Hansa Pilsener: From Niche to Main Stream

SABMiller plc ranks as the world's second largest brewer in terms of volume, trailing only Anheuser-Busch Companies, Inc. Although now based in London, the company owns no breweries in the United Kingdom. Its true home country is South Africa, where The South African Breweries Limited (SAB) was founded in 1895 and where SABMiller today holds an impressive 98 percent share of the beer market. The firm operates seven breweries in South Africa, where it sells 14 brands of beer, including local lager Castle (the best-selling beer in Africa), SABMiller import brands Pilsner Urquell and Miller Genuine Draft, and one foreign brand brewed under license--Amstel. The company also maintains a major presence in the South African soft drink market through a 74 percent interest in Amalgamated Beverage Industries Ltd., the country's largest bottler and distributor of the Coca-Cola line of products, and full ownership of Appletiser South Africa (Pty.) Ltd., a producer of nonalcoholic sparkling fruit juices. In addition, SABMiller owns a 30 percent stake in Distell Group Ltd., the leading distributor of wines and spirits in South Africa, and 49 percent of Tsogo Sun Holdings (Pty.) Ltd., an operator of hotels and casinos in southern Africa.

South African Breweries embarked on an aggressive program of overseas expansion in the post-apartheid era, initially concentrating on the emerging markets of sub-Saharan Africa, central Europe (first entered in 1993, in Hungary), China (1994), India (2000), and Central America (2001). By the early 2000s SAB was the number two brewer in China and produced two-thirds of all beer in Africa. In July 2002 SAB acquired Miller Brewing Company, the number two U.S. beer producer, and renamed itself SABMiller plc. This move into the developed world was followed by a second, the June 2003 purchase of majority control of Birra Peroni S.p.A., Italy's second largest brewer. Via this acquisition spree, SABMiller had by late 2003 amassed a total of 115 breweries in about two dozen countries on four continents.

The history of SAB is in many ways the history of the South African brewing industry, most notably through the government-ordered merger of the largest breweries in 1956. The company's history was also greatly influenced by the apartheid system and its effect on the domestic economy, on domestic firms, and on foreign investment in South Africa.

Early History

The discovery of gold on the Witwatersrand (a region encompassing Johannesburg) in 1875 brought large numbers of prospectors to South Africa. Small outposts for white settlers were transformed into busy cities with new industries. Several brewmasters, most with little experience, began to produce a variety of beers that immediately gained popularity with the settlers.

In 1889 a British sailor named Frederick Mead left his ship in Durban and took a job working in the canteen of a local army garrison at Fort Napier. While there, Mead, who was only 20, became acquainted with a businessman in Pietermaritzburg named George Raw. Neither of them knew anything about brewing, but they persuaded the local residents to help establish the Natal Brewery Syndicate. After purchasing a factory site, Frederick Mead returned to England to procure machinery and raise capital. In need of brewing expertise, Mead approached W.H. Hackblock, head of Morgan's Brewery in Norwich. The two men became friends and Hackblock agreed to serve as chairman of Mead's company, which was registered in 1890 as the Natal Brewery Syndicate (South East Africa) Limited. The company brewed its first beer in July 1891.

Mead remained interested in establishing a brewery in the rapidly growing Witwatersrand. In 1892 he purchased the Castle Brewery in Johannesburg from its proprietor Charles Glass. The expansion of this facility, however, was beyond the means of the Natal Brewery Syndicate, and Mead returned to England to attract new investors. In the final arrangement, Mead formed another larger company based in London called The South African United Breweries. This company took over the operations of both the Natal Brewery Syndicate and the Castle Brewery.

After construction of the new Castle Brewery, South African United Breweries made additional share offerings which were purchased by South Africa's largest investment houses. Subsequent growth precipitated a restructuring of the company and reincorporation in London on May 15, 1895, as The South African Breweries Limited.

In 1896 South African Breweries purchased its first boarding houses. That same year, Frederick Mead moved to England for health reasons but continued to occupy a seat on the board of directors and frequently returned to South Africa. From London, Mead directed the purchase of machinery for brewing lager beer from the Pfaudler Vacuum Company in the United States. Patent restrictions and