Graham Mackay Chief Executive SABMiller

GIBS University Presentation Monday 25 October 2004

SABMiller today
Europe 8 countries 18 breweries

USA 8 breweries 1 country Asia* 32 breweries 2 countries Central America 2 breweries 2 countries

Africa** 14 breweries 29 countries (17 countries jointly with Castel) South Africa 7 breweries

Markets where SABMiller has brewing operations

* Excludes 10 breweries in India ** Excludes 29 sorghum breweries

SABMiller drivers of future profit growth

Earnings growth
Leading positions in large emerging markets International premium brands Turnaround of Miller Strong domestic operations in growth markets

Today

TIME HORIZONS

Illustrative
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SAB transformation 1995 to 2002

South African conglomerate to international beer & beverage company
1995
Manufacturing

% Turnover
South Africa Beer Complementary Beverages Central America International Beer

2002
Hotels South Africa Beer

Retail & Hotels

Complementary Beverages

Africa & Asia Beer

Europe Beer

South Africa

1995 Beer volume (m HL) Global brewers ranking Market capitalisation ($ bn) US$ = ZAR 35 6 8.0 3.6

2002 70 4 6.0 10.5

SAB applied a clearly defined acquisition strategy and a distinctive business model
Acquiring (under-valued) assets in developing/ emerging markets Enhancing industry conduct and pricing Building local market scale and leadership around a portfolio of (local) mainstream brands

Driving operational and cost leadership

Securing route-to market control

A shared model of how to create value

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Supported by strong capabilities

Management talent and broad based culture
(South African)

World class manufacturing and operational skills Performance management culture Efficient brand portfolio management M&A and post merger integration expertise

2002-2004 further business reshaping

Acquisitions of Miller and Peroni
2002
Complementary Beverages Central America

% Turnover
Hotels South Africa Beer Complementary Beverages Central America

2004
Hotels South Africa Beer Europe Beer

Africa & Asia Beer South Africa

Europe Beer

North America Beer

Africa & Asia Beer

2002 Beer volume (m HL) Global brewers ranking Market capitalisation ($ bn) US$ = ZAR
* Including Altria non-voting convertible shares

2004 138 3 14.0* 6.4 16.3*

70 4 6.0 10.5

Overall scale and portfolio balance shifted Different model of value creation
Required capabilities different
TRADITIONAL MODEL Market type Growth potential Nature of turnaround task Emerging Good volume growth Difficult environments; privatisation; weak economies / govts; ineffective competition; first mover advantage; volume growth expectation Reasonable MILLER AND PERONI Developed and mature Value growth more than volume growth Sophisticated countries; turnaround in face of strong industry competition; contested markets; value growth proposition Full

Acquisition cost

Acquisition of Miller Brewing Company

First major developed market acquisition

USA Worlds largest profit pool Diversified currency and emerging market risk Miller potential to establish as strong no. 2 Market concerned about:
- Consumer marketing skills - Ability to work with US distribution system - History of decline at Miller

Miller: application of our turnaround skills

Systematically analysed the problem asked the right questions Applied knowledge and expertise of the beer business Launched holistic turnaround programme structured within four
strategic thrusts
Brand-building and portfolio shaping
Insight on consumer choice patterns New Miller trademark identity Able challenger marketing strategy Quantity and quality of sales force Local market plans and analytical tools A new, productive relationship with distributors Cut costs to reinvest in brands, assets, people World Class Manufacturing Realigned structure to match strategy Performance management, new talent recruitment

Sales and distribution

Costs and productivity Organisation capability

Most importantly, reinvigorated the culture

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Driving transformational culture change through 3 key processes

1. Performance management
Translate strategies into goals Drive execution at speed

2. Organisation alignment
Change the organisation to ensure strategic capabilities

3. Talent & capacity management

Get the right skills and talent for today Build a pipe-line of talent for key positions

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1. Performance management
The pattern prior to acquisition
2000: 55% of managers received excellent or superior ratings 2001: 61% of managers received excellent or superior ratings
Target Performance Actual Performance Reward

Targets not taken seriously rewards for

completing activities

No correlation business performance, individual

performance and reward

No consequence for under-performance

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Implementation
Key features & themes

Top-down goal setting rigorous alignment process Deliberate management against goals intensity & passion Goal adjustment as required speed and agility Tough performance reviews no satisfactory underperformance Performance directly linked to pay differentiated consequence Strong support from 60 champions
Two years of rigorous implementation a good foundation, a shift in culture felt
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2. Organisation alignment
Strategy A Strategy B

A change in strategy requires a change in the organisations capability

Structures Roles Resourcing Skills Processes Systems

Structures Roles Resourcing Skills Processes Systems

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3. Talent & capacity management

Extensive recruitment and selective training, to:
- Get top caliber people in key jobs - Build a talent pipe-line of cover

Impact on rate of change*

- Actual for F04 (full year) = 19% - Actual for F05 to date (5 months) = 24% [469 people]

* Defined as external appointments + internal promotions + internal transfers

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The challenge of global leadership

The beer industry is at a defining moment in
its evolution

We have emerged as one of the leaders of the

consolidation process

To retain our leadership position we must review:

- Our existing models and drivers of growth - Our skills and modus operandi

What changes are required to maintain our

leadership position?
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Could our enablers to date inhibit change?

ENABLER TO DATE
Local strategies and strong decentralisation Focus on local brands and mainstream Infusion of SAB practice, expertise, process and culture SAB sole source of global talent Limited corporate centre Issues and stakeholders managed locally

POSSIBLE INHIBITORS
Failure to grasp matrix management Ability to capture value from premium drift Slowness in growing the talent pool globally and over reliance on SAB as a source Reluctance to adopt / leverage synergies Failure to manage global reputation
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How are we addressing this?

Applying local optimisation as the sole criteria for decision-making

Stop (let go)

Defaulting to local solutions for marginal gain over standard solutions Reluctance to build and exploit best-practice and shared resource

Emphasis on winning the competitive battles locally

Continue (keep)

Focus on operational excellence in all aspects of business Devolved authority and Performance Management as an enabler Grow value of brands & portfolios, including international & worthmore

Start (embrace)

Actively developing local and global talent Systems, processes and structures to help leverage Group assets and skills

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Focus of future efforts and capabilities

Developing a balanced portfolio of businesses, in high
growth emerging markets and selected high value developed markets Capturing maximum share of value through complete and differentiated brand portfolios in each market Focus on winning at the point of purchase Leveraging our scale to compete efficiently in and across markets Managing and enhancing our reputation amongst all stakeholders Building our people, organisation and capacity
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Building our people, organisation and capacity

Embracing global talent, particularly
those with top-line capabilities

Continuing to build strong and cohesive

management teams in local markets

Developing world class marketing,

customer management and execution capabilities

Historically high reliance on recruiting, developing and exporting strong South African talent Beer division alumni are increasingly thinly spread!

Leveraging our global talent pool

through Strategic People Resourcing

Institutionalising Best Operating

Practices and SAB Ways

Training and general management

development programme
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Summary
SABMiller has transformed itself from a South
African conglomerate into a successful global beer company

However, we recognise need to drive further change

- Sources of future value growth changing - The competition - The scale and profile of our business

As a result, we are
- Developing new capabilities to complement our traditional skills - Activating a series of initiatives to reshape the company
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