SABMiller, the London-listed brewing group created earlier this year through the merger of South African Breweries and Miller Brewing, has announced that it is to increase its stake in three Chinese breweries from 90 per cent to 100 per cent, thereby giving it total control of the important Snow beer brand.
SAB Miller operates in China through China Resources Breweries (CRB), a joint venture with local company China Resources Enterprise (CRE).
Under the terms of the deal, CRB will now buy up all the outstanding shares in China Resources (Shenyang) Snowflake Brewery, Shenyang Snowflake Beer Company and Shenyang Shengyang Beer Company from minority shareholder Shenyang Pi Jiu Chang for the sum of HK$131.6 million (€16.9m) plus an additional consideration of up to HK$7.8 million.
All the breweries are in Shenyang, in China's northeast Liaoning province.
CRB is China's second largest brewer and has invested in 28 breweries with an annual production capacity of approximately 37 million hectolitres. In addition to Snow, its brand portfolio includes Blue Sword.
SABMiller last week reported first half turnover of US$3.98 billion (€4bn), up from $2.2 billion a year earlier, and pre-tax profits of $374 million, up from $322 million in 2001, as it began to reap the benefits of the Miller acquisition.
Total beverage volumes for the half were up 57 per cent to 75 million hectolitres, with organic growth of 5 per cent. Europe was the main driver of growth, although there was also a strong performance in South Africa, despite currency concerns there.
Graham Mackay, chief executive of the group, commented: "The benefits of an increasingly balanced portfolio play an important part in the group's overall results. We are working actively on numerous projects at Miller Brewing Company to improve its performance and are confident that the potential identified at acquisition will be realised over time."
He continued: "A key initiative is the focus on improving brand equity, particularly the important Miller Lite brand. The majority of the marketing spend is being directed behind our core brands, and the effectiveness monitored closely. The route to market is an important part of our strategy to rebuild sales momentum, and we continue to improve distributor relationships to enhance sales execution and focus on our brands."
But the work to be done at Miller goes further than that. "Substantial work is being undertaken to enhance the performance culture within Miller in line with our practices," said Mackay. "Areas of focus in the integration process that are expected to yield medium term cost savings and benefits in excess of the initial estimate of US$50 million include synergies in procurement (e.g. raw materials and packaging), a reduction in IT costs, operational efficiencies and greater distribution for the Pilsner Urquell brand in the United States from leveraging Miller's distribution system and benefits from rationalisation of the many export offices of PU International and Miller International."
Europe was a key market during the half, helped by 8 per cent growth in the Polish beer market due to good summer weather, which in turn lifted volumes at SABMiller's Kompania Piwowarska unit by 11 per cent. In fact, KP lifted its market share to more than 31 per cent during the half, helped by the launch of a new brand, Debowe, but also by a 10 per cent rise in volumes of the flagship brand, Tyskie.
In the Czech Republic, where SABMiller owns the Pilsner Urquell brand, volumes were up 6 per cent, with a 13 per cent rise from PU itself and both Gambrinus and Kozel showing strong growth. Russian volumes were up 8 per cent, driven by international brands Miller Genuine Draft and Holsten, but also by a new brand, Try Bogatyrya. However, volumes for the local premium brand, Zolotaya Bochka, were disappointing.
In Hungary, the total beer market is estimated to have grown by 5 per cent, while SABMiller's Dreher unit grew its share by 1 per cent on the back of a 7 per cent hike in volumes. The beer market in Romania grew marginally at around 1.4 per cent and the group's operations increased their market share their to approximately 15 per cent, driven by the premium Ursus brand and Timisoreana Lux.
In Slovakia, the Saris brewery posted volume growth of 24 per cent over the previous year, driven to a large extent by the strength of licensed Czech brands.
Pilsner Urquell also continued to perform well in the key markets of Germany, US and the UK, with sales volumes in these markets up 32 per cent, 19 per cent and 38 per cent respectively on the prior year. In total, volumes of Pilsner Urquell outside the Czech Republic increased by 21 per cent to 356,000 hl compared to the same period in the prior year.