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18 SABMiller plc Annual Report 2012Chief Executive’s review continuedIf the key to affordability in Africa is locally-sourcedingredients, our businesses in Latin America areachieving the same ends and capturing moredrinking occasions by launching different-sizedpackaging. In some cases they’ve introducedsmaller units: the 225 ml bottles for Águilita andPilsener, for example, can sell at a lower price andalso be drunk before the beer loses its chill. In othercases, the solution is larger packaging. For Poker,Águila and Águila Light, the roll-out of 750 mlbottles designed for sharing is attracting Colombianconsumers looking for affordability, both in bars andrestaurants and when drinking at home.Although we are first and foremost a beer business,we have opportunities to expand into adjacentcategories such as malt and other non-alcoholicdrinks. Our water and malt drink businesses inAfrica continue to grow and we recently launchedtwo new malt drinks, Maltizz in Colombia andActiMalta in Honduras and El Salvador.Creating the right operating processesOur geographic footprint and strong brands willonly benefit the business if we have the systemsand skills to extract value from them. In creatingthe right operating process, we’re guided by ourbelief that beer is an inherently local productand that SABMiller’s success depends on localmanagement being able to pursue their owncommercial priorities.It’s important to remove noncommercialactivities from eachbusiness so that local managerscan focus on their customers,consumers and communities.We constantly seek to improve our local salesexecution and levels of customer service.The Operations review on pages 25 to 35 givesexamples of our progress in these areas acrossthe business during the year.As competition intensifies and regulatory and otherpressures increase, winning in the local market isbecoming more complex. It’s therefore important toremove non-commercial activities from each businessso that local managers can focus without distractionon their customers, consumers and communities.To this end, we’re implementing a comprehensivebusiness capability programme – not just to easethe load on local teams but also to boost efficiency,raise standards, capitalise on our scale and createa more connected organisation.The past year has seen continued progress.Our global procurement organisation, Trinity, hascontributed significant savings and we’re extendingits remit to cover more of our purchasing thansimply brewing materials. Further benefits havecome from regional programmes such as theconsolidation of our manufacturing and supplychain in Europe and the introduction of new salesand distribution systems in Latin America.Our global IS project has developed further duringthe year. The latest stage covering back, middleand front-office processes was deployed in its firstmarket, Ecuador, in November 2011 and the nextfull deployment will be in Poland.Net operating benefits from our businesscapability programme once again exceeded ourexpectations, reaching US$159 million for the year.As a consequence, we’ve raised our 2014 targetfor net operating benefits to US$450 million peryear by the end of that year. Further details of thebenefits and the investment we’re making todeliver them are set out in the Chief FinancialOfficer’s review on pages 37 to 44.We’ve been further capitalising on our scalewith programmes designed to codify, share andenhance our business capabilities. In recent yearswe’ve been working on a series of eight SABMillerWays – procedures and protocols for transferringbest practice across the business and coveringall aspects of our operations from marketing andmanufacturing to finance and corporate affairs.We now have ongoing programmes to build specificskills in line with the Ways, with particular emphasisthis year on commercial and marketing capabilities atthe local level. To ensure continuous improvement,we’ve introduced key performance indicators tomeasure our progress in the main areas covered bythe Ways and results are reviewed every quarter.Building the right partnershipsMore than most other industries, the beer business isabout being rooted in the community and connectedto a wide variety of partners and stakeholders.Partnerships are crucial to our success. We devotegreat care and effort to building alliances throughoutour value chain and believe that SABMiller is unusualin the industry in its partnership skills.At industry partner level we have successful andlong-standing alliances with businesses such asCastel in Africa, CRE in China and Molson Coorsin the USA, all characterised by mutual respectand a willingness to work together for mutual value.This year we’ve joined forces with Anadolu Efes andhave further strengthened our alliance with Castel.Other partnerships are aimed at achieving‘inclusive growth’ in local communities. By this wemean building value chains that stimulate economicdevelopment and cultivate the entrepreneurial skillsof local partners so that they can contribute to ourbusiness and we can help them develop theirs.An example of this approach is our Farming BetterFutures programme, under which we’re seekingto increase the local sourcing of agricultural rawmaterials in Africa, India and Latin America. Threeyears ago, all the barley we used in Zambia hadto be imported. Today, Zambia is growing enoughbarley not only to meet its own needs but also tobecome a net exporter and the new barley industryhas created employment for over 4,000 ruralworkers. In Africa as a whole, we’re committedto increasing the local sourcing of raw materials toUS$450m2014 target net operatingbenefits from our businesscapability programme
