China: SABMiller answers firmly to China invasion

As China extends its reach ever more deeply into Africa's economies, one country has quietly but aggressively moved in the opposite direction, with its companies becoming major players in booming Chinese industries, Washington Post Foreign Service reported February 11.

Martyn Davies, director of the Center for Chinese Studies at Stellenbosch University, estimated the total of South African investment in China (including SABMiller, which maintains stock market listings in London and Johannesburg) at nearly $2 billion.

SABMiller, which became the world's second-largest brewer with its 2002 acquisition of U.S.-based Miller Brewing Co., began moving into Chinese markets in 1994. It followed a business plan honed in Africa, company officials said, by buying up breweries and upgrading them while continuing to sell beer under local labels. It brews Kilimanjaro in Tanzania, Laurentina in Mozambique and Nile Special in Uganda.

In its joint venture with a quasi-governmental agency in China, SABMiller has won 15 percent of the market, becoming the largest brewer without offering its South African flagship, Castle, or its American one, Miller Genuine Draft. Instead, the joint venture has dozens of breweries and brands. Taken together, this financial year the venture will produce 50 million hectoliters – 1.3 billion gallons – of beer in China, more than double the entire South African beer market.

Andre Parker, SABMiller's managing director for Africa and Asia, said the skills needed to compete successfully in China were born in apartheid-era South Africa, when the brewer struggled to get new equipment and parts because of sanctions. Instead, it had to make breweries run more efficiently and profitably.

The company learned from operating in less-developed African markets how to use radio, billboards and corporate sponsorships to promote its products. That gave it an edge against European brewers that came to China with expansion plans based on building new breweries and advertising mainly on television.

"We were better at that stuff," Parker said.

The company also avoided costly expatriate workers, relying instead on Chinese employees to manage breweries, deal with the government and organize distribution systems. SABMiller once had as many as 15 expatriate employees living in China; now there are two.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .