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Tag Archive 'Graham MacKay'

Oct 05 2009

And what about transparency in big companies?

Published by under Companies,More News

I’m back on this issue of information dissemination and transparency. Sorry, for boring you. But, as far as I’m concerned, the danger lurking behind it is (in the long-term) on a par with the danger which emanated from the financial sector for the world economy in the years before 2008**.

I’m referring to the duty of listed companies to inform the public of what they are doing. And the games some multinationals play when it comes to this “duty to disclose”.

Stock exchanges say their listed companies must publish all information of “wesenlike belang”. Fine. But, it’s over to those companies to interpret “wesenlike belang” and boy, do these interpretations run amok!

Some say, when the CEO of a major subsidiary in Europe resigns, it is of “wesenlike belang” and a press release has to go out. Others don’t. Some lose R500 million and say it’s not important enough to tell the shareholders. Others lose R1 million and release a long statement.

What is “wesenlik” varies from company to company, depending on their sizes and who is at their helms.

When companies operate in countries with strange languages, the definition of what needs to be communicated to the outside world, gets even fuzzier. What is easier for a SA listed company than to do business in eastern Europe and never release any information in English about what it does there? The local media may report, but the news seldom make it out of the country. And the JSE doesn’t have the foggiest…

In short, the issue of information dissemination is a thorny one – and open to manipulation.

Naspers is right up there when it comes to “playing around” with this duty to inform. It always moves in the grey area, releasing only the bare minimum and then immediately withdrawing behind high walls when asked for more. Yes, it’s quite ironic, that a company which started out as a “house of journalists” should now be so shy when it comes to disseminating information.

I was reminded again of this truth, when reading this article by Reuters. (It’s about Naspers wanting to extend a $800 million loan by 2 years from 2011 to 2013….pretty important, I’ll say. Why isn’t there anything about it on the Naspers portal under “Media Centre”?)

I refer here to Naspers, but I’m sure what is true here, is true for many big companies out there.

There are, of course, also the exceptions. And, I’m proud to say, some of the best big companies (in this regard) are also SA-linked. Take, for instance, SABMiller, the 2nd biggest beer company in the world.

In my experience, this is a multinational which takes its duty to inform seriously! A quick glance at the SABMiller and Naspers corporate websites confirms this view. The one is lively, packed with news and efforts to build a positive image. The other is static, thin on press releases and reminds of a history lesson.

So far this year Naspers has published nine press releases, including one on the Paarl fire and one on prizes awarded by Ton Vosloo. Between 23 September 2009 and 5 October 2009 (a period of 12 days) SABMiller published exactly the same number of press releases – nine.

If a multinational company such as Naspers (working flat-out to internationalize) adhered to the JSE and LSE rules on disclosure with nine press releases over nine months, then the JSE and LSE rules are too slack.

** The bankers have done their bit to rubbish the image of the free market; non-transparent, arrogant company bosses may still push the world economy into the arms of the socialists.

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Mar 10 2009

Achtung! Mackay is reaching for his purse

Published by under Companies,More News

Dominic Walsh of Times Online interviewed Graham Mackay, CEO of SABMiller, about the past and the future on the 10th anniversary of the company’s move from Johannesburg to London. The story is worth a read. Especially the last few paragraphs, which focus on the future.

This is what Walsh wrote: The SAB boss, who remains coy about his retirement plans, hints at a possible interest in the assets that Anheuser-Busch InBev is seeking to dispose of to reduce its debt mountain and has previously indicated an interest in Foster’s, the Australian lager maker.

It is clear, however, that if further targets do come up for grabs, SABMiller will be first in the queue of potential bidders. 

So, Mackay is on the acquisition trail again (or still). Where will he hit next? My guess is the InBev interests in Germany, which Dr. Oetker failed to buy earlier this year, after protracted negotiations. The full story here. Why? Because SABMiller recently announced ambitious plans to grow its sales in Germany. That one here. More importantly, because people with inside info to the industry say so…

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Nov 10 2008

We don’t tremble, says SABMiller’s Mackay

Published by under Companies,More News

This article was first posted to my old blog on 30/6/2008. I republish it here today, because it’s actual again with the news that InBev has to sell businesses to finance the Anheuser-Busch deal. 

The Belgian beer giant Inbev has made an offer to buy Anheuser-Busch, the biggest beer brewer in the US, for $46 billion. (Which is, by the way, almost the same amount Microsoft offered for search engine Yahoo! earlier this year). Should the bid be successful, the new entity will be the world’s biggest beer brewer and London-based SABMiller will be pushed into second place.

On 23 June Handelsblatt, Germany’s biggest national daily business newspaper, published an interview with SABMiller boss Graham Mackay. 

Here the interview as it appeared (translated by me):

Global size alone brings no benefits – Mackay

by Dirk Heilmann

The chairman of the board of the world’s biggest beer brewer SABMiller, reacts to the planned billion dollar deal between rivals Inbev and Anheuser-Busch and the special rules governing the beer market. In addition, Graham Mackay talks about his interest in German family breweries.

Handelsblatt: Your competitor Inbev wants to take over the US beer brewer Anheuser-Busch for $46 billion and wrestle the world leadership from you. What do you think about that?

Mackay: It will be very difficult for Inbev to obtain savings which justify the offered price. In the beer market, take-overs do not automatically bring strong synergies. The global beer brands are still in their baby shoes. That makes it very difficult to obtain synergies across borders. The Inbev/Anheuser-Busch deal will not bring many local synergies in individual markets. So, Inbev must think they will be able to run the Anheuser-Busch business more efficiently than the current management.

Handelsblatt: Why is that not possible?

Mackay: We have gained some experience with take-overs all over the world. With most of these take-overs we bargained we would be able to manage the businesses better than the managements had done up to that point. That was possible, for instance, when a company had been privatised shortly before, which enabled us to achieve much by bringing in a professional, experienced management. But, until just a few years ago, Anheuser was still known as the most competitive brewer in the world. One wonders how Inbev intends to reach such high savings, without damaging the business in the process.

Handelsblatt: So, you would not be interested to enter the fray with a counter-offer?

Mackay: It would be very difficult for us to intervene in such a deal – irrespective of the price. After all, we have a good business and established brand relations in the US.

Handelsblatt: Inbev might turn its attention to SAB, should its take-over attempt in the US fail. How would you react to that?

Mackay: There would have been markets in which we could have attained synergies, and others in which anti-trust intervention could have been expected. If Inbev were to cast a serious eye on us, it would have to be willing to pay a very high price. It would be extremely difficult for every bidder to convince our shareholders that it could manage our business better than we do. That may sound a bit smug, but I really believe it.

Handelsblatt: What would the take-over of Anheuser by Inbev mean to your young joint venture with Molson Coors, the second biggest beer brewer in the US?

Mackay: We most definitely do not tremble. Inbev will be very busy with the integration and the realisation of the promised savings. I can’t imagine that the cost reductions needed for that, will improve the competitiveness of Anheuser in the immediate future. Admittedly, Anheuser is 50% bigger than us in the US, but the momentum is on our side. We are in a strong position, and are moving in the right direction and that will not change in any way with this deal.

Handelsblatt: Until now, SAB’s involvement in the US has not been financially successful. Correct?

Mackay: It is true that our investment in Miller in 2002 has not yet returned its capital cost. But, that will quickly happen with the new joint venture. The Miller deal has, however, helped us in another way: It strengthened our profile and taught us a lot about mature markets. It has made us a global player. One of the reasons why the Miller deal has to date not returned the capital cost is the massive discounts handed out by Anheuser to brake our progress. That has worked, but has been very costly to them. In the recent past, it has been one of the causes of the position Anheuser finds itself in now.

Handelsblatt: Would it be a problem for you not to be the number one on the world beer market any longer?

Mackay: Presently, a number of estimates put us in the number one position measured by volume. But, I can’t say that I now feel any different from the time we were number two and three. What we want to produce, is growth and return. Global size on its own brings nothing in the beer market. One must also be able to take advantage of size. Within a particular country, size is very important. When you are the market leader in a country and operate efficiently, you usually make more money than the others.

