SABMiller plc, the second-largest beer company globally in terms of volume, is a major competitor to Anheuser-Busch Companies, Inc. Originally established as The South African Breweries Limited (SAB) in 1895 and currently based in London, SABMiller does not possess any breweries in the United Kingdom. Nevertheless, it boasts an impressive 98 percent market share in South Africa’s beer industry.
The firm operates seven breweries in South Africa and sells 14 brands of beer, including Castle, which is the best-selling beer in Africa. It also imports brands such as Pilsner Urquell and Miller Genuine Draft from SABMiller. Additionally, it brews one foreign brand, Amstel, under license. The company has a significant presence in the South African soft drink market through its 74 percent interest in Amalgamated Beverage Industries Ltd., the largest bottler and distributor of Coca-Cola products in the country. Furthermore, it owns Appletiser South Africa (Pty.) Ltd., a producer of nonalcoholic sparkling fruit juices.
SABMiller has a 30% stake in Distell Group Ltd., the main distributor of wines and spirits in South Africa. In addition, it owns 49% of Tsogo Sun Holdings (Pty.) Ltd., which manages hotels and casinos in southern Africa. After the end of apartheid, South African Breweries pursued an aggressive international expansion strategy, focusing on emerging markets such as sub-Saharan Africa, central Europe (entering Hungary in 1993), China (in 1994), India (in 2000), and Central America (in 2001). By the early 2000s, SAB became China’s second-largest brewer and accounted for two-thirds of all beer consumption across Africa.
SABMiller plc, which was originally known as SAB, acquired the Miller Brewing Company in July 2002. This acquisition made SAB the second largest beer producer in the United States. In June 2003, they also purchased majority control of Birra Peroni S.p.A., Italy’s second largest brewery. As a result of these acquisitions, SABMiller had a total of 115 breweries in around two dozen countries on four continents by late 2003. The history of SAB is closely tied to the South African brewing industry, particularly through the merger mandated by the government in 1956 between the largest breweries.
The apartheid system had a significant impact on the company’s history, affecting the domestic economy, domestic firms, and foreign investment in South Africa.
The Witwatersrand, where gold was discovered in 1875, attracted numerous prospectors to South Africa, resulting in the transformation of small settlements into bustling cities. This development also led to the emergence of several brewmasters, many of whom lacked experience, but managed to produce a range of beers that quickly became popular among the settlers.
In 1889, a young British sailor named Frederick Mead decided to leave his ship in Durban and start working at the canteen of Fort Napier, a local army garrison. During his time there, Mead, who was only 20 years old, got acquainted with George Raw, a businessman in Pietermaritzburg. Despite their lack of knowledge in brewing, they managed to convince the local residents to support the establishment of the Natal Brewery Syndicate. Mead bought a piece of land for the factory and then went back to England to acquire machinery and raise funds. Realizing they needed brewing expertise, Mead approached W. H. Hackblock, who was the head of Morgan’s Brewery located in Norwich.
The two men formed a friendship and Hackblock accepted the role of chairman in Mead’s company, which was officially registered as the Natal Brewery Syndicate (South East Africa) Limited in 1890. By July 1891, the company successfully brewed its first beer. Mead’s interest in creating a brewery in the rapidly developing Witwatersrand region persisted. In 1892, he acquired the Castle Brewery in Johannesburg from its owner, Charles Glass. However, expanding this facility exceeded the resources of the Natal Brewery Syndicate, prompting Mead to travel back to England with the aim of attracting new investors.
The South African United Breweries, a larger company based in London, was formed by Mead in the final arrangement. This company assumed control of the Natal Brewery Syndicate and the Castle Brewery. South African United Breweries offered more shares after building the new Castle Brewery, and these were bought by South Africa’s leading investment houses. As the company grew further, it underwent a restructuring and was reestablished in London on May 15, 1895, as The South African Breweries Limited.
In 1896, South African Breweries acquired its initial boarding houses. At the same time, Frederick Mead relocated to England due to health reasons but remained a board member and often visited South Africa. Mead oversaw the procurement of brewing machinery for lager beer from the Pfaudler Vacuum Company in the United States. However, patent limitations and technical problems resulted in a delay in Castle lager production until 1898. The popularity of the beer was so immense that rival breweries promptly launched their own lagers.
