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SABMiller Africa

Enterprise Development: A Partnership in Innovation with Smallholder FarmersDriving value and competitive Driving value and competitive advantage through localisation advantage through localisation of our supply chainof our supply chain

AgriBusiness Forum 2011

Johannesburg, October 2011

Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011

So what’s new ?

New approach to the commercialisation of cassava: new mobile technology set to revolutionise the cassava industry in Africa and add substantially to economic and rural development

”Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers

Novel brewing technology to produce a clear good tasting lager beer using cassava as the main ingredient, allowing access to new beer growth markets

New-style 3-way public-private partnerships (Government-private enterprise-NGO/donor organisation) creating a real ”win-win-win” relationship driving agricultural development in Africa

© SABMiller plc 2005 2


Presentation Outline

SABMiller introduction

Business imperative for enterprise development

The cassava story

The Mocambique cassava pilot project

Game changing innovations min)

Total: 20 min


Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011© SABMiller plc 2005 4

Managed operations in 17 countriesManaged operations in 17 countries Castel operations in 22 countriesCastel operations in 22 countries SABMiller and CastelSABMiller and Castel

– Coca-Cola bottlers in 20 of their Coca-Cola bottlers in 20 of their 36 countries36 countries

Africa volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL pa

SABMiller in Africa (excl South Africa)Operations in 39 of 52 African countries


Cost Breakdown of a Typical Bottle of Beer

© SABMiller plc 2005 5© SABMiller plc 2005

Crowns: 5 %Water: 2 %Labels: 8 %

Malt: 46 %

Hops: 16 %

Adjuncts: 10 %

Cost Breakdown

On average 77% of

all inputs by value

are imported

Glass: 13 % (RB)

43% 0% 51%

80%

100%

55 %

Imported % (av)

96%

Our target is more

than 55 % local by

2014

77 % of cost of typical bottle of beer is imported


The Enterprise Development initiative rests on 3 strategic business pillars


Taking costs out through collapsing our supply chain

Drive new growth markets in the affordability sector

Enhance our license to trade


Substantial growth potentialOutside of South Africa, Beer consumption per capita is low

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PopulationPopulation

Source: Plato, November 2007 and August 2010Source: Plato, November 2007 and August 2010

Litres p/capita consumptionLitres p/capita consumptionLitres p/capita consumptionLitres p/capita consumption


~80 % of raw materials historically ~80 % of raw materials historically importedimported

Driving costs savings through raw Driving costs savings through raw material substitutionmaterial substitution

Government support and new Government support and new excise regimesexcise regimes

Licence to TradeLocalising our supply chain

Barley % Self SufficiencyBarley % Self SufficiencyBarley % Self SufficiencyBarley % Self Sufficiency

From 18,000 From 18,000 to 45,000 to 45,000 farmers farmers

within the within the next 2 yearsnext 2 years

From 18,000 From 18,000 to 45,000 to 45,000 farmers farmers

within the within the next 2 yearsnext 2 years


Driving New Growth Markets in the Affordability SectorOur target market: informal liquor


Typical cost p/serveTypical cost p/serve

$0.50 – 0.75$0.50 – 0.75

$0.85$0.85

$1.00$1.00

$1.20 +$1.20 +

$1.50 +$1.50 +

$0.15 - 0.30$0.15 - 0.30


What is cassava ?

3 min)

Total: 20 min


■ Root crop with ~78 - 85% starch on dry basis (21 - 25% on wet basis)

■ Root stable in the ground, but starts to degrade as soon as it is harvested, challenging handling logistics

■ Approx 9 – 12 months to maturity, but can then be harvested at any time (not seasonal)

■ Needs ambient temperatures of >30 ° C, ideal for warmer countries (north of RSA / Namibia). Africa in top 3 global producers

■ 3rd largest source of carbohydrates / starch for human food in the world . In Africa generally a subsistence crop.


