Business Strategy study guide

Beer companies developed sophisticated distribution

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Beer companies developed sophisticated distribution systems to serve different needs of two classes of beer retailers - “Shebeen” retailers – illicit business in the beer trade – during prohibition period (illegal for blacks) – sporadically and remotely located – BUT, limited capacity for storage or refrigeration, poor distribution - New Market Opportunities Attract New Competitors (1962-1990) o 1962 – SA government repealed legislation that prohibited the purchase of beer and liquor products by blacks o By early 1990s, SAB solidified its market position – 98% share in home market - Guinness : owned by Diageo – distributed by SAB until 1999 termination - Heineken : 3 rd largest brewer in the world by volume, distributed by SAB - Namibia Breweries - Sorghum Beer - SAB Domestic Sstrategy – Focus on Operation Excellence: o Strategy of “operational excellence” o Putting affordable beer within arm’s reach of all consumers through efficient beer production and distribution o Invested in production facilities and deployed the best technology o World’s most efficient brewers
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o Lowered the real cost of beer each year for over twenty years o Developed an IS for tracking beer product through the entire chain from brewery to retail outlet o Distribution strategy facilitated segmentation of customers into various categories o Two types of customers: those with predominately on-premise consumption and those with off-premise consumption o SAB invested aggressively in worker training to improve overall skill level of workforce (5% of payroll dedicated to training and development) - SAB Enters Tanzania o Apartheid isolated SA companies like SAB from the international business o Tanzanian government controlled production, marketing, and distribution o Decided to position beer business for expansion and growth - Tanzania in the 1990s o Economy was heavily dependent on foreign aid (IMF) o Reforms led to government liberalization of agricultural sector o Tanzania had poor infrastructure (setback) - Tanzania Breweries Limited o Beer production was a simple process o SAB saw Tanzania Breweries as hazardous o Imported most of its raw materials and paid high taxes on imports o Distribution network in Tanzania suffered from an insufficient supply of beer and significant overcapacity in the distribution channel - The Turnaround o Danie thought the company’s first priority was to boost beer production o Fixing damaged brewery equipment and maintenance schedulings o Replacing machines – improved significantly o Streamlined distribution network – cut them and becoming more stringent o Launched a marketing strategy to resurrect the “Safari Lager” brand name – sponsor for country’s main soccer league o Company produced 3x its original level of volume while cutting workforce - Competition o Tanzanian beer market wasn’t very competitive o By 1990s, the market became one of the fastest growing markets in the world: Guinness, Interbrew, Heineken - Tanzanian Breweries in the Future o
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