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"Worth-more" brands are the key to SABMiller's UK strategy, as MD Gary Whitlie tells the Morning Advertiser
After being founded in 1895, South African Breweries didn't waste any time establishing itself on the global trading map, getting listed on the London Stock Exchange in 1898. But for nearly 100 years, the brewer, now the biggest in the world, remained dormant in Europe.
It wasn't until the free elections in South Africa in 1994 that its global expansion really took off. The creation of SABMiller in 2002, through the purchase of the Miller Brewing Company, led to a number of major acquisitions, including Peroni in Italy in 2003.
The deal paved the way for SABMiller to make its first decisive move into the UK and in 2005 it set up Miller Brands UK. In the three years that followed, the once sleeping giant has gone from being something of an enigma to a serious contender — no mean feat in a beer market that continues to decline.
The first job of executives at the newly formed Miller Brands UK was to end the distribution tie-up it had with Scottish & Newcastle (S&N), which had given its beers a promising start. And if the market was unsure how Miller Brands intended to take them to the next level, the £30m initial marketing investment it pledged left little doubt.
"Although a number of our brands were sold here through third parties, we felt we could do a more focused job," says Gary Whitlie, the brewer's managing director. "As it happened, two to three years ago, a number of the contracts were coming to a close, so in July 2005, Miller Brands was set up in the UK."
Whitlie now oversees a staff of 70, working out of its offices in Woking.
Seizing back control of a TLC-starved Peroni, which had been under the stewardship of S&N, gave Whitlie a chance to show the market what it could achieve.
Miller Brands was quick to exploit the beer's Italian connections in a £6m campaign, which focused on La Dolce Vita style and glamour.
In a beer market that often struggles to mine new marketing ideas, there is a lot to be said for doing things differently. And it's what the market is crying out for, as sales figures show that the brand's volumes were up 35% last year.
"We wanted to be a bit different," says Whitlie. "When you have a mass-market product, your consumer reach is a lot more spread out.
"With Peroni, we deliberately didn't want to follow the traditional beer marketing route. One of our key strategic themes is innovation — and that's not innovation in new products, it's about how we do things, and marketing is a big component.
"We are trying not to follow the usual channels of communication. We don't want to create a faddish brand, we're about sustainable growth. We are in it for the long haul rather than something that has rapid growth and then falls off."
Like many in the industry, Whitlie cites the emergence of a new tier of quality beers, what he calls "worth-more brands" — those that have "a premium status that's not defined by abv".
"There is a fair chunk of consumers who want to drink Carling, but, of late, the more premium end of the market has grown. People want to feel that they are treating themselves and having something special."
As well as Peroni, Pilsner Urquell and Miller Draught formed the original line-up Miller Brands began trading with when it set up shop in the UK. Whitlie sees each of these as having a different taste, which means they are not all necessarily aimed at the same consumer.
Last year, SABMiller's unexpected £532m purchase of Grolsch gave it a well-established brand to add to its armoury. The fact that it showed some interest in buying Scottish & Newcastle, but withdrew itself from the race, shows more acquisitions could be on the horizon.
But the deal came after a difficult 2007, when Grolsch's UK sales dropped by 10% amid "severe" market pressures. This was in stark contrast to the US and other European markets, where it grew by 20%, and Whitlie is obviously excited at the prospect of unlocking further growth on foreign soil.
"Grolsch fills an important hole in our international premium portfolio. We have robust research-based evidence to suggest that northern European brands are the best vehicles to establish the premium category in emerging markets.
"The global premium category is actually much less developed than might be assumed. In many of our markets, it is just beginning to emerge and we expect this to accelerate."
In the UK, Grolsch is currently brewed under licence by Coors Brewers, which owns 49% of a joint venture with SABMiller.
Whitlie says there are no plans to end the current marketing and distribution arrangement.
"We anticipate that the brand will continue to remain under Molson-Coors management and, as such, we will work with them to ensure the brand's current trends are improved. It is premature at this stage to speculate on future strategy for the brand, but we are confident that Grolsch's long-standing reputation in the
UK market can be protected and
built upon."
By keeping its contract with Coors, Miller Brands has more time to devote to developing the rest of its beer portfolio.
"We concentrated a lot of our focus and resources on Peroni, with a clear message that we are here to build premium brands. We are now incorporating Pilsner Urquell into the market and are investing quite heavily behind it. We are being very focused about where it's stocked, the glassware, the promotions, the association it has with barmen."
The beer's Czech origin, along with its "distinctive taste profile", and claims that it was the first Pilsner, form the basis of Miller's efforts behind it. So far, these have concentrated on getting top on-trade accounts to understand what sets it apart from its rivals — and to pass this on to the consumer.
"Pilsner Urquell is a perennial favourite with beer anoraks. We believe that there are a lot of consumers in the UK who care about their beer and what they drink when they go into a pub. And we feel that there is a lot of potential for us if we target those people properly.
"I am convinced that with focused attention, it will be as popular as Peroni in the coming years."
As it stands, Whitlie quotes swelling sales in London, where it has grown 12%, as proof that its target audience of informed, trendsetting drinkers is getting the message.
The future for Miller Draught is also under the microscope. In its Scottish heartland, it has a 23% share of the bottled beer market, but Whitlie wants 2008 to be the year it makes a dent south of the border.
Going up against Budweiser and Corona, he knows it will be a
tough challenge.
"Miller Draught doesn't have a negative history, so we think we have a relatively clean slate with it. We are grappling with how we take it forward, but I think it has a lot of potential for us."
So far, it has concentrated on trying to give Miller an "edgy" personality, by associating it with urban art and graffiti.
Also on the radar are Tyskie and Lech, which are leading the charge of an increasingly strong Polish contingent of beers, buoyed in particular by the UK's growing community from the country.
Whitlie says this could lead to more Polish beers going onto draught, though it is researching the pull its beers have for all beer drinkers.
Deciding how to develop and market a brand is where SABMiller fully exploits its scale, sharing ideas and best practice with other markets.
"We report into the Europe operation and get a great deal of support from other European markets. We are constantly talking to see what they can add, how they can enhance us. We get to share a lot of ideas, especially in the marketing arena."
Miller Brands UK might only be three years old, but having achieved so much in such a short space of time, and in one of the most challenging beer markets in the world, Whitlie and his team are no doubt influencing how the rest of SABMiller does business globally.
In the UK, Whitlie's peers are also watching carefully, wondering whether he c