South African Breweries, also known as SAB, was listed on both the London Stock Exchange in 1895 and the Johannesburg Stock Exchange two years later. These listings provided SAB with increased access to investor capital. However, in October 11, 1899, a war erupted between British colonial forces and Boers, a group of Dutch and Huguenot settlers. This conflict led to the evacuation of Johannesburg’s residents and the temporary closure of Castle Brewery for nearly a year. Fortunately, when British troops regained control of the area, the brewery had experienced minimal damage, if any.
British authorities deemed the plant crucial and urged the company to recommence production in August 1900. Due to disrupted supply lines, there were shortages of yeast and other raw materials, but within a year, production resumed at maximum capacity. Although the Boer War concluded in 1902, it was succeeded by a harsh economic recession. Nonetheless, the brewing industry experienced less negative impact compared to other sectors, enabling SAB to keep expanding throughout southern Africa. SAB acquired the Durban Breweries and Distillers company and established a fresh facility in Bloemfontein.
SAB acquired Morgan’s Brewery in Port Elizabeth in 1906 and, five years later, acquired another brewery in Salisbury, Rhodesia (now Harare, Zimbabwe). They also established a brewery at Ndola, northern Rhodesia (now Zambia). W. H. Hackblock passed away in 1907 and was replaced as chairman by Sydney Chambers. In 1912, Chambers led the company into a collaboration with competitor Ohlsson’s Brewery to cultivate hops jointly at a location near the city of George, which is halfway between Port Elizabeth and Cape Town. A subsidiary called Union Hop Growers was formed, and they dedicated numerous years to developing new hop hybrids. Unfortunately, this delayed the first commercial use of South African-grown hops until 1920.
In the early 20th Century, SAB expanded into Bottles, Lodging, and Mineral Water. However, World War I caused a disruption in the bottle supply to South Africa, presenting a significant challenge for SAB. Following the death of Frederick Mead in August 1915, John Stroyan took over as the new key figure in SAB management after Sydney Chambers had been in charge briefly. In 1917, SAB decided to establish its own bottle-making plants but production did not commence until 1919 when the war concluded.
Despite the economic depression experienced after World War I, South Africa’s demand for beer grew steadily, helping to offset some of the negative effects. In 1921, SAB acquired the Grand Hotel in Cape Town, which was a valuable addition to its lodging business thanks to its financial strength. Furthermore, in 1925, SAB purchased a significant share in the Schweppes Company and established a notable presence in the mineral water industry. Even during the Great Depression of the early 1930s, South Africa’s brewing industry remained strong as SAB expanded operations and enhanced facilities.
The company encountered major obstacles stemming from a scarcity of labor and capital. The supply of cork to South Africa was interrupted due to the Spanish Civil War and escalating political tensions in Europe between the mid- and late 1930s. In order to address a shortage of cork seals for their beer, SAB adopted a recycling method for used cork until they could establish a new source of cork supply. Castle Beer was consumed by South African soldiers stationed in East Africa and the Mediterranean during World War II; however, South Africa as a nation remained relatively unaffected by the war.
When hostilities ceased in 1945, SAB shifted its focus towards additional modernization and growth. Arthur Griffith-Boscawen, who had taken over as chairman in 1940 after John Stroyan, passed away in 1946 and was succeeded by Captain John R. A. Stroyan, the son of John Stroyan. With the guidance of the younger Stroyan, SAB prioritized the development of a South African barley industry as an extension of the joint agricultural project it carried out with Ohlsson’s.
South African Breweries entered a new phase of development in 1950 with the takeover of Ohlsson’s and United Breweries. As part of a corporate modernization program, SAB decided to relocate its head office from London to Johannesburg. In 1951, the company acquired the Hotel Victoria in Johannesburg and a second brewery in Salisbury (Harare). Captain Stroyan retired the following year and returned to England. The position of this talented barrister successor, J.K. Cockburn Millar, was short-lived as he passed away after only four months in office. He was then replaced by solicitor S.J. Constance. Despite exclusively producing beer for over six decades, SAB diversified its product range by introducing various liquor products due to increased taxes on beer.
