Competitive Advantage Generated Through the Global Deployment of a Continuous Improvement Programme

Ed Koch
Head of Manufacturing Development

Contents

SABMiller some context Operational Excellence at SABMiller The SABMiller Manufacturing Way Results Summary

SABMiller some context

Scope of our Operations Today

200+ brands owned Presence in 75 countries, across six continents 140+ breweries, 20+ bottling plants, 10+ maltings Almost 70 000 employees 213 million hectolitres of lager sold US$26 350 million group revenue to Mar 10 * US$4 381 million EBITA to Mar 10 *
* Not Audited

Where We Operate

Reported Volumes and Earnings Contribution (March 2010)

(hl000)

Earnings Contribution (EBITA)

3% 19% 31%

Total Sales Volumes

261,447

Lager 212,576 Soft drinks 43,509 Other alcoholic beverages 5,361

2%

Latin America Europe North America Africa Asia South Africa Beverages

12%

14%

19%

Hotels and Gaming

International Brands

Grolsch Premium Lager Miller Genuine Draft Peroni Nastro Azzurro Pilsner Urquell

The Dutch premium quality lager

The original cold-filtered draft beer

Italian style in a bottle

The Pilsner from the original source

Key Regional Brands

Aguila Castle Miller Lite Snow Tyskie

Other Regional Brands

SABMiller owns over 200 regional beer brands, including: 2M (Mozambique) Atlas (Panama) Carling Black Label (South Africa) Castle Lite (South Africa) Club Colombia (Colombia) Cristal (Peru) Dreher (Hungary) Gambrinus (Czech Republic) Hansa Marzen Gold (South Africa) Haywards (India) Kilimanjaro (Tanzania) Nile Special (Uganda

Pilsener (Ecuador) Pilsener (El Salvador and Honduras) ari (Slovakia) St Louis (Botswana) Timisoreana (Romania) Lech (Poland) Velkopopovick Kozel (Czech Republic) Zolotaya Bochka (Russia)

Becoming a Global Brewer

First acquisitions in Europe 1988 Compania Cercercera de Canarias in Canary Islands 1993 Dreher in Hungary 1895 Foundation of South African Breweries and launch of Castle Lager 1897 Listing on Johannesburg stock exchange 1898 Listing on the London stock exchange Regional and product expansion 1978-82 Botswana, Lesotho and Swaziland 2003 Acquisition of Birra Peroni, Italy 2008 Acquisition of Grolsch, The Netherlands 2008 MillerCoors JV created, USA

1895
1910 Expansion into Zimbabwe (formerly Rhodesia) Global growth begins 1993 Uganda 1994 Angola, Mozambique, Tanzania, Zambia, China 1995 Poland 1996 Romania 1997 Ghana, Slovakia 1998 Russia 1999 Czech Republic 2000 India 2001 El Salvador, Honduras, strategic alliance with Castel Group in Africa 2002 Creation of SABMiller following purchase of Miller Brewing Company 2005 Merger with Grupo Empresarial Bavaria

2010

Acquisition in South Africa 1956 Ohlssons, Chandlers Union Breweries 1975-79 Old Dutch, Whitbreads, Swaziland breweries, beer interests of the Rembrandt Group attaining 99% market share

1999 Movement of primary listing to London Stock Exchange

Our Strategic Priorities

SABMiller has a clear strategic focus, at the centre of which are our four strategic priorities: Creating a balanced and attractive global spread of businesses Developing strong, relevant brand portfolios in the local market Constantly raising the performance of local businesses Leveraging our global scale

Operational Excellence

Technical Strategic Priorities

1. Building pride in the technical fundamentals of our brands. 3. Developing a reputation for product and packaging innovation.

2. Enhancing our reputation for operational excellence. 4. Enhancing the sustainability of our supply chain.

Evolution of Operational Excellence in SABMiller

Increasing Performance

Reduced Variability & Lead time

Strategic Operating Practice (SOP)

1. 2. 3.

