There May Be More Cost Cutting at SAB-Miller


SABMiller could seek to further streamline its production facilities in parts of Europe and North America if consumer demand for beer continues to be weak.

The Peroni Nastro Azzurro brewer may also seek more acquisitions or tie-ups with craft brewers in the US, according to its CEO, Graham Mackay.

SABMiller reported a healthy set of full-year results today (19 May), with net sales up by 7% to US$19.41bn and net profits up by 22% to $2.56bn for the 12 months to the end of March. However, the brewer largely relied on higher beer prices to boost sales in North America. Global volume sales, meanwhile, rose by 2% and were predominantly driven by emerging markets in Asia and Africa.

Speaking about the US beer market on a media call today, Mackay said that, despite a lot of observers "searching the tea leaves" for signs of improvement on the US beer market, there has not been serious improvement. "I've not seen a systematic uptick in the US," he said.

SABMiller's US joint-venture with Molson Coors, MillerCoors, reported volume sales to wholesalers and retailers down by 3% in SABMiller's fiscal year.

Even though beer pricing has remained relatively firm in the country, Mackay suggested that further streamlining of the business may be necessary. The same is true of Central and Eastern Europe, where SABMiller also reported a 3% drop in lager volumes over the 12 months.

"We've got a pretty extensive production grid in Europe as a result of buying a patchwork of local businesses," said Mackay. "Rationalising of the production grid is always under the spotlight." He added that "there are possibilities for that in North America", too.

MillerCoors is drawing close to the end of its $750m synergies programme, with $684m in annual cost savings realised by the end of March this year.

At the same time, MillerCoors may push further into the craft beer sector, which has remained in growth throughout a turbulent period for mainstream beer brands in the US. MillerCoors' craft beer business, Tenth & Blake, reported double-digit volume increases for SABMiller's fiscal year.

Asked whether MillerCoors might seek to acquire craft brewers, Mackay said that the group remains "open to alliances" and might have "some options coming along".

Mackay declined to comment when questioned by journalists today on SABMiller's global ambitions in the mergers and acquisitions sector. The brewer has been linked with a move for Foster's Australian beer business, Castel's African beer business and also Brazil's second largest brewer, Schincariol.