The consumption of beer in South Africa experienced a decrease for the first time ever and appeared to be on a continuing downward trend. The top three brewing companies in South Africa, namely SAB, Ohlsson’s Cape Breweries, and United Breweries, held meetings in London and Johannesburg to evaluate the feasibility of competing in a deteriorating market. In 1956, it was decided that the three companies should merge their operations into one large brewing organization. SAB took over the shares of Ohlsson’s and United Breweries, ensuring that the name South African Breweries would be retained. B. C. Smither from Ohlsson’s and M. W. J. Bull from United Breweries joined the SAB board of directors.
Despite having a 90 percent control over the beer market in South Africa, the new company faced challenges due to outdated production facilities, which led to a narrowing of profit margins. To address this issue, the company decided to centralize its operations in the Transvaal and the Western Province, regions where the three rival companies had previously competed against each other. Additionally, the old Castle Brewery in Johannesburg was shut down in 1958. After taking over as chairman from Constance in 1959, M. W. J. Bull spearheaded a diversification strategy into wines and spirits. As part of this strategy, SAB acquired the Stellenbosch Farmers Winery in 1960 and later added Monis Wineries to its portfolio.
Bull retired in 1964 and was succeeded by Dr. Frans J. C. Cronje, a government-experienced economist and lawyer. In 1966, the company faced a severe financial crisis due to Whitbread and Heineken’s entry into the South African beer market. Nonetheless, the government’s continuous excise duty increases posed the most detrimental impact as beer became the most heavily taxed beverage per serving. As a result, consumers began shifting towards wine and sorghum beer. SAB mitigated the crisis by boosting sales of Stellenbosch winery products.
In 1966, South African Breweries (SAB) CEO Ted Sceales played a crucial role in the establishment of Barsab Investment Trust. This subsidiary was jointly held by SAB and Thomas Barlow & Sons Ltd. (later Barlow Rand), a mining services group that was experiencing rapid growth. The main purpose of Barsab was to allow SAB and Barlow to invest in each other and combine their managerial and administrative resources. This arrangement helped SAB adapt to the quickly changing market conditions. Unfortunately, Sceales passed away in 1967 due to a car accident, but Barsab’s success continued under the leadership of the new CEO, Dick Goss.
South African Breweries tried to relocate its legal domicile from Britain to South Africa in 1950. However, the British government imposed tax obligations that made the process challenging. As a result, SAB had to comply with the British trade embargo against Rhodesia in 1967, despite earning a substantial portion of its income through investments in Rhodesia and Zambia.
South African Breweries (SAB) has been involved in South Africa since 1970, following parliamentary motions initiated in 1968. However, these motions were only approved on March 17, 1970. By May 26, 1970, SAB officially became a South African company after operating as an English company for 75 years.
In the late 1960s, SAB started brewing new beers and obtained licenses from foreign brewers such as Guinness, Amstel, Carling Black Label, and Rogue. Along with that, they acquired the Old Dutch and Stag brands within South Africa along with Whitbread.
Despite the increasing sales of wine and spirits, SAB divested some liquor-oriented hotels and restructured the remaining ones under a new subsidiary named the Southern Sun Hotel Corporation.
Southern Sun, which managed 50 hotels in South Africa, was created in 1969 through the merger of SAB’s hotel interests and the Sol Kerzner family’s interests. The South African government prohibited SAB from making further investments in the liquor industry and restricted its ability to invest internationally. Consequently, the company made various efforts to diversify its operations. In 1972, SAB and Barlow Rand decided to modify their collaboration and dissolve Barsab, resulting in SAB gaining control of two former Barsab holdings: the Shoe Corporation and Afcol, South Africa’s largest furniture manufacturer.