OD Self-sufficient teams Multi-skilling Asset Care & QC at Source

Best Operating Practice (BOP)

1. 2. 3. Process Control Performance Measurement Plant Availability

Quality and Production Upgrade Strategy 1988 1992 1996 2000 2004 2008

The SABMiller Manufacturing Way

Best Operating Practice II (BOP II)

Approach to Operational Excellence

PHASE 1 PREPARE AND ENABLE CHANGE, IMPROVE & SUSTAIN MANUFACTURING CAPABILITY

Principles Principles

Principles Principlesand andphilosophy philosophythat thatensures ensuresan an integrated approach for Operational Excellence integrated approach for Operational Excellencein in the context of business strategy. Long term the context of business strategy. Long term thinking thinkingwith withaabusiness businesscase casefor forchange. change. Build Buildan anorganisation organisationto toimplement implementand and sustain operational excellence including sustain operational excellence including structures, structures,roles rolesand andjobs. jobs. Enable Enableperformance performanceand andcapability capability transformation transformationthrough throughchange changeleadership leadership and a deliberate approach to learning. and a deliberate approach to learning. Enable Enablecontinuous continuousimprovement improvementthrough through collaboration and development of collaboration and development ofnew new competencies. competencies. Processes Processesto toEnhance EnhancePerformance Performance including teamwork, standard including teamwork, standardwork, work, waste elimination and other work waste elimination and other work practices. practices.

Organisational Organisational Model Model

PHASE 2 CONTINUOUS IMPROVEMENT OF MANUFACTURING CAPABILITY

Competency Competency and andCapability Capability

WCM WCM Work Work Practice Practice Development Development

Deployment of the Manufacturing Way via a decentralised collaborative model

Head of MDEV
MDEV Hub Leader South Africa MDEV Hub Leader MillerCoors MDEV Hub Leader Asia

Group Leadership Team

MDEV Hub Leader Africa

MDEV Hub Lead

Country Lead

MDEV Country Leads Europe

MDEV Country Leads LATAM

Country Lead Country Lead

Regional Hub Team

Country Lead

Country Lead

Country Lead

Brewery Consultant

Country Team

Brewery Consultant

Brewery Consultant

Partnership with CCI

SABMillers partnership with CCI extends more than 20 years. Currently CCI actively consults in over 50 of SABMiller operations. It is fair to say that CCI has supported SABMillers global expansion by providing thought leadership and consulting support into the operational excellence approach. Operational excellence has been fundamental in driving SABMillers growth.

Results of the SABMiller CCI Partnership

The Global Evaluation of Manufacturing (GEM)

Excellence in Results Measured by Global KPIs, GTS

Excellent processes leads to excellent and sustainable results.

Unsustainable Results

WCM Excellence

Therefore SABMiller measures operational excellence in terms of both the what we achieve (Results) as well as the how we go about achieving our results (Work Practices and Processes)

Incorrectly FocusedWCM Programme

Excellence in Work Practices Measured by GEM

The GEM is intended to measure the maturity of Work Practices.

GEM and TRACC

The Global Evaluation of Manufacturing is a SABMiller customised version of the TRACC Assessment tool. The content was customised by SABMiller to include our own learning and knowledge. The tool was developed and is supported by CCI.

Principles Principles

Key elements
The following slides illustrate some of the key elements of our approach to operational excellence.

Organisational Organisational Model Model

Competency Competency and andCapability Capability

WCM WCM Work Work Practice Practice Development Development

Organisational Model
Policy Deployment & Performance Management

Definition of Performance Management Core to our culture and our ways of working, performance management is how we manage the performance of teams and individuals against goals through personal accountability, which drive execution of the business strategy in a way that shapes a high-performance, high-engagement culture and ensures sustainable business performance.

Business, regional and functional aspirations, strategies and plans

Goal setting for teams and individuals

Performance monitoring through one-on-ones and team meetings

Midyear and yearend performance reviews

Performance data feeds into key decisions on compensation, Individual development and career management

Key input

Process steps

Key output

Organisational Model Shift Team Work Practices

Pre-shift meetings One-on-one shift hand-over (at work stations) Team goal setting and performance measurement Operating fundamentals Improving flexibility Asset Care and Autonomous Maintenance Participation in focused improvement and problem solving Operator-based quality control at source

Shift Shift Team Team Leader Leader Operator Operator Skill Skill 1 1

Level Level 1 1
Operator Operator Skill Skill 2 2 Mech. Mech. Crafts Crafts Electrician Electrician

Shift Shift1 1 Shift Shift2 2 Shift Shift3 3

Organisational Model Leader Standard Work Meetings

Standardised work to identify, monitor and control the optimum conditions under which a manufacturing operation will be failure and defect free at optimum cost and service.

