| BOCA RATON, Fla.
BOCA RATON, Fla. Feb 20 One of the biggest
challenges facing the incoming chief executive of SABMiller Plc
will be continuing to grow the business as strongly in a
world with fewer acquisitions to make, according to its outgoing
With the global beer industry undergoing a wave of
consolidation over the last two decades, brewers can no longer
count on much of a boost from mergers and acquisitions - deals
that helped transition SABMiller from a regional South African
brewer to the world's second-biggest, with over 200 brands
ranging from Miller Lite to Peroni to Grolsch.
"The opportunity to bring on new businesses, integrate them
and derive earnings ... that opportunity is diminishing," said
SABMiller CEO Graham Mackay in an interview on Tuesday.
"Everywhere we are relying more on organic growth. And that's a
lot easier in some markets than in others."
That will be one issue facing Alan Clark, who will take the
reins at SAB this summer.
"How to drive organic growth is one that he's going to face
particularly keenly," Mackay said on the sidelines of the
Consumer Analyst Group of New York conference in Boca Raton,
SABMiller recently announced a deal in China through a local
joint venture. Sales volume in the country declined in the most
recent period, however, after the coldest winter there in 28
"China is a long-term growth market, no question," Mackay
said. "It's never been a particularly profitable market. The
margins are low because prices are very low. They still look set
to be at pretty low levels for some time to come."
By contrast, Mackay said growth was "extremely profitable"
in Africa, where per capita consumption is much lower, but
prices are higher. Africans, who have a cultural proclivity to
drink beer, still only drink about one-tenth the amount, on
average, as their American counterparts.
SABMiller generates half of its revenue and nearly
two-thirds of its profits from Latin America and Africa.
Mergers and acquisitions have "gotten stickier," Mackay
said, because of fewer available assets and high price
expectations. He said SAB's appetite for acquisitions has not
changed from what it has been, even if its balance sheet is a
bit more extended as a result of the 2011 acquisition of
The biggest beer deal on the agenda right now is Anheuser
Busch InBev SA's pending takeover of Mexico's Grupo
Modelo. The world leader last week revised its
$20.1 billion deal to satisfy antitrust concerns that led the
U.S. government to sue to block the deal.
Mackay said he would expect the deal to ultimately get done.
"I would be personally surprised if ABI doesn't get this
thing through one way or the other," Mackay said. "Whether the
major concession they made recently is enough to get it across
the line, I have no inside knowledge. There's lots of
commentary, but I'm not sure I can really add to it."
He did however question the government's use of the argument
regarding "coordinated price action."
The DOJ has argued that if AB InBev owned Modelo - even if
Constellation Brands Inc owned the U.S. distributor
Crown Imports as planned - it would become less likely to buck
pricing trends set out by AB InBev or Miller Coors, the U.S.
joint venture of SABMiller and Molson Coors Brewing Co
. To satisfy that concern, AB InBev revised its deal to
include the sale to Constellation of the Piedras Negras brewery,
which supplies the Modelo beer destined for the United States.
As for the ultimate end-game in beer consolidation - the
often speculated on possible takeover of SABMiller by AB InBev -
Mackay said the choice was not his to make.
"The decision of whether to do that or not is obviously not
going to be mine," he said. "It'd be a huge and very expensive
deal. Our job, as I've always said, is to make our business as
expensive to buy as possible and that's it."
The company's market capitalization is about $80 billion,
plus it has about $17 billion of debt, Mackay said.
"It would be a very expensive deal for them," he added. "Of
course they'd have to pay, I think, a fairly high premium on
whatever our price was at the time."
Mackay is preparing to step down from his current role, some
35 years after he joined South African Breweries Ltd.
He became group managing director in 1997 and chief
executive of South African Breweries Plc when it listed on the
London Stock Exchange in 1999. In 2012, he was appointed
executive chairman, with plans to become non-executive chairman
at the 2013 annual general meeting.
During his tenure, the company underwent aggressive
international expansion, moved its primary listing from
Johannesburg to London and acquired Miller Brewing in the United
"I've been extraordinarily lucky because I happen to have
been running the show at the time when it was without doubt the
most exciting period in the world beer industry that there's
ever been and it can't happen again either," he said.
"The new guys are much cleverer than I am ... but it will
get harder to drive out growth because the consolidation phase
has passed its first flush."
Clark, who is taking over at this year's general meeting,
joined South African Breweries in 1990 and became COO last year.
When asked what he was most proud of, the 63-year-old Mackay
cited getting rid of SAB's other interests in South Africa to
focus on beer and moving to London.
"That was a seminal decision," he said. "I obviously didn't
take it on my own, but that worked."
On the flip side, Mackay said there are also things he
"should have done if I'd been cleverer, more energetic or could
"I don't regret any of the transactions we did. I suppose
there are some we turned our noses up at, that with hindsight we
might have been more accommodating about," he said.
He declined to be more specific.
As for Mackay's own plans, he expects to play a bit more
He also will keep his seats on the boards of SABMiller,
Reckitt Benckiser Group Plc and Philip Morris
"That's kind of enough to keep me out of mischief for a
bit," he added.
(Reporting by Martinne Geller in Boca Raton, Florida. Editing
by Andre Grenon)