SAB Miller CEO Alan Clark says his company will work ‘over time’ to build beer demand and tap new consumption needs, stepping out of core lager and focusing on mixed-gender occasions.
Discussing SAB Miller’s H1 2014 results with analysts last Wednesday – total beverage volumes up 2%, financial performance in line with expectations, challenges in Europe – Clark was asked by Adam Spielman, director and analyst at Citigroup, what he wanted to change at the group?
Clark succeeded former CEO Graham Mackay in April, and is now shaping the world’s second-biggest brewer - brands include Grolsch, Peroni, Miller, Pilsner Urquell - in line with his own leadership vision.
Clark told Spielman that SAB would increasingly focus on the “romance and differentiation of core lager” but begin over time to shift core lager demand to drive a more diverse range of occasions and needs – moving beyond a “traditional core target audience of young males”.
“So making it much more relevant, for example, in mixed gender occasions. That’s not a change in strategy; it’s a recognition of how the world evolves and how consumers are evolving with it that will differ, I think, in future, for us as an organization,” he said.
Stepping out of core lager
With innovation increasingly central to SAB’s commercial strategy than in the past, Clark said this “step out of core lager” would aim to access a greater range of needs and occasions, with beer flavors and styles that differ from core lager.
But he caveated this by emphasizing a need for balance, given SAB Miller’s “fundamental heartland” in mainstream lager, “which is in reality where all the value lies”.
“Core lager on a global basis is 28% of retail sales value in packaged beverages. It is the largest single profit pool and one that will continue to grow, albeit not at the pace, potentially, of other packaged beverages,” Clark said.
“But it will continue to grow…quite strongly in the emerging markets where we have 75% of our footprint,” he added.
Cider profit pool ‘dwarfed by lager’
Core lager remains SAB’s No.1 priority, Clark said, given that adjacent alcoholic drinks categories (beverages such as cider as well as other beer styles) represent only 6% of global retail sales value.
“That’s a reasonable profit pool but it’s still dwarfed by lager – so over time, we will expand. It will be much more of a focus now in markets like Australia, like the US and Europe where search is on for premium growth,” Clark explained.
Turing to SAB Miller’s H1 results, Clark saluted his firm’s strong performance in Africa, and progress in building positions in LATAM, South Africa and Asia Pacific.
“Following a challenging start to the year, trading conditions in Europe and North America saw a modest improvement in the second quarter,” Clark said.
Analyst Phil Carroll at Shore Capital admitted that organic revenue growth of 4% in H1 2014 beat his expectation of 3%, and probably that of the market as a whole, given that SAB’s share price rose circa. 4% following last week’s results announcement.