Daily Level 3 meeting of department and area managers covering safety, production to plan, quality and cost

Competence and Capability Learning and Collaboration

Our learning and collaboration model is linked to some of the fundamental principles of the Manufacturing Way, namely:

Common Measurement

Lessons Learnt

Operational Excellence is entirely dependent upon a resolute process of continuous improvement. Performance and practice are measured against internal and Standards external benchmarks. Organisational Learning and Collaboration are important aspects of the improvement process. Individual competence and development is promoted.

Better Practice

Competence and Capability Developing Individual Competence

Making learning accessible, rapidly

The Manufacturing Way on eLearning

A solid foundation for all manufacturing employees and managers to achieve operational excellence.

Competence and Capability Collaboration Tools

Competence and Capability Benchmarking The Manufacturing Global Key Performance Indicators (KPI) Process enables benchmarking. Principles Focus: the Global KPIs are limited to 15 measures. Balance: measures are spread across the key manufacturing drivers. Common measurement: a defined set of procedures and rules. Benchmarking Focus: drives continuous improvement in a sustainable way

100

120

20

40

60

80

0 TOP 25% East Coast Quito Medellin Boyac Cusco Malabar Arequipa Bucaramanga Ind La Constancia Tocancipa Bogot Bialystok Tychy Motupe San Pedro Sula Kaluga Plzen Poznan Velke Popovice Central Distillers 98.37 96.62 94.85 94.66 94.61 94.25 94.20 93.66 93.49 93.20 92.67 92.43 92.16 91.31 91.18 91.10 91.04 90.97 90.82 90.58

Machine Efficiency - Best and Worst Quartile Ranked - Mar F10 (YTD)

Sustainability (Water Usage, Energy Usage)

Simple Average = 82.09 BOTTOM 25%

Std Dev = 10.13 76.42 76.00 75.72 74.75 73.71 73.42 72.88 71.16 70.97 69.00 67.32 67.23 65.84 65.07 62.75 61.80 60.03 59.81 58.70 58.05

Bialystok Poznan Fort Worth Tychy Guayaquil Beer Trenton Ind La Constancia Ibhayi Kaluga Boyac Eden Nosovice Newlands Shenandoah Prospecton Albany Velke Popovice Grolsch Polokwane Bucaramanga

Quality (Brewery Hygiene, Consumer Predictive Index, Flavour Stability Index, Packed Product Quality, Total Packaged Oxygen)

Albany Rosslyn Bari Vladivostok Dar es Salaam Shenandoah Lusaka Beer Charminar Maputo Lesotho Beer Golden Grolsch Accra Sarmat Kgalagadi Beer Lubango Swaziland Beer Beira Haryana Ulyanovsk

hl/hl 10 12 14 16 0 2 4 3.10 3.24 3.42 3.50 3.53 3.64 3.65 3.69 3.77 3.78 3.84 3.84 3.87 3.95 3.95 3.96 3.99 4.07 4.07 4.10 6 8

Competence and Capability Benchmarking

TOP 25%

Water Ratio - Best and Worst Quartile Ranked - Mar F10 (YTD)

Simple Average = 5.13 Std Dev = 1.7 BOTTOM 25%

Productivity (Unadjusted Factory Efficiency, Machine Efficiency) Cost (Total Cost of Manufacturing, Cost of Maintenance, Macro Extract Loss, Container Loss)

5.70 5.84 5.91 6.08 6.23 6.72 6.87 6.92 6.95 7.19 7.33 7.41 7.51 7.58 7.64 7.77 8.01 8.29 9.50 13.62

Cluj Vladivostok Lubango Dar es Salaam Nile Buzau Mwanza Sarmat Lesotho Beer Sica Pondicherry Swaziland Beer Arusha Central Distillers Beira Accra Kgalagadi Beer East Coast Maputo Lusaka Beer Vietnam Beer

