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3 Priority: B2B and Downstream Supply Chain Strategy in Southern Africa
A strategic weakness of our target (SABMiller), which we must confront once the deal closes, pertains
to pressures on its profitability, arising from its relatively weak bargaining power and B2B strategy over
its major supermarket customers. We have 4 strategic options: 1) stop selling to the least profitable
supermarkets; 2) persuade them to reduce the number of cost-generating activities; 4) venture into

direct retailing; and/or (4) introduce new technologies to reduce the cost of cost-generating activities.
This is ranked 3 priority as the resulting savings are an integral part of the cost synergies and
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efficiency improvements valued in priority 1 and incorporated in priority 2, yet it will only ever be
implemented once we have taken control of SABMiller. We recommend option 3: introduce new

technologies to reduce the cost of cost-generating activities and lock-in the supermarkets whilst
reducing their power over Newco.

4 Priority: Africa Direct Entry via Nigeria
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We had prior to making the SABMiller offer, considered (and are still considering) alternative strategies
to enter the African market –organic growth through Foreign Direct Investment (FDI) in Nigeria
(involving the direct set-up of manufacturing operations). Should the SABMiller deal not close, for a

break-up fee of between US$3-6billion, we could literally reverse the deal, and through this FDI, still
enter the African market. As a Plan B, the benefits of this route, therefore, need to be carefully
evaluated. This is the 4 and very last priority because we have already made an accepted offer - and
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the top 3 issues are all linked to that offer, whereas this is just a Plan B, for –in the event that we fail

to secure all the requisite approvals. We support this strategy, but only if the SABMiller deal fails to
close.

Some of the above issues are embedded with ethical dilemmas (see section 5 of this
report) whilst others were considered neither significant nor worthy of the Board’s
attention.

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2018'
www.charterquest.co.za | Email: thecfo@charterquest.co.za