A Look at Breweries – Growth Through Acquisitions: SABMiller plc (SAB) and More

SABMiller plc (LON:SAB)

SABMiller is a holding company with interests in brewing and beverages across the globe. It has more than 200 brands of beer in its portfolio and is also a bottler for Coca-Cola. Like Diageo and Ab InBEv, SabMiller too has been making acquisitions. The company’s acquisitions in 2011-2012 include:

1). 27.5% interest in BIH Brasseries International Holding (Angola) Ltd

2). remaining 50% share in Pacific Beverages Pty Ltd

3). 33% interest in International Breweries

4). Additional 2.9% interest in Tanzania Breweries Ltd

5). 100% interest in Foster’s Group Ltd

SABMiller is now looking to consolidate its position in the Chinese beer market with the acquisition of Kingway Breweries, which controls seven breweries, four of which are in the fastest growing region of Guangdong province on the South China Sea coast.

The company has a relatively lower operating margin of 24.43%, diluted trailing twelve month EPS of 2.76. Year-on-year, the company posted quarterly earnings growth of 15.10%.

Summary

It is not clear whether the strategy of growing by acquiring multi-national and regional companies in the industry stems from fears of a fall in beer consumption or simply an effort on the part of cash rich companies to expand horizontally. Whatever be the reason, it is a strategy that is working very well.

Despite reports of a fall in beer consumption in the developed world, the global players in the brewing industry have developed an interesting growth strategy by buying brewing interests in emerging markets. Companies like Diageo stand to benefit in the developed world due to the shift seen in consumer preference towards spirits. On the other side, beer majors, AB InBev and SABMIller, are going all out to cash in the growing demand for beer in the emerging markets.

The article A Look at Breweries – Growth Through Acquisitions originally appeared on Fool.com and is written by Sujata Dutta.

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