Work Practices Short Interval Control

MONTH TO DATE SIC REPORT ALL BREWERIES Dec-09 4 Month to Date

Description SAFETY / PEOPLE DART Rate Salaried - Budget Salaried - Actual Salaried - Budget (Temps) Salaried - Actual (Temps) Hourly - Total Hourly Temps Hourly - Sick/Personal Hourly LOA Hourly FMLA's QUALITY TPO - BOTTLES TPO - CANS ESR - FV (T150's) CQI: Taste CQI: Clarity CQI: Foam Flavor Stability Index PPQA - Bottles PPQA - Cans SERVICE Production Volume - Plan Production Volume - Actual Weekly Order Fulfillment FE OEE ME

Unit of Measure

Corporate Targets

Milwaukee

Eden

Albany

Trenton

Ft. Worth

Irwindale

Golden

Shenandoah

# # # # # # # % % %

1.55 - 1.65 1,154 22

1.78 161 154 3 0 541 0 0.0% 0.0% 0.0%

1.83 144 145 3 5 455 8 0.0% 0.0% 0.0%

1.67 139 142 3 17 461 0 0.0% 0.0% 0.0%

1.65 128 127 3 4 436 3 0.0% 0.0% 0.0%

0.00 160 156 0 4 510 0 0.0% 0.0% 0.0%

0.00 149 138 1 2 412 13 1.9% 4.4% 1.9%

0.00 174 0 0 0 0 0 1.1% 1.1% 0.2%

2.65 122 113 9 11 353 31 1.1% 0.0% 0.7%

0.85 1,177 975 22 43 3,168 55

# # # % % % % 6 Sigma 6 Sigma

80 120 25,000 50% 80% 30% 50% 4.8% 4.7%

61 135 15,714 67% 100% 36% 67% 4.8% 5.2%

106 137 38,533 64% 94% 48% 65% 4.8% 5.6%

93 112 24,997 51% 95% 39% 52% 4.9% 4.5%

75 121 21,173 48% 94% 59% 49% 5.3% 5.6%

61 135 32,221 60% 90% 26% 60% 5.5% 4.4%

99 108 24,311 52% 96% 38% 58% 5.0% 4.9%

94 223 25,959 46% 92% 10% 48% No Data No Data

88 156 8,572 59% 53% 34% 67% No Data No Data

(LM Only) 83 123 25,826 56% 89% 36% 58% 4.9% 4.7%

# # % % % % 95.0% 63.7% 74.7% 80.3%

544,160 537,103 94.0% 69.4% 79.4% 85.4%

608,321 572,248 84.1% 54.5% 67.7% 77.9%

632,359 608,823 67.4% 57.2% 67.1% 74.1%

945,068 694,462 91.1% 59.8% 74.1% 81.8%

597,935 608,475 94.4% 65.6% 79.8% 85.5%

427,020 400,289 88.0% 64.9% 72.6% 78.8%

1,040,524 861,165 97.9% 51.1% 60.5% 66.7%

483,215 458,283 87.7% 50.1% 67.8% 71.7%

5,278,602 4,740,848 (ALL) 86.1% 57.2% 69.3% 76.0%

Shopfloor

Management

Work Practices Standard Work Operator Quality Control

Standardised work to identify, monitor and control the optimum conditions under which a manufacturing operation will be failure and defect free at optimum cost and service.

10

20

30

40

50

60

70

0 Packaging Stoppages Bottle Breakage / December Carton / Trays Losses Malt Transfer Losses Beer Losses in Packaging Beer Losses in Brewing Material Usages Material Usages Material Usages Usage of Laboratory Material Losses and Usages

Loss Analysis: the difference between Focused Improvement and Continuous Improvement Example below is from Kaluga Brewery, Russia

Time Losses

December

Ruble/Hl

Empty Bottle Breakage Flt's Gas Usage Quality Losses Quality Losses Quality Losses Gas Usage (Utilities) Water Usage (Utilities) Energy Usage Maintenance Costs Waste Water Utilisation Electricity Usage Brewing Maintenance Packaging Maintenance Warehouse Maintenance Utilities Maintenance

Work Practices Focused Improvement

YTD

Month

best result

Work Practices
Asset Management and Autonomous Maintenance
Autonomous Maintenance forms part of the Asset Management programme to ensure conditions for equipment operation and care are standardised and effective

Reliability ReliabilityCentred Centred Maintenance Maintenance

Breakdown Breakdown Maintenance Maintenance

Preventative Preventative Maintenance Maintenance

Maintenance Maintenance Prevention Prevention through throughDesign Design of ofEquipment Equipment