SABMiller plc Annual Report 2012 19Castle Milk StoutOrigin: South AfricaFirst brewed: 1935www.sab.co.za50% in the next two years – a move that will raisethe number of farming jobs directly supported byour operations from 100,000 to an estimated150,000. In India, we aim to source all our barleylocally within the next five years.Building local supply chains in this way requiresclose collaboration with farmers and others andhelps to create jobs and prosperity for localcommunities. For every person we employ inUganda, for instance, we generate over 200 jobsin the supply chain and the broader economy.We devote great care andeffort to building alliances andpartnerships throughout ourvalue chain.Downstream from our breweries, we seek valueenhancingpartnerships across the spectrum fromlarge, sophisticated supermarket chains and majordistributors to neighbourhood stores, bar andtavern proprietors and owner-drivers. In manymarkets, such alliances help further in stimulatingenterprise and boosting employment. We alsocontribute through corporate social investmentwhich this year totalled US$34 million, a significantportion of which is focused on supporting localentrepreneurs, particularly in Colombia andSouth Africa.Recognising that our business is not separate fromsociety but embedded within it, we play our part intackling shared challenges such as water, energyand food security. Our first responsibility is to runour own operations as resource-efficiently aspossible and here again we’re making progress.In the past year, our water consumption perhectolitre of lager produced was 4.0 hectolitres,a 5% reduction on the previous 12 months. Overthe same period, our fossil fuel emissions totalled12.4 kgCO 2e per hectolitre of lager produced,a year-on-year drop of 10%.Looking beyond our own operations, we knowwe can only find long-term solutions to issues suchas water scarcity in partnership with governments,NGOs, civil society and others. A case in point isour global Water Futures partnership with WWFand the German development agency, GIZ,now engaged in watershed protection schemesaround the world. Other partnerships – includingprogrammes with police forces and public healthbodies – are making us more effective in addressingalcohol abuse.In summary, the year has seen solid progress withthe key components of our business model – beingin the right markets, having the right brand portfolio,creating the right operating processes and buildingthe right partnerships. Our work in these four areashas continued to generate long-term value for ourshareholders.Castle Milk Stout is brewed as a lager, unlike most stout.The ’milk‘ refers to lactose sugars added during the brewingprocess. It has a thick texture, strong flavour and full,satisfying taste with a hint of caramel. Roasted dark maltprovides its distinctive colouring, and the creamy-smoothhead comes from special yeast.Addressing risksWe recognise that running a global businesspresents complex risks. Our aim is to maximisethe opportunities and minimise the threats that anygiven risk presents so as to generate the greatestreturn for our shareholders. To this end we have awell-developed risk-management process (detailedon pages 65 to 67) for identifying, monitoring andmanaging the principal risks we face (these arelisted on pages 22 and 23).The latest annual review of our principal risks hasresulted in two changes to the list. The economicenvironment is no longer presented as a separate riskas we feel that the challenges of the global economysince the global financial crisis of 2008 have becomea normal part of operating a global business andshould be met through our strategic planning andbusiness processes. We have also removed ‘volatilityin the price of raw materials’ from our list of principalrisks as this is now the focus of the Trinityprocurement organisation.Looking aheadWhile it’s difficult to predict the impact of theuncertain economic environment on consumersentiment, the beer sector has, in the past, proveditself resilient in difficult times.Our underlying financial position remains strong,as does our medium-term outlook for growth involume, revenue and profitability. As I said lastyear, I believe we have the skills, resources andcapabilities to continue generating value for ourshareholders and other stakeholders.Graham MackayChief ExecutiveOverview Business review Governance Financial statements Shareholder information
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Registered officeSABMiller HouseChu
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