The next year, SAB purchased OK Bazaars, a sizable discount department store chain. Nevertheless, certain other investments were divested, such as ventures in banking and food products. Some brewing interests tried to contest SAB’s dominant position in the South African market. Different German interests established breweries in Botswana and Swaziland in an unsuccessful effort to establish a presence in South Africa. Louis Luyt, a South African entrepreneur, also did not succeed and sold his breweries to the Rembrandt Group in 1973.
The Luyt breweries, which were the foundation of Rembrandt’s alcoholic beverage group, were later integrated into Intercontinental Breweries. Dr. Anton Rupert, the chairman of Rembrandt, was determined to succeed and implemented a strategy centered around controlling liquor retail establishments. In 1978, Rembrandt obtained a 49 percent stake in Gilbey’s, the third largest liquor group in South Africa. This acquisition granted Rembrandt access to a total of 450 stores, including Gilbey’s 100 retail outlets. In response, South African Breweries purchased Union Wine, an independent liquor retailer with 24 hotels and over 50 retail outlets.
The government proposed a rationalization program to address the market conditions that hindered competition. As part of this program, SAB would acquire Rembrandt’s brewing interests, giving it a 99 percent share in the South African market. In return, SAB would transfer its wine and spirits operations to an independent subsidiary called Cape Wine and Distillers. The implementation of this program took place in November 1979. Additionally, Rembrandt would transfer its Oude Meester wine and spirits operations to Cape Wines, with SAB, Rembrandt, and the KWV cooperative each holding a 30 percent stake.
The remaining 10 percent interest was sold to private investors. In 1979, SAB acquired a 49 percent stake in Appletiser South Africa (Pty. ) Ltd., a producer of nonalcoholic sparkling fruit juices. Three years later, full control of Appletiser was obtained. The 1980s and early 1990s saw increased diversification due to government restrictions and worsening social conditions for blacks, which had become global concerns.
Despite the open calls for change from many business leaders, the government continued to restrict companies like SAB from transferring capital out of South Africa through foreign investments. As a result, these companies were often compelled to reinvest their surplus capital in South African ventures. This subsequently increased their stake in resolving social and human rights issues within the country. On the other hand, foreign-owned companies, facing fewer divestment restrictions, chose to sell their South African subsidiaries and shut down their offices there. This shift in dynamics made it easier for South African companies to acquire these businesses.
SAB acquired control of Amalgamated Beverage Industries Ltd., a Coca-Cola bottler, from the Coca-Cola Company in 1977. They also obtained several clothing retailers, including Scotts Stores (acquired in 1981) and the Edgars chain (added in 1982). In 1986, SAB completed the government order to sell its Solly Kramer retail liquor stores, five years ahead of the deadline. Additionally, in the same year, they established a joint venture with Ceres Fruit Juices to sell popular noncarbonated juice brands Ceres, Liquifruit, and Fruitee. In 1987, Murray B. Hofmeyer replaced Cronje as chairman.
In the period from 1987 to 1992, Hofmeyer and his successor, Meyer Kahn, significantly grew their business by acquiring various companies. They started by acquiring Lion Match Company in 1987, which is Africa’s leading producer of safety matches. In 1989, they further expanded by acquiring Da Gama Textiles Company, a prominent textile manufacturer based in South Africa. Their portfolio was further enhanced in 1992 when they added the Plate Glass Group, a specialized manufacturer of glass and board products.
During the post-apartheid era, there was a global expansion. The process of dismantling apartheid began in 1990 with the lifting of bans on opposition political parties and the release of political prisoners like Nelson Mandela. This led to significant and rapid political changes such as abolishing all remaining apartheid laws in 1991 and approving a new constitution through an all-white referendum in 1992, paving the way for free elections. In 1994, the African National Congress (ANC) won the first nationwide free elections and Mandela became president. SAB, which had already started hiring black individuals in the early 1980s mostly for self-interest reasons, observed that black people bought approximately 85 percent of beer consumed in South Africa.
From 1985 to 1994, the percentage of black salaried employees rose from 28 percent to 48 percent. However, after apartheid ended, SAB faced the risk of a government-ordered breakup of its beer monopoly. Under Kahn’s leadership, South African Breweries took advantage of relaxed laws on foreign investment and aggressively expanded internationally starting in 1993. In that same year, SAB invested $50 million to acquire an 80 percent ownership stake in Dreher Breweries, Hungary’s largest brewer. This marked the company’s initial entry into the emerging markets of central Europe.
From 1995 to 1997, SAB acquired joint control of Lech Brewery and Tyskie Brewery in Poland, along with three breweries in Romania and one brewery in Slovakia. In 1994, SAB partnered with China Resources Enterprise Limited in Hong Kong, ultimately gaining majority control over five Chinese breweries by early 1998. Furthermore, SAB expanded its presence in sub-Saharan Africa by obtaining management control over breweries in Botswana, Swaziland, Lesotho, Zambia, Tanzania, Mozambique, Ghana Kenya Ethiopia Zimbabwe and Uganda.
In August 1997, Kahn became the first civilian to lead the South African police service. He had previously advocated for economic liberalization and restoring law and order. Kahn was tasked with addressing a widespread crime epidemic. Cyril Ramaphosa, a former trade unionist and prominent black capitalist in South Africa, assumed the role of acting chairman of SAB.
South African Breweries, which was the fourth largest brewer in the world at that time, had a rapidly expanding international brewing empire. The company decided to sell its noncore businesses in order to focus more on brewing and its other beverage operations. Under Ramaphosa’s leadership, SAB divested its holdings in OK Bazaars, Afcol, Da Gama Textiles, Edgars, Lion Match, and Conshu Holdings (a footwear maker) from late 1997 to early 1999. By selling Plate Glass in mid-1999, SAB had reduced its holdings to beer, soft drinks, wine and liquor, and hotels and gaming.
The year 1999 was a significant year for SAB in many aspects. In order to gain better access to capital markets, the company relocated its headquarters to London and changed its name to South African Breweries plc. Additionally, it shifted its primary stock exchange listing from Johannesburg to London, while keeping the former as a secondary listing. It successfully raised ? 300 million through its London listing to support its international expansion plans. Moreover, there were also management changes during this time.
Kahn finished his time at the police service and returned as chairman, while Ramaphosa stayed on the board as a director. Graham Mackey, who had been the group managing director since 1997, was appointed as chief executive in early 1999. SAB purchased a stake in another Chinese brewery and started beer production in Russia at Kaluga Brewing Company, which they had acquired in the previous year. The two Polish breweries owned by SAB, Lech and Tyskie, were combined to create Kompania Piwowarska S.A.
The major brewery transaction of that year was the acquisition by SAB of a controlling interest in Pilsner Urquell and Radegast, two Czech Republic brewers, for $321 million from Nomura International plc in October. These two breweries held a combined 44 percent market share, making them the leading beer producers in a country with the highest per capita beer consumption worldwide. The highlight of this deal was obtaining the renowned Pilsner Urquell brand, which is the original pilsner and the most famous Czech beer. It was first brewed in Pilsen in 1842.
SAB initiated strategies to establish Pilsner Urquell as its primary brand beyond Africa and to enter developed markets by exporting this brand. This acquisition enabled South African Breweries to dominate the central European beer market and rise to third place among global brewing giants.
Moving into the Developed World As SABMiller, Early 2000s
SAB’s expansion into emerging markets continued during the early 2000s when South African Breweries ventured into the Indian beer market in 2000. This move involved acquiring a majority stake in Narang Breweries. The following year, SAB purchased controlling stakes in two more Indian brewers – Mysore Breweries and Rochees Breweries.
In April 2001, SAB formed a strategic alliance with Castel group, Africa’s two largest beverage companies. As part of the alliance, SAB exchanged a 38 percent interest in its African division (excluding South Africa) for a 20 percent stake in Castel’s beer business. This collaboration allowed SAB to gain ownership in a wider range of African breweries. Both partners also agreed to pursue joint ventures to invest in new African markets on a 50-50 basis.
