing importanceof female consumers will influence the waywe approach any given market. Then wehave to offer the right brands to the righttarget audiences in order to capture thegrowth where we think it exists.Here we benefit from a second of ourstrengths – the ability to develop strong,relevant brand portfolios for each localmarket. Unlike some of our competitors,we’ve never concentrated on just oneor two monolithic brands. Instead, we’vedeveloped a spectrum of strong brandsfrom economy to premium, local tointernational and traditional to experimental.This is now turning out to be an advantageas we now have a locker-full of brands withwhich to address almost any segment ofany market where we see an opportunity.The aim is to develop and deploy thesebrands for maximum competitiveadvantage in each local market.A third strength of our business is itsoperational capability. Our strategy here isto keep improving our day-to-day executionby consistently and relentlessly raising theperformance of each local business. In ourmanufacturing, our routes-to-market, oursales processes and every other aspect ofour operations, we believe that long-termsuccess comes down in the end to superiorlocal execution, recognising that each of ourlocal markets has is own unique features.Shorter term, with input costs remaininghigh, it is critical to be able to secure theraw materials we need at the lowest costs.This key priority is discussed further onpage 14.Finally, we’re looking to grow by leveragingour global scale. While allowing eachbusiness a high degree of autonomy andaccountability, we’re setting up structuresand networks to foster collaboration, toensure standard ways of doing thingswhere this is helpful and to capture thebest ideas and practices and dispersethem quickly through the group. Theobjective is to create a collaborative,learning organisation in which the wholebecomes greater than the sum of the partsand is better able to seize the opportunitiesfor growth.We recognise that our people are criticalto our success. We have a strong cultureof accountability and empowerment withclearly defined performance goals and wesupport our employees with world-classtraining and development. Further detailsare included on page 31.Addressing risksLike any organisation, we face a varietyof risks. Recognising that risk is a fact ofbusiness, presenting opportunity as wellas threat, we aim to manage it in a waythat generates the best return for ourshareholders. The well developed riskmanagementprocess described on pages39 and 40 helps us to identify and monitorthe principal risks to the business and dealwith them appropriately. The principal riskswe face are set out opposite while financialrisks are discussed on page 97.In summaryWith the market positions we now occupyand the strategies we’ve consistentlydeployed, we believe that we’re well placedto capture the growth opportunities ineach market, to reinforce our competitiveadvantages and to keep generating valuefor our shareholders.Graham MackayChief ExecutiveOverview Operating and financial review Governance Financial statements Shareholder informationChief Executive’s review 9SABMiller plc Annual Report 2008