Sabmiller

QUESTION 1

Identify the corporate logics that SABMiller have adopted over the course of the case

Company Perspectives:

The South African Breweries Limited is a holding company invested in and taking management responsibility for a portfolio of businesses, principally engaged in meeting mass market consumer needs. Beer is the major profit contributor, but an important balance is provided by interests in complementary beverages, retailing, hotels, and the manufacture and supply of selected consumer goods and services, together with strategic investments in businesses which support the mainstream interests.

Company History:

The South African Breweries Limited (SAB) is a holding company whose principal line of business is brewing. The company holds an impressive 98 percent share of the beer market in its home country of South Africa, where it sells 14 brands of beer, including local lagers Castle and Lion as well as foreign brands brewed under license--Heineken, Guinness, Amstel, and Carling Black Label. Aggressive overseas expansion following the end of apartheid, however, has also given SAB ownership of, or stakes in, more than 25 breweries in the emerging markets of central Europe, China, and sub-Saharan Africa. Overall, in terms of volume, South African Breweries is the world's fourth largest brewer. SAB also has a variety of nonbrewing operations, such as carbonated and natural fruit drinks and other beverages, retailing, hotels and gaming, and manufacturing of safety matches and glass. The company has been divesting many of these noncore assets in the late 1990s. SAB's history is in many ways the history of the South African brewing industry, most notably through the government-ordered merger of the largest breweries in 1956. The company's history was also greatly influenced by the apartheid system and its effect on the domestic economy, on domestic firms, and on foreign investment in South Africa.

Early History

The discovery of gold on the Witwatersrand (a region encompassing Johannesburg) in 1875 brought large numbers of prospectors to South Africa. Small outposts for white settlers were transformed into busy cities with new industries. Several brewmasters, most with little experience, began to produce a variety of beers which immediately gained popularity with the settlers.

In 1889 a British sailor named Frederick Mead left his ship in Durban and took a job working in the canteen of a local army garrison at Fort Napier. While there, Mead, who was only 20, became acquainted with a businessman in Pietermaritzburg named George Raw. Neither of them knew anything about brewing, but they persuaded the local residents to help establish the Natal Brewery Syndicate. After purchasing a factory site, Frederick Mead returned to England to procure machinery and raise capital. In need of brewing expertise, Mead approached W. H. Hackblock, head of Morgan's Brewery in Norwich. The two men became friends and Hackblock agreed to serve as chairman of Mead's company, which was registered in 1890 as the Natal Brewery Syndicate (South East Africa) Limited. The company brewed its first beer in July 1891.

Mead remained interested in establishing a brewery in the rapidly growing Witwatersrand. In 1892 he purchased the Castle Brewery in Johannesburg from its proprietor Charles Glass. The expansion of this facility, however, was beyond the means of the Natal Brewery Syndicate, and Mead returned to England to attract new investors. In the final arrangement, Mead formed another larger company based in London called The South African United Breweries. This company took over the operations of both the Natal Brewery Syndicate and the Castle Brewery.

After construction of the new Castle Brewery, South African United Breweries made additional share offerings which were purchased by South Africa's largest investment houses. Subsequent growth precipitated a restructuring of the company and reincorporation in London on May 15, 1895, as The South African Breweries Limited.

In 1896 South African Breweries purchased its first boarding houses. That same year, Frederick Mead moved to England for health reasons but continued to occupy a seat on the board of directors and frequently returned to South Africa. From London, Mead directed the purchase of machinery for brewing lager beer from the Pfaudler Vacuum Company in the United States. Patent restrictions and mechanical difficulties delayed production of Castle lager until 1898. The beer gained such widespread popularity that competing breweries rushed to introduce their own lagers.

South African Breweries, or SAB, was listed on the London Stock Exchange in 1895 and two years later became the first industrial company to be listed on the Johannesburg Stock Exchange. Through these listings SAB had greater access to additional investor capital.

On October 11, 1899, a war broke out between British colonial forces and Dutch and Huguenot settlers known as Boers. The war drove residents of Johannesburg out of the city and forced the Castle Brewery to close for almost a year. When British troops recovered the area, the brewery had sustained little or no damage. British authorities regarded the plant as an essential industry, and encouraged the company to resume production in August 1900. Disrupted supply lines caused shortages of yeast and other raw materials, but within a year production had returned to full capacity.

The Boer War ended in 1902 but was followed by a severe economic depression. The brewing industry was not as adversely affected as others, however, and SAB was able to continue its expansion across southern Africa. The company acquired the Durban Breweries and Distillers company, and established a new plant at Bloemfontein. SAB purchased Morgan's Brewery in Port Elizabeth in 1906 and, five years later, acquired another brewery in Salisbury, Rhodesia (now Harare, Zimbabwe). At its northernmost point, SAB established a brewery at Ndola, Northern Rhodesia (now Zambia).

W. H. Hackblock died in 1907 and was succeeded as chairman by Sydney Chambers. In 1912 Chambers led the company into an innovative arrangement with its competitor, Ohlsson's Brewery, to cultivate hops jointly at a site near the city of George, midway between Port Elizabeth and Cape Town. A joint subsidiary called Union Hop Growers spent many years developing new hybrids, which delayed the first commercial use of South African-grown hops until 1920.

Diversified into Bottles, Lodging, and Mineral Water in Early 20th Century

After Frederick Mead died in August 1915, John Stroyan, who succeeded Sydney Chambers