Latin America has grown in importance for beer companies searching for growth, but the two biggest players in the beer world, Anheuser-Busch InBev and SABMiller, have adopted different strategies in recent years.
Anheuser-Busch InBev (the maker of Budweiser) has largely expanded through acquisitions, and it is moving forward with closing the deal to acquire Mexico’s Grupo Modelo (which makes Corona), after surmounting some antitrust hurdles in the US. While SABMiller (which makes Pilsner) has also made acquisitions in Latin America, its strategy has been to focus on growing its local and international brands.
Latin America is a key region for SABMiller, accounting for more than 40% of earnings growth since 2007. It is dominant in countries including Colombia, Peru, Ecuador, Honduras, El Salvador and Panama. Where Anheuser-Busch is seen as competing more on price, SABMiller has had success in introducing Miller Genuine Draft, Miller Lite and other products that are marketed as premium beers.
London-based SABMiller is also focusing on bringing new offerings to the market and making beer more affordable for lower income consumers. As SABMiller Latin America President Karl Lippert puts it, even low income consumers don’t want to be associated with cheap brands. “They don’t think of themselves as poor,” Mr. Lippert says. “They just think they are temporarily out of money.”
Still, SABMiller doesn’t have a significant presence in Latin America’s biggest markets of Brazil, Argentina and Mexico. And Lippert acknowledges the company’s presence is still relatively small in the region. He sat down with Quartz to discuss his views on where SABMiller can find opportunities in Latin America.
Quartz: SABMiller hasn’t done a major acquisition in Latin America since 2010. Do you see the company’s future growth coming from acquisitions or do you see a more organic expansion?
Karl Lippert: M&A is opportunistic, so there has to be a willing target at a price you are willing to pay. Those are hard to come by. And we do not want to overpay. [SABMiller was interested in the Dominican Republic's Cerveceria Nacional Dominicana but wasn't willing to pay the more than $1 billion that Anheuser-Busch paid for a majority stake in 2012.] There are only two beer companies that dominate Mexico: InBev through Modelo, and Heineken. Neither of them is going to sell. So we will focus on growing the brands we have.
Q: SABMiller has done well in introducing brands in the premium market, which is not always easy to do in emerging markets. How can you build on those kinds of successes?
KL: There is definitely room to grow in that area, particularly in beer versions that are closer to spirits and can be marketed in a different way. At any given time, we have about 50 innovations [like new products, brand extensions, new packaging] in the pipeline. We’ve achieved a 6% innovation rate for fiscal 2013 [revenue coming from new products etc.], compared to 2% in 2011. Heineken has set a goal of reaching 6% by 2020, but we’re already there.
Q: Latin America is obviously an important market for SABMiller. But how critical is it for the beverage industry in general, both for companies that sell alcoholic and non-alcoholic products?
KL: The beer landscape is well formed so those companies have already realized the importance of Latin America. I’m surprised how long it’s taken for the rest of the world to notice. It can be a challenging operating environment so that has put some companies off. Maybe because we started off in an emerging market in South Africa, we’re comfortable in places like Latin America. Now that the operating environment has improved, I expect to see others discover Latin America.