By Peter Evans
LONDON--In 2002, soon after acquiring Miller Brewing Co. from
Philip Morris Cos., the newly formed SABMiller PLC unveiled its
plan for world beer domination: It launched Pilsner Urquell--a
premium Czech lager--into the U.S. market.
In doing so, SAB was breaking with its past. The U.K.-based
brewer had become the world's second-biggest beer company by
stocking up on popular local brands in countries such as Ecuador,
Poland and Tanzania. With Pilsner Urquell, it wanted to build a
global beer brand.
SAB ended up spending $20 million on the U.S. rollout of Pilsner
Urquell, but it was a "total flop," said Nick Fell, the company's
marketing director. And it was just one of several failed attempts
by SAB in the early 2000s to cultivate a global beer.
"In the early days, we handled a global premium brand in exactly
the same way as we handed a local brand," Mr. Fell said. "We put it
into mass distribution, we pumped a lot of basic advertising and
promotion behind it. And then we failed."
More recently, SAB took a different approach to having a global
beer brand: buying one outright, with a bid for Heineken NV. But in
September, Heineken rejected the takeover overture, which could
have led to a deal potentially worth about $40 billion. Heineken's
namesake lager brand is coveted because it is sold--often at
premium prices--in more than 100 countries.
Now, SABMiller is back to the drawing board.
Beers with a global footprint are rare but have clear advantages
over local labels. The tried-and-trusted marketing strategies and
distribution channels of a world beer like Budweiser or Heineken
make it easier to launch into new markets, a key consideration.
They can also be sold for higher prices than local brews.
SAB does have an alternative to spending billions on an
established brand: It could expand one from its existing stable.
Its big brands include Miller Genuine Draft, Grolsch and Peroni, an
Italian lager that is the focus of SAB's latest high-end expansion
efforts.
SAB already owns a 49% stake in the world's top-selling beer,
China's Snow. But Snow has limited appeal and distribution outside
its homeland. Anheuser-Busch InBev SA, the world's No. 1 brewer by
sales, owns four of the world's top 10 beers, including
Budweiser.
For years, SAB's local approach has contrasted with AB InBev's
focus on building global megabrands. As well as Budweiser, the
Belgian brewer owns Bud Light and Stella Artois.
SAB has Club Premium, the top-selling lager in Mozambique, and
St. Louis, Botswana's favorite beer brand.
SAB executives insist local brands are still its best route to
success. "We remain convinced beer is a fundamentally local
business," Chief Executive Alan Clark told The Wall Street Journal
last year.
But the company's recent Heineken approach--as well as expanded
budgets and international distribution for Miller Genuine Draft and
Peroni--suggests SAB is modifying that view.
"The only thing that's really missing on the scene, especially
as [SAB] takes more of its brands across borders within regions, is
a truly global beer brand," said Chris Wickham, an analyst at Oriel
Securities.
In part, SAB's change of tack reflects increasing competition
among major brewers to sell to consumers in markets where beer
consumption is relatively low, especially in Africa and Asia.
Africa alone will have 65 million more legal drinkers by 2023,
according to the African Development Bank. Another reason for SAB's
renewed interest in a world-wide brand: It would make the company
less susceptible to a long-rumored takeover bid from AB InBev. Mr.
Clark last month rejected that theory, saying the move for Heineken
was "assertive, not defensive." AB InBev has declined to comment on
the deal speculation.
Either way, buying Heineken seems an unlikely solution for SAB.
The Heineken family owns just over 50% of the parent company and
has said it is unlikely to sell, meaning SAB may look elsewhere for
a blockbuster beer brand.
Industry analysts have speculated that SAB could target Turkey's
Anadolu Efes, in which it already owns a 24% stake. Efes is
Turkey's No. 1 beer and has a strong presence in Russia, with the
potential for expansion in Asia, experts say.
If SAB can't buy a global beer, it plans another attempt at
building one, executives at the company said. In recent years, SAB
has invested heavily in Peroni and given another push to Pilsner
Urquell throughout Europe and the U.S.
In the U.K., Peroni has succeeded through a premium pricing
strategy--a draft pint sells for around GBP5.50 ($8.73)--and by
using ads that target women as much as men. U.K. sales of the beer,
which SAB insists is served in a bespoke Peroni glass, increased
15% in the six months ended September. SAB said it doesn't break
out specific sales figures for its brands.
SAB has similar plans for Peroni in the U.S., already its
third-largest market outside Italy. The brand is "growing strongly"
and has the potential to take price increases, said Mr. Fell, SAB's
marketing director.
"We want to behave as if we were Ferrari, or Armani, or Gucci,"
he said. "We don't want to attract 25-year-old plumbers who are
quite happy being plumbers."
Write to Peter Evans at peter.evans@wsj.com
Corrections & Amplifications
The Anheuser-Busch InBev beer brand Corona is no longer among
the world's top 10 beers by volume, according to Euromonitor
International. An earlier version of this article incorrectly said
Corona was a top-10 brand.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires