Why you should never tolerate complacency

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What made SABMiller a world leader?“ someone asked in the Q&A part of one of my presentations recently.

It requires a bit of explanation.

Each of the many mega-successful South African companies that have taken their smart ideas global have done something particularly well. Nando’s created casual dining in the UK and took its superlative branding and food concept global, Natasha Sideris of Tasha’s has taken her own pain-staking attention to detail to the UAE and is looking to expand her influence into Saudi Arabia and the UK over the next two years. Discovery has taken its obsession with data driven decision making global through attaching its Vitality rewards program to health insurers around the world, Investec took its customer obsession and the courage to standout in new markets as being different to the world. Stefan Antoni through his architectural design business of SAOTA took exceptionalism beyond the constraints of a South African marketplace and today 98% of this work is done out of Cape Town for clients around the world.

Of all of them SAB stands out for the fact that it grew globally exporting very little of its core product. It grew by acquiring breweries, most of which had lost their ability to serve their customers.

Rather than emulate rivals like Budweiser, Carlsberg and Heineken which pursued a strategy of global brand champions, SAB treated beer as a local product, with local relevance and a strong heritage in their home market. Instead, it developed its IP and exported systems and processes to newly acquired businesses around the globe. How it did that is what made it a great operator and the very best at what it did.

It figured out two very important things in the 1980’s as it sat trapped in sanctions era South Africa. It understood that apartheid, the vile ideology which made the country a global pariah, would have to end at some point; and the Berlin Wall the symbol of communist eastern Europe would eventually come down. That would herald a new era in geopolitics and would mean that economies which were previously inaccessible to investors would open up and be hungry for investment.  That would open huge opportunities for the worlds’ most effective brewers to buy broken, but once proud brands across multiple countries. SAB set about becoming battle ready long before it was apparent that either one of those political shifts was imminent.

It could have waited for the right time. It could have waited for certainty. It could have waited for PW Botha’s second and debilitating stroke which made his leadership position untenable before starting. It had no idea when the Soviet high command would have to acknowledge it could no longer sustain its ideology.

Instead. SAB simply began its preparations, knowing that rivals too were readying for a once-in-a-lifetime series of events which would herald a new era of opportunity.

It’s worth remembering the environment at the time. In South Africa, the armed struggle was real, there were state-sanctioned killings in an out the country. It was bankrupt, had defaulted on its debt and sanctions made any meaningful interaction with the outside world nigh impossible.

SAB refused to allow itself to become complacent for a moment. Many of the breweries it would buy in a 20-year acquisition spree had given up on their own futures, unable to look through the short term uncertainty and plan for a better tomorrow. Once proud heritage brands in Eastern Europe had not been refreshed, some for decades. Bottles were old, scuffed and chipped, supply chains were old fashioned and its distribution was a mess.

SAB spent the decade before the Berlin Wall collapsed, preparing for its expansion. It hired the best and built world class teams. It perfected its brewing processes, manufacturing facilities, and distribution networks ensuring its customers could get their beers in demand where and when they wanted them and at their perfect temperature in containers that made drinkers proud to be seen to be consuming their product.

Nothing was left to chance. Everything down to the tread of the tyres of the delivery trucks was measured to ensure optimal efficiency at all times. Everything was documented and systematised.

By the time they began their global acquisition spree, they were ready to hit the ground running in new markets.

SAB had little domestic competition. It could have taken the easy route. The Rupert family tried to challenge SAB’s domestic dominance and failed while fertiliser magnate Louis Luyt also dipped his toe into the brewing market. SAB dominated the sector with more than 90% market share, and was obsessive about every aspect of what it did.

SAB opted for country brands. Castle was very much South African, Pilsner Urquell, then CEO Graham McKay’s favourite was brewed only in Czech Republic and one site in Poland. While later it would export and brew in country some beers like Miller Genuine Draft, it stuck broadly to the principle of local champions.

In Dr Seuss’s “Oh the Places you will go,” the author cautions the reader to be wary of being stuck in the dreaded “waiting place.” It’s the place other people go, he says, not those with an ambition to be successful, because waiting for an opportune moment means it will simply pass you by.

“Waiting for a train to go or a bus to come, or a plane to go or the mail to come, or the rain to go or the phone to ring, or the snow to snow or waiting around for a Yes or No or waiting for their hair to grow. Everyone is just waiting. Waiting for the fish to bite or waiting for wind to fly a kite or waiting around for Friday night or waiting, perhaps, for their Uncle Jake or a pot to boil, or a Better Break or a string of pearls, or a pair of pants or a wig with curls, or Another Chance.  Everyone is just waiting.”

SAB didn’t wait for “the right time/signal/opportunity to present itself. They ensured they were in peak condition all the time and consistently sought to improve systems and processes looking to shave pennies off the cost of production and distribution.

I once asked the founder of services group Bidvest, Brian Joffe why he’d launched his business in the year South Africa defaulted on its debt, when it appeared that the political situation in South Africa would deteriorate and the economy, already in tatters, would never resuscitate itself.

He looked quizzical: “Because the time was the time. Chipkins (a food services business) became available and I bought it.”

Not complicated. Actually.

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