The importance of cassava to Africans is epitomised in the Ewe name for the plant, Agble, meaning "there is life”

© SABMiller plc 2005 11© SABMiller plc 2005

Cassava accounts for a daily calorie intake of 30% in Ghana and is grown by nearly every farming family


Global Distribution of Cassava



Using Cassava to Drive Growth in the Affordable Sector“Aligned to African agricultural agendas and Government priorities …”


Great “yield headspace”

- Subsistence farming yields average between 2 and 10 MT/Ha- Average commercial yields average between 25 and 35 MT/Ha- New cultivars are seeing yields of 60 to 80 MT/Ha lading to major reductions in production costs- Potential starch yield per ha typically 2-3 x average maize starch yield with lower inputs and lower risk

Can control the value chain: cost of product + “fair” return model vs. market pricing

Main subsistence crop in sub-Saharan Africa – key to smallholder farming development on the continent.

Government priority in terms of agricultural and rural development: top of government’s agenda

Commercialization opportunities and synergies following from that

Drive competitive advantage: supply chain and cassava technological “know-how”

Not in the mainstream food chain such as sugar and maize: commercialisation of cassava will aid food security

The perfect sustainable development crop

New brewing technology has resulted in an excellent tasting clear lager cassava beer

Cassava is a “known” raw material on the continent: largest crop grown, but least commercialised. Features in country MDG’s

10 great reasons why ...


Relative Extract CostsCassava very competitive with other processed adjuncts


Cost of Producing Starch from Cassava*

* 20 t per ha yield

Just under 60 % of cassava fair price influenced by cost of growing

• Remaining 40 % processing cost

Potential cassava starch yield 2-3 x equivalent maize yield with lower input costs and risks Cassava derived starch very competitive with other adjunct derivatives – approx 15-20 % cheaper

than the nearest competitors - further opportunities driven by yield productivity and ownership of the value chain.


CDM Cassava Beer Project (Brand “X”)

Economics driven by lower material costs and new excise regime


Based on success in other Sub-Saharan African countries, SABMiller, the parent Company of

Cervejas de Mocambique (CDM), is engaged in a local sourcing initiative to stimulate agriculture

in Mozambique.

The project utilises recent breakthroughs in brewing techniques to enable SABMiller to produce

clear beer replacing traditionally imported malted barley with locally grown cassava.

The project is based on reducing the price of the beer produced from locally grown cassava to

ensure that the product is affordable to a much wider section of society thereby creating a

product with sufficient demand to commercialise the underlying crops.

CDM is investing in the development of a new commercial cassava industry in the country, in

order to produce and market a new range of quality affordable lager beer products in a

sustainable and financially viable manner.

Cassava is not generally used in lager beer brewing, but a prototype lager beer (Brand ‘X’) has

been developed as a result of our own in-house product development program, in which it

substitutes in part for imported barley malt to produce a quality product. This will be the first

commercially produced cassava based lager beer in our African portfolio, and the learning’s will

be used to roll out the product to our other African businesses.


CDM Cassava Beer Project (Brand “X”)

Economics driven by lower material costs and new excise regime


The Mocambique Government has indicated strong support for the initiative by levelling the

playing field and approving a “favourable” excise regime for the new category at the 10 % ad

valorem rate (25 % of mainstream beer excise @ 40 %) .

With this lower-than-beer excise rate the intention is to produce a more affordable clear lager in

Moçambique from locally grown and processed cassava and is expected to retail at about 70 %

of the price of a “mainstream” beer. At this price level it will appeal to consumers currently

consuming various forms of “affordable alcohol” (including “cheap” liquor, illegal - and often non-

excised - spirits and dubious quality home-brews), and will constitute an aspirational purchase.

As such the brand is expected to generate in excess of 660 000 hl pa of new beer volumes over

the next 5 years (30 % of our brand portfolio).


Some dimensions of the project

Will create a demand for over 45 000 tpa cassava root

Will generate over 1700 new farming jobs

New income > $ 1125 per farmer per annum min)

Total: 20 min



Some challenges in farming cassava


■ Cyanide Content Concentrated in skin – removed on peeling No traces found in cassava flour or brewing process SABMiller MD has done the taste test …….. and lived !