Run to fail

Emergency Maintenance

Scheduled Maintenance
(Time Based)

(Inspect & Repair)

Corrective Maintenance

Predictive Maintenance
(CBM)

Autonomous Maintenance

Work Practices Sustainable Development

discourage irresponsible drinking brew more beer but using less water reduce our energy and carbon footprint create a vibrant recycling and reuse economy work towards zero waste operations have supply chains that reflect our own values and commitment to SD bring benefit to the communities we serve respect human rights reduce the impact of HIV and Aids in our sphere of influence be transparent in our response to these environmental and social trends

Work Practices Sustainable Development

Recovery of biogas from waste water treatment

Results

Performance Improvement El Salvador Water and Energy

WaterHL/HL
12.00 10.00 8.00 6.00 4.05 4.00 2.00 0.00 F02 F03 F04 F05 F06 F07 F08 F09 11.15

ThermalEnergyMJ/HL
180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 F02 F03 F04 F05 F06 F07 F08 F09 93.41 164.24

Performance Improvement Italy Birra Peroni Water Usage

Performance Improvement MillerCoors Packaged Beer Quality

TPO measure the oxygen content in package, Oxygen leads to poor flavour stability in beer and it is critical to keep it as low as possible
Quality Total Packaged Oxygen (ppb) & Cpk
TPO Cpk

140 120 100 80 60 40 20 0

128 97 72 72

1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

FY06

FY07

FY08

FY09

Performance Improvement Honduras Factory Efficiency

80

70

60

50

40

30 F05 F06 F07 F08 F09

15% Factory Efficiency improvement in 4 years

L3 L4 L5 PET

Performance Improvement MillerCoors Machine Efficiency

Total maintenance labour hours initially increased to improve performance and bring lines into the Zone of Maintainability. Thereafter labour hours and spend was reduced but performance continued to improve indication of more efficient maintenance.
Can Line Performance
100,000

Annual Total LH

F05
90,000 80,000 70,000 60,000

F06 F04 F07 F08

75% 76% 77% 78% 79% 80% 81% 82% 83% 84% 85% Annual Avg ME

Performance Improvement ABI South Africa Efficiency Improvement

In a rapidly growing business, investment in asset management people and processes has effectively delayed investment in further capacity by four years!
Efficiency & Capacity Improvement
100% 130%

126%

90%

Machine Efficiency

80%

Investment in Support Heads

109%

107%

110%

100%
70%

99%

100%
100%

60%

90%

50% F04 F05 F06 F07 F08 F09 F10 TD

80%

Machine Efficiency

Effective Capacity Increase

Effective Capacity Increase

117%

120%

Growth in GEM* Maturity

35

31 27 21 17 13 7 8 6 1 18 22 19 17

Number of Operations

30 25 20 15 10 5 -

< 1.5

1.5 - 2.0

2.0 - 2.5

2.5 - 3.0

> 3.0

GEM Assessment Score

F08 H2 53 Operations F09 H2 73 Operations F10 H2 87 Operations

*The Global Evaluation of Manufacturing (GEM)

Performance and Practice Correlation

Consolidated ranking across 15 globally measured KPIs

Global KPI Rank

GEM Maturity 1 0 10 20 30 40 50 60 70 80 Africa Asia Europe Latin America MillerCoors South Africa 1.5 2 2.5 3 3.5 4

Summary

Key Learning on our Journey

Senior leadership belief in, and engagement with the process. A team based organisational design (structure, roles, practices) is most effective for delivering continuous improvement. Policy deployment through a structured performance management process. Optimise the system or process, not the functional area. Operational Excellence is entirely dependent upon a resolute process of continuous improvement.

Key Learning on our Journey

Benchmarking performance and practice internally and externally. Strong partnership with thought leaders and outside experts are important to build internal capability and to maintain an external perspective. Organisational learning and collaboration are important aspects to the improvement process. Individual competence and development is crucial. We are still on the journey we are still learning.

In the end

Organization doesn't really accomplish anything. Plans don't accomplish anything, either. Theories of management don't much matter. Endeavors succeed or fail because of the people involved. Only by attracting the best people will you accomplish great deeds.
General Colin Powell

Chairman (Retired), Joint Chiefs of Staff Army of the United States of America

Thank you! Questions?