Handelsblatt: So, the beer industry is not subject to the same consolidation logic as other sectors?

Mackay: That’s correct. In comparison to, for instance, spirits or cigarettes. Beer is a local business. It is attached to local brands and value-creation chains.

Handelsblatt: Why are there then so many international take-overs in the sector?

Mackay: Most recently, because of the fall of the Iron Curtain. In the wake thereof, there were many privatisations in Eastern Europe and elsewhere. That made it possible for us to make acquisitions in totally new markets. And we could really increase the values of these breweries with professional managements. That was not really a wave of consolidation. At the end of this phase, there are now big brewery concerns with aggressive managements, which believe in consolidation.

Handelsblatt: And this is not a game you have to participate in?

Mackay: I don’t think so. SAB Miller is a robust, global player. We don’t have to make any deals in response to Inbev. We will continue to look at everything coming onto the market. And the number of the opportunities coming to market might increase. Due to the high prices, many brewery owners might see this as the right moment to make money.

Handelsblatt: In this regard, do you also have German family businesses in your sight?

Mackay: Most certainly. Should an opportunity present itself to buy a bigger brand, then we would take a look at it. But, Germany is a special case. Here owners hang onto their breweries – which they have in many cases operated for generations already – especially tight. In Germany the development of national brands have proceeded very slowly. Here it is very difficult to consolidate and acquire market power. That’s why we have until now focussed on importing premium brands, such as Pilsner Urquell. We are relatively small, but are growing quite strongly – which is something the German market is not doing.

Handelsblatt: There is the general trend for traditional beer markets to stagnate, or shrink. Is it only possible for beer breweries to grow in emerging market countries?

Mackay: That is not a problem specific to beer. The same holds for toothpaste or washing powder. It is, therefore, the right strategy to move on the level of the premium brands. There we can continue on a growth path – even in mature markets with declining per capita consumptions.

Handelsblatt: Does this also hold true in times of business cycle downswings?

Mackay: The trend towards premium brands has practically no end. In good times it is really strong and in bad times somewhat weaker. Only very seldom the trend turns around in individual markets. But, more recently, the revival of the local markets has been another trend. That leads to a fragmentation of the premium segment.

Handelsblatt: How long can the strong growth in beer sales continue in the emerging market countries?

Mackay: The question is no longer whether growth will slow, but rather by how much it will slow. The commodities boom is not as strong now as it was just a few months ago and many emerging markets have inflation shocks to come to terms with. Interest rates have risen and consumer goods are under pressure. We continue to grow in these countries, but not as strongly as last year.

Handelsblatt: On commodities: How does SAB Miller handle the cost rises?

Mackay: We have increased prices quite substantially and have improved our productivity. This helped us to maintain our operative margin at 18 percent. I think, under the circumstances, it is a good performance.

Handelsblatt: Which commodity prices give you the biggest headache?

Mackay: The rise of commodity prices started out with the rise in energy prices, which drove our packaging costs up. That round was overtaken by agriculture products, such as barley, malt and hop, whose prices rose more than energy prices. Now another wave of energy price rises is upon us – and we spend about double as much on packaging as on agriculture products. We cannot say we have the worst behind us yet. I expect the oil price to rise further, but hope the prices of agriculture products will drop again soon.

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Nov 03 2008

Mackay on Philip Morris board

Published by under More News,People

Behind every successful man stands 100s who say they were at university with him. I wasn’t at university with him, but played in the same squash team with him at a Johannesburg club between 1987 and 1990, when he was already managing director of South African Breweries. I remember Graham Mackay as a very competitive guy, with a lot of ball sense.

He obviously has a lot of business sense too. He’s been CEO of SABMiller, the world’s second biggest beer brewer, for a while. Now he’s also a member of the board of the world’s biggest cigarette manufacturer Philip Morris International

He accepted the invitation to join already in January. Back then he said he’d take up the position “later in 2008″.

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