SABMiller in Nigeria Founded in South Africa in 1895 as South African Breweries (SAB), SABMiller was the world's sec-ond-largest beer company measured by revenues (behind the Belgian-Brazilian Anheuser-Busch InBev [AB InBev]). In 1999, SAB moved its headquar ters to London. In 2002, SAB changed its name to SABMiller after acquiring an American brewer, Miller. SABMiller's brands included Fosters, Grolsch, Miller, Peroni Nastro Azzurro, and Pilsner Urquell. While SABMiller operated in 75 countries, in the 21st century it found that its fastest-growing market was its birthplace: Africa. Among some 40 African countries in which SABMiller sold beers, Nigeria stood out. Nigeria has the largest population (170 million) in Africa-approximately one in five of Sub-Saharan Africa's 930 million people lives there. Nigeria is also the largest beer market after South Africa. Furthermore, the Nigerian population is young and growing- at an annual rate of 2-3%. Nigeria is attractive not only because of its huge size, but also because of its "soft power" influence. Since Nigerian music, movies, and TV shows are popular throughout Africa, a win in Nigeria may influence consumer behavior elsewhere on the continent. However, Nigeria would not be an easy market to crack because Guinness (owned by British multinational Diageo) and Nigerian Breweries (owned by Dutch giant Heineken) had been strong incumbents prior to SABMiller's entry. In 2009, SABMiller entered Nigeria, not by going after Lagos, the largest city where Guinness and Nigerian Breweries would definitely retaliate if attacked. Instead, SABMiller went to other cities away from Lagos. It acquired a rundown brewery in Port Harcourt and another one in llesha. In 2012 it built a brand-new, $100-million greenfield plant in Onitsha. SABMiller developed a new beer specifically for the Onitsha plant: Hero. Its bottle featured the rising sun, an icon of the local Igbo people. Undercutting the competitors, a 650-ml bottle of Hero only sold for $1, whereas a Guinness cost $1.67 and a Star (from Nigerian Breweries) $1.33. In Nigeria, SABMiller not only had to fight off rivals, but also had to deal with a traditional substitute of factory-made beer: home brews. But home brews could be unsafe. To persuade low-income potential customers to get away from home brews, SABMiller brought in chi-buku, an even cheaper brew from Zambia that sold for half of Hero's price. While Nigeria is exciting, it is also challenging. Political risk is not far away. Boko Haram, a fundamentalist Islamist group, kills innocent people who engage in "un-Islamic" practices such as drinking alcohol, resulting in hundreds of deaths. In 2014, it kidnapped 276 schoolgirls. Health risk is also significant. The rules of the game for business can change quickly and for the worse. Land is expensive and disputes are com-mon, making it hard to construct new factories or offices. Power outage is frequent. Transportation is perilous. Nigeria has one of the world's highest rates of road deaths. Shipping beer to remote areas is thus both costly and dangerous. In addition to the hazards above that every firm doing business in Nigeria must confront, SABMiller learned an important lesson the hard way. That is: be even more careful about what you are getting into. It succeeded in other African countries by acquiring struggling breweries and fixing th am up. Its Port Harcourt acquisition seemed to make sense. But it soon had to confront back pay and unpaid invoices that its pre-acquisition due diligence failed to uncover. In Africa, the business community has a vivid phrase to describe the necessary learning that is needed to overcome the initial challenges: paying school fees. "You have to persist through the school-fees stage and not lose your nerve." noted one executive. In other words, persistency pays. Overall, SABMiller's business in Nigeria performed well. Launched in 2012, Hero became the country's third-largest beer brand in a few years. Primarily because of SABMiller's excellent market position in many emerging economies such as Nigeria (now Africa's largest beer market), AB InBev, which was relatively weak in emerging economies and had an insignificant market share in Nigeria, paid an enviable 50% premium in a $107 billion mega deal to acquire SABMiller in 2015.

Case Questions 

1. How do firms such as SABMiller and AB InBev enter foreign markets?

 

2. Why do they enter certain countries such as Nigeria but not others?

3. What determines their success and failure in Nigeria and elsewhere?