Sector News

AB InBev trims the fat at SABMiller South Africa

January 23, 2017
Food & Drink

Beer giant AB InBev has wasted no time in trimming the fat at SABMiller, which it bought late last year – launching a voluntary severance package that targets big earners.

The producer of Budweiser and Corona has off-loaded assets globally and it was only a matter of time before it took the scissors to its South Africa operations, where it received approval to buy SAB seven months ago. The $140-billion (about R1.9-trillion) deal is one of the largest in history.

Robyn Chalmers, communications director for AB InBev Africa and SAB, confirmed that a voluntary severance process had been launched and said it was geared towards employees at a “certain management level in South Africa”.

But Chalmers said it was “too early in the process to say how many people may opt for the [voluntary severance offer], or what the impact in terms of cost savings may be.”

Insiders said the offer was announced in mid-December leaving mid-level managers to mull the proposal over Christmas and respond by the end of January. They said about 60 people had been targeted so far. Three sources confirmed the offer.

Chalmers said the offer was a “single-phase process”.

Katishi Masemola, general secretary of the Food and Allied Workers Union, was surprised at the news of the offer this week. “I’m going to tell the company that in terms of the tribunal ruling, even if they cut the fat on top, they need to increase the jobs at the bottom in line with maintaining the same number of jobs, as undertaken to the competition authority. I’ll be writing them a letter.”

Chalmers said the offer was “in keeping with the conditions AB InBev agreed to with the South African Competition Tribunal”.

The conditions prohibit forced retrenchments in perpetuity after the merger and require that over the next five years employees covered by the bargaining unit agreement may not receive voluntary separation offers.

“No employee will be forcibly retrenched … this process will not interfere with the commitment on job numbers, as different positions will be created and announced in due course,” Chalmers said.

Some changes were being introduced “to processes, ways of working and the structure of the business as well as roles in the Africa business”.

David Shapiro, deputy chairman of Sasfin Securities, said AB InBev had aggressively sold off assets across the globe in recent months.

“I think they are just positioning themselves where they can start running as this new big giant. They’ve gone a little ahead of where we thought they would go. A lot of the Coca-Cola assets have been sold off,” Shapiro said.

The company’s share price declined slightly but perhaps this was due to market forces in October. “They haven’t quite recovered and they’ve underperformed their peers. Nor have they gathered traction here,” he said,

“I follow the market every day and I look at volumes – what is being sold and what is being bought – and it doesn’t make big volumes.”

The firm had not yet “made waves”, Shapiro said. “It’s still in the process of redefining itself.

“I think at these levels it starts to look attractive from a pure South African point of view. Globally, beer is also under a bit of pressure,” Shapiro said.

Source: Sunday Times South Africa

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