■ Cassava Process Cassava needs to be processed as soon as it is harvested –

logistics challenge Purification / concentration / drying process relatively

capital & energy intensive Simplified mobile process critical to ensuring economic

viability Possibility of maltose manufacture

■ Cassava Growing Challenge will be to convert subsistence farmers to cash crop

farmers and ensure reliable and sustainable supply chain Introduction of disease resistant, higher yielding cultivars


Conventional cassava starch processing plant


Rotary Dry Peeler Rotary Washing PeelerCassava Root intake Chopping and Rasping Conical sieve separators Crude Starch tank

Hydro Cyclone

Concentrator bankFine sieve separatorsDeaeration

Final washing hydro cyclone system

Fine concentration recovery

Pure Starch Milk Tank

Rotary Vacuum Filter

Flash Dryer

Starch injection

Air Intake

Cyclone bank Air Cooling & Blower

Starch storage silo

Discharge bag or bulk

165 degrees C

250tonne/day

60/65tonne/day650kg/m3

Blower

Steam

Chopper

Hopper

Rasping

Pulp waste

CASSAVA PROCESSING FLOW DIAGRAM

Utility requirementsSteam: 4.5t/hr boilerElectrics: 1.6 MVA

Water: 12m3/hr fresh water

Building size64m x 24m

M/S S/S


Supply Partnership with DADTCO NVOutsourcing to third parties of non core activities


Supply “partnership” has been formed between CDM and DADTCO

Mandioca (Shareholders: DADTCO NV and Mocambican partner

(still to be selected – preferred Farmer Co-op))

• Scope of supply co will be:

• Supply and implement cassava processing technology

• Manage the farming programme: farming model based on

“hub and spoke” and comprising commercial farmers

• Cassava processing

• Smallholder farmer development

• Cassava development


DADTCO AMPU cassava processing unit(Autonomous Mobile Processing Unit)


Africa Seminar | March 2011© SABMiller plc 2011 2222SABM Africa: MD’s Forum Botswana 2011:


Concept of the AMPU Using mobility to overcome obstacles of high water content and perishability



Farming Model: “Hub & Spoke” model combining commercial and smallholder farmers in a symbiotic relationship


2 or 3 commercial farmers in the Nampula area (radius max 100 km from Nampula) with a smallholder development

Role of the commercial farmers will be to:

Manage the cassava supply from the smallholder units

Develop the agri skills of the smallholder farmer

Provide on the ground advice to the smallholder farmers and overview the cassava production at critical stages

Assist with inputs as necessary


“Hub & Spoke” Farming Model Using commercial farmers to drive smallholder development


(approx 150)

(approx 150)

(approx 150)

Cassava

Cassava Root

Cassava Root

Cassava

Root

Cassava

Cassava

Cassava Processing Unit

Cassava Cake

CDM – DADTCO Cassava Processing AMPU


Establishing a “Win – Win -Win” Three-way Public-Private Partnership


Benefits to SABMiller / CDM / Dadtco

Creates new employment to farmers and service providers – +1700 farmers + 30 000 indirect

New employment leads to growth in the economy through the “multiplier” effect

Knowledge / skills transfer

Additional excise receipts: $ 2.2 m and foreign Exchange savings: $ 1.4 m

Commercialization of cassava industry may lead to other agricultural commercialization (e.g. wood)

Contributes to Government Strategy:

- Food security- Millennium Development Goals - Beira corridor incentive - Rural development

- Gender equality - Water conservation

- Infrastructure development- Agricultural Productivity + R&D

- Health

Opportunity to access “affordable beverage” market estimated to be at least equal in size to the formal beer market – game changing

New profit pool / new markets

Additional incremental contribution of new beer volumes

Sets up competitor barriers to entry

Brand “X” model for the rest of Africa

Protects / enhances our license to trade

Access to “best-in-class” technology

Decreased risk

Replicable in the rest of Africa

Benefits to Mocambique Government

SABMiller (CDM)

DADTCO NV3rd Party

Service ProviderIFDC

Donor Funding

Country Government (Mocambique)

Public-Private Partnership

A successful partnership with Government will stand out as an excellent example of a value-adding public-private partnership adding to positive economic growth


So where is the innovation ?


New approach to the commercialisation of cassava: distributed raw cassava processing systems with centralised secondary processing.

– Combines advantages of mobility and simplicity with economies of scale

New mobile containerised cassava processing technology: only requires a water source

„Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers

Novel brewing technology allowing access to new beer markets

New-style 3-way public-private partnership creating a real ”win-win-win” relationship

SABMiller AfricaWinning in Africa

Questions

Thank You

Economy & Finance

Agri11 workshop iv-sab miller