In 2001, South African Breweries (SAB) made significant advances. It formed a new partnership with the Sichuan Blue Sword Breweries Group in China, which had ownership of ten breweries in Sichuan province. At this point, SAB had investments in over 24 Chinese breweries and secured its position as the second-largest brewer in the nation, following Tsingtao. Furthermore, SAB achieved another milestone by becoming the inaugural international brewer to venture into the Central American market.
In November, SAB acquired a 97 percent stake in Cerveceria Hondurena, S. A., the main brewer and the biggest bottler of soft drinks (Coca-Cola) in Honduras, from Dole Food Company Inc. for $537 million. At the same time, SAB and the well-known Meza family of El Salvador formed a partnership called BevCo Ltd. In this venture, SAB added its newly acquired Honduran business and the Meza family contributed most of its brewing, soft drink, and bottled water enterprises in El Salvador.
By fiscal 2002, approximately 55% of SAB’s $4.6 billion in revenues were generated by operations outside of South Africa that had been acquired within the past eight years. In just one year, after acquiring Miller Brewing Company in the United States – the world’s largest beer market – SAB’s non-South African operations accounted for an impressive 75% of its total revenues. The acquisition of Miller Brewing Company occurred in July 2002 and was executed through a stock swap valued at $3.48 billion with Philip Morris Companies Inc., the owner at that time. Along with the acquisition, SAB also took on $2 billion in debt from Miller.
SABMiller plc, formerly known as SAB, became the world’s second largest brewer after acquiring SAB. It ranked just below Anheuser-Busch. Altria Group, Inc., previously Philip Morris, became SABMiller’s biggest shareholder with a 36 percent economic interest and 25 percent of the voting rights. They also obtained three seats on the SABMiller board. Despite earning $4.4 billion in revenue in 2001, Miller was losing market share to both Anheuser-Busch and Adolph Coors Company. To address this issue, SABMiller took immediate action by closing one of Miller’s nine breweries and appointing Norman Adami as the CEO. Adami had previously overseen SABMiller’s South African brewery operations. Furthermore, in March 2003, SABMiller consolidated its hotel and gaming interests into a newly formed company called Tsogo Sun to focus on its core operations.
Holdings (Pty. ) Ltd., which was intended to be majority controlled by Tsogo Investments, a black empowerment company, had SABMiller holding an initial 49 percent interest in the newly formed company. SABMiller expressed its intention to continue reducing its hospitality holdings despite just completing the acquisition of Miller. The company did not hesitate to make additional purchases and deals, evident when they acquired Browar Dojlidy, a brewer in northeastern Poland, for $38 million earlier in 2003. In June, SABMiller made its initial significant investment in Western Europe by purchasing a 60 percent stake in Birra Peroni S.A., the second-largest brewing company in Italy, for EUR 246 million ($279 million).
In 2003, Peroni stopped producing and selling Budweiser in Italy and began importing Miller Genuine Draft. SABMiller also expanded globally by introducing Pilsner Urquell and Miller Genuine Draft in South Africa and bringing Miller Genuine Draft to other European countries like Russia, Romania, the Czech Republic, and Poland.
In Asia, SABMiller united its operations in India by combining Mysore Breweries with Shaw Wallace and Company Limited, resulting in a joint venture named Shaw Wallace Breweries Limited. Mysore owns 50 percent of this venture, and the consolidation cost SABMiller $132.8 million. Additionally, SABMiller invested HK$675 million ($87 million) for a 29.6 percent share in Harbin Group Limited, which is the largest brewer in China’s northeastern region and the country’s fourth largest overall.
During the early 21st century, SABMiller, a company focused on beverages (especially beer) and operating globally, was significantly different from the apartheid-era SAB. The latter had a prominent presence in South Africa with diversified interests. SABMiller’s growth was achieved through an ambitious and targeted international expansion strategy. Nevertheless, the company faced a considerable task in revitalizing Miller Brewing, with Mackey estimating a potential two to three years for the process to be completed by late 2002.
While trying to make Miller Genuine Draft a global premium brand and introducing new advertising campaigns in the US, the new Miller owners aimed to reduce the number of brands in the portfolio to focus on the higher-end market. SABMiller’s ambitious strategies, although not fully implemented, had the potential for significant success.