| Fri 16 May 2003, 9:59 | | Birra Peroni and SABMiller may make happy bedfello |
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Birra Peroni and SABMiller may make happy bedfellows
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Consumer Industries Editor
CAPE TOWN Time is likely to show that SABMiller has walked off with a prize in managing to secure Italian brewer Birra Peroni.
Leaving aside aspects of the deal that the market dislikes, like the hefty price and the extra distraction while SABMiller is digesting Miller Brewing in the US, Peroni will in many ways slot neatly into the SABMiller fold in the next few years.
SABMiller's stated strategy is to drive volumes and productivity in its major markets, which it defines as central Europe, north and central America, Asia, Africa and SA.
The growing empire stretches from Poland in the northeast to the Canary Islands off the northwest coast of Africa. Italy fits neatly into the diagonal, defying criticism that SABMiller is straying from its area of geographic strength.
SABMiller says there is little distinction between western and eastern Europe now. It is after growth markets. In Europe as a whole, that eliminates the big beerdrinking markets like Germany and the UK, which are shrinking. The only other country with beer growth potential in Europe is Spain, where per capita consumption is expected to rise to 84l a year by 2006 from 75l at present.
Peroni is well spread across Italy. It has four hi-tech production plants in the central and northern parts of the country in Rome, Padua, Naples and Bari as well as 41 warehouses around Italy and control of 17 distributors.
It focuses on beer and also has a chain of restaurants called Crazy Bull Cafe. (It would be surprising if SABMiller sold these off). Peroni's production capacity is 5,7-million hectolitres and volumes sold last year were 4,4-million hectolitres.
Given Peroni's technology and its spare capacity, SABMiller's capital investment will be minimal in the short term.
But there is certainly room for improvement. It appears from the figures published by SABMiller this week that Peroni's operating margin is about 9,1%, which compares to SABMiller Europe's operating margin of about 15,5% last year , up from 13,5% in 2001.
SABMiller could be looking to improve Peroni's efficiency considerably. Because of the high initial cost of a brewery and the fixed costs of distribution, volume is the key to profitable brewing. For Peroni, the volume should come from growth in the Italian beer market, exports and SABMiller's global marketing of its brands.
Peroni is not a huge acquisition in SABMiller's universe. Europe accounts for about 25% of SABMiller's total annual beer production of about 120-million hectolitres. With Peroni included, the figure is about 28%. In such a tightly fought region, this is a strategic gain.
May 16 2003 07:10:59:000AM Charlotte Mathews Business Day 1st Edition
Friday
16 May 2003
