Global Beer Industry 2007
SABMiller: Challenges Ahead, But Outlook Remains Compelling
􀂄 SABMILLER IS FACING NEW CHALLENGES IN SOUTH AFRICA. Although the recent
loss of Amstel in South Africa represents a setback, we believe that SABMiller has the
operational skill, robust footprint, and management depth needed to meet this challenge
as well as to move to another stage of growth. In this report, we appraise the challenges
the company faces following the loss of the Amstel brand and the hurdles that new
entrants like Heineken will encounter against this deeply entrenched competitor.
􀂄 THE U.S. REMAINS WORRISOME. We comment on new Miller Lite ads that seek to
elevate the comparative discourse versus Anheuser-Busch (A-B) and imports by
refocusing the marketing message on the intrinsic qualities of the brand. However, even
if Miller Lite stabilizes, we remain concerned about what other industry and companyspecific
trends might mean for the future of Miller Brewing.
􀂄 BUT LATIN AMERICA LOOKS POISED TO OUTPERFORM, AND CHINA AND EUROPE
REMAIN STRONG. From both an operational and macroeconomic perspective, the
upside on Latin America remains high versus expectations, and we comment on
SABMiller’s early success in the region. Results in China will again be robust, and the
company’s European footprint remains dynamic. We believe these results will help
offset any shorter-term weakness in South Africa, or longer term in the United States.
􀂄 SABMILLER IS STILL AMONG THE BEST COMBINATIONS OF VALUE AND GROWTH IN
THE GLOBAL BEVERAGE SPACE, IN OUR OPINION. We believe recent skepticism is
overblown, and we make the case again for an Outperform rating; with SAB currently
trading at 15.6x 2008 EPS, the stock appears undervalued versus slower-growth peers.

Table of Contents Page
Executive Summary...................................................................................................................................................5
Top Three Questions Weighing on SABMiller..........................................................................................................6
Question No. 1 ....................................................................................................................................................6
Question No. 2 ....................................................................................................................................................8
Question No. 3 ....................................................................................................................................................9
Storming the Castle: Retrenching in South Africa ...................................................................................................10
There Is Much Still to Be Done in South Africa................................................................................................10
SABMiller Remains a Powerhouse....................................................................................................................12
Rethinking Miller Brewing......................................................................................................................................18
Much Has Changed in the U.S. Since 2005.......................................................................................................18
Miller Still Faces Major Structural Issues..........................................................................................................19
Trend No. 1: Heineken Premium Light..............................................................................................................20
Trend No. 2: Wholesaler Consolidation ............................................................................................................21
Reinventing the Beer Industry in Bavaria’s Markets ...............................................................................................23
SABMiller Appears Ahead of Schedule in Latin America................................................................................23
Global Brewers — Comparable-Company Analysis................................................................................................29