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Graham Mackay Chief Executive SABMiller. GIBS University Presentation Monday 25 October 2004. SABMiller today. Europe 8 countries 18 breweries. USA 8 breweries 1 country. Asia* 32 breweries 2 countries . Central America 2 breweries 2 countries. Africa** 14 breweries 29 countries

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graham mackay chief executive sabmiller

Graham MackayChief Executive SABMiller

GIBS University PresentationMonday 25 October 2004

sabmiller today
SABMiller today

Europe

8 countries

18 breweries

USA

8 breweries

1 country

Asia*

32 breweries

2 countries

Central America

2 breweries

2 countries

Africa**

14 breweries

29 countries

(17 countries jointly with Castel)

Markets where SABMiller

has brewing operations

South Africa

7 breweries

* Excludes 10 breweries in India

** Excludes 29 sorghum breweries

sabmiller drivers of future profit growth
SABMiller drivers of future profit growth

Leading positions in large emerging markets

International premium brands

Earnings growth

Turnaround of Miller

Strong domestic operations in growth markets

Today

T I M E H O R I Z O N S

Illustrative

sab transformation 1995 to 2002 south african conglomerate to international beer beverage company

South Africa

SAB transformation – 1995 to 2002 South African conglomerate to international beer & beverage company

% Turnover

2002

1995

Manufacturing

South AfricaBeer

ComplementaryBeverages

Hotels

South AfricaBeer

Central America

InternationalBeer

Retail & Hotels

ComplementaryBeverages

Africa & Asia Beer

EuropeBeer

sab applied a clearly defined acquisition strategy and a distinctive business model

Acquiring (under-valued) assets in developing/emerging markets

Enhancing industryconduct and pricing

Building local market scale and leadershiparound a portfolio of (local)mainstream brands

Driving operationaland cost leadership

Securing route-to market control

SAB applied a clearly defined acquisition strategy and a distinctive business model

A shared model of how to create value

supported by strong capabilities
Supported by strong capabilities
  • Management talent and broad based culture (South African)
  • World class manufacturing and operational skills
  • Performance management culture
  • Efficient brand portfolio management
  • M&A and post merger integration expertise
2002 2004 further business reshaping acquisitions of miller and peroni

South Africa

2002-2004 further business reshaping Acquisitions of Miller and Peroni

% Turnover

2004

2002

ComplementaryBeverages

Hotels

ComplementaryBeverages

Hotels

South AfricaBeer

South AfricaBeer

Central America

Central America

EuropeBeer

Africa & Asia Beer

EuropeBeer

North America Beer

Africa & AsiaBeer

slide8
Overall scale and portfolio balance shifted Different model of value creationRequired capabilities different
acquisition of miller brewing company first major developed market acquisition
Acquisition of Miller Brewing CompanyFirst major developed market acquisition
  • USA – World’s largest profit pool
  • Diversified currency and emerging market risk
  • Miller potential to establish as strong no. 2
  • Market concerned about:
    • Consumer marketing skills
    • Ability to work with US distribution system
    • History of decline at Miller
miller application of our turnaround skills
Miller: application of our turnaround skills
  • Systematically analysed the problem – asked the right questions
  • Applied knowledge and expertise of the beer business
  • Launched holistic turnaround programme structured within four strategic thrusts

Most importantly, reinvigorated the culture

driving transformational culture change through 3 key processes
Driving transformational culturechange through 3 key processes

1. Performance management

  • Translate strategies into goals
  • Drive execution at speed

2. Organisation alignment

  • Change the organisation to ensure strategic capabilities

3. Talent & capacity management

  • Get the right skills and talent for today
  • Build a pipe-line of talent for key positions
1 performance management the pattern prior to acquisition
1. Performance managementThe pattern prior to acquisition
  • Targets not taken seriously – rewards for completing activities
  • No correlation – business performance, individual performance and reward
  • No consequence for under-performance

2000: 55% of managers received excellent or superior ratings

2001: 61% of managers received excellent or superior ratings

Target Performance

Actual Performance

Reward

implementation key features themes
ImplementationKey features & themes
  • Top-down goal setting – rigorous alignment process
  • Deliberate management against goals – intensity & passion
  • Goal adjustment as required – speed and agility
  • Tough performance reviews – no satisfactory underperformance
  • Performance directly linked to pay – differentiated consequence
  • Strong support from 60 champions

Two years of rigorous implementation – a good foundation, a shift in culture felt

2 organisation alignment
2. Organisation alignment

Strategy A

Strategy B

Structures

Roles

Resourcing

Skills

Processes

Systems

Structures

Roles

Resourcing

Skills

Processes

Systems

A change in strategy requires a change in the organisation’s capability

3 talent capacity management
3. Talent & capacity management
  • Extensive recruitment and selective training, to:
    • Get top caliber people in key jobs
    • Build a talent pipe-line of cover
  • Impact on rate of change*
    • Actual for F04 (full year) = 19%
    • Actual for F05 to date (5 months) = 24% [469 people]

* Defined as external appointments + internal promotions + internal transfers

the challenge of global leadership
The challenge of global leadership
  • The beer industry is at a defining moment in its evolution
  • We have emerged as one of the leaders of the consolidation process
  • To retain our leadership position we must review:
    • Our existing models and drivers of growth
    • Our skills and modus operandi
  • What changes are required to maintain our leadership position?
could our enablers to date inhibit change
Could our enablers to date inhibit change?

ENABLER TO DATE

Local strategies and strong decentralisation

Focus on local brands and mainstream

Infusion of SAB practice, expertise, process and culture

SAB sole source of global talent

Limited corporate centre

Issues and stakeholders managed locally

POSSIBLE INHIBITORS

Failure to grasp matrix management

Ability to capture value from premium drift

Slowness in growing the talent pool globally and over reliance on SAB as a source

Reluctance to adopt / leverage synergies

Failure to manage global reputation

how are we addressing this
How are we addressing this?

Applying local optimisation as the sole criteria for decision-making

Stop

(let go)

Defaulting to local solutions for marginal gain over standard solutions

Reluctance to build and exploit best-practice and shared resource

Emphasis on winning the competitive battles locally

Continue

(keep)

Focus on operational excellence in all aspects of business

Devolved authority and Performance Management as an enabler

Grow value of brands & portfolios, including international & “worthmore”

Start

(embrace)

Actively developing local and global talent

Systems, processes and structures to help leverage Group assets and skills

focus of future efforts and capabilities
Focus of future efforts and capabilities
  • Developing a balanced portfolio of businesses, in high growth emerging markets and selected high value developed markets
  • Capturing maximum share of value through complete and differentiated brand portfolios in each market
  • Focus on winning at the point of purchase
  • Leveraging our scale to compete efficiently in and across markets
  • Managing and enhancing our reputation amongst all stakeholders
  • Building our people, organisation and capacity
building our people organisation and capacity
Embracing global talent, particularly those with top-line capabilities

Continuing to build strong and cohesive management teams in local markets

Developing world class marketing, customer management and execution capabilities

Leveraging our global talent pool through Strategic People Resourcing

Institutionalising Best Operating Practices and SAB “Ways”

Training and general management development programme

Building our people, organisation and capacity

Historically high relianceon recruiting, developingand exporting strongSouth African talent

Beer division alumni are increasingly thinly spread!

summary
Summary
  • SABMiller has transformed itself from a South African conglomerate into a successful global beer company
  • However, we recognise need to drive further change
    • Sources of future value growth changing
    • The competition
    • The scale and profile of our business
  • As a result, we are
    • Developing new capabilities to complement our traditional skills
    • Activating a series of initiatives to reshape the company