The MT Interview: Graham Mackay

He knows more about beer than anyone else on the planet, it is said, and the way he has turned a South African conglomerate into a world force in brewing in 15 years seems to prove it. SABMiller's thoughtful boss choreographed all the moves - and the dance isn't over yet.

by Andrew Davidson
Last Updated: 31 Aug 2010

Up on the first floor of SABMiller's base in Mayfair, central London, Graham Mackay sits like Caesar in repose, all hooded eyes and hawk nose under tightly shaven head. Power rests easily on him: he barely moves, just occasionally smoothing the surface of the table in front of him with his hand. In his smart pinstripe suit, red braces visible beside silk jacket-lining, and purple handkerchief just popping out of his top pocket, he presents a spotless exterior. Only when he speaks, with barely a twang of his native South African left in his accent, do you get a sense of the man underneath. Every response comes after what seems an agony of consideration - the pauses pregnant with earnest cogitation.

He doesn't like giving interviews, it is said, but if so, he's too polite to show it, offering to every question the respect of a fully thought-out answer. Just occasionally he looks exhausted. He is, by reputation, a man of some stamina, who has built his brewing group into one of the biggest beer firms in the world. But he is also on his second marriage, and has a new family, with three children under six to add to the three grown-up children he has from his first marriage. At 56, being woken up regularly by his toddlers, then putting in 12-hour days running the $14 billion-turnover SABMiller group, he should be completely knackered.

He smiles gently when I put it to him. 'I got woken at five past five this morning; 10 to five yesterday.' That's hard. He shrugs. He travels three weeks out of four, getting about the global SABMiller empire, and is grateful to see as much of his family as he can. For a man who prides himself on his hands-off approach to heading the company, being hands-on with his family is important.

And you can bet he has thought it all out, because that is his style. Mackay, electrical engineer turned beer boss, is the man who called the brewing business correctly, right from 15 years ago when hardly anyone outside Africa had heard of South African Breweries.

Back then, working his way up through senior management, he was predicting to colleagues exactly how global forces would move. Now SABMiller jostles with Anheuser-Busch (A-B) and Inbev as one of the three global giants of the beer business. Smaller groups such as Molson Coors, Heineken, Scottish & Newcastle, Carlsberg and Fosters are a way behind.

They must be scratching their heads at how the South Africans have shot past them. Under Mackay, chief executive since 1999, and his mainly South African top team, SABMiller seems to have come from nowhere to bestride the world. In 2003, it surprised many by snaffling up Miller, the American giant. Last year it swooped to buy South America's second-biggest brewer, Colombia-based Empresial Bavaria, for $7.8 billion, slotting in another piece in its global jigsaw puzzle. It also released annual figures showing profits up 31% to £1.2 billion.

Now it is neck-and-neck on global beer production with Inbev (about 14% each of the total market), and has A-B's superior profitability figures in its sights. SABMiller has zipped up MT's most admired companies list, proof that many in the UK have now noted the South African's rapid rise.

What's even more remarkable is that Mackay has overseen it all with a singularly different approach to global management.

Because, unlike bosses at the other global groups, he doesn't centralise.

Just look around head office. There's hardly anyone there: three floors in Mayfair, including a rather nice bar, with suede seats in a rainbow of colours below a large television, playing to no-one. For a global group, it's base seems empty, with just 30 staff. Partly, that may be because SABMiller brews no beer in Britain - its assets are all overseas. It has kept a listing here since 1999 because of access to capital and the restrictions on moving cash out of South Africa.

Even so, as one of Mackay's lieutenants told me, it is highly unusual to run such a light headquarters - most bosses draw things towards the centre and like to have their senior executives around them. Mackay, on the other hand, pushes them out to get on with it elsewhere, splitting the group up into regions and countries.

And nothing is quite as you expect - the five regions are in fact two countries (the US, South Africa), two continents (South America, Europe) and a hotchpotch (Asia/Africa) - but it works. There is no technical chief at head office, as with other brewers; no sales supremo. As for global super-brands so popular with his rivals (Inbev pushes Stella and Brahma, A-B has Budweiser), Mackay thinks that is premature. He reads the beer market as a series of local markets, with strong local brands. He keeps SABMiller's biggest brands - Perroni Nastro Azzuro, Pilsner Urquell and Millers - on a leash. His rivals can do what they want.

'Over a long time horizon, I think the markets will be more dominated by global brands, but it is not really true right now,' he says, almost professorially. 'The sweet spot of profitability right now is upper mainstream domestic beers. Not that they are individually more profitable, but when taken in conjunction with volume and pricing, you get a more interesting outcome.'

And anyway, he continues, most of the global brands are not what they seem. 'Take any of them and there are only two that merit the description at all: Corona and Heineken. The others, if you look at the underlying dynamics, are very much more limited.'

Even Inbev's Stella Artois? He smiles. 'Stella is certainly global in aspiration.'

Mackay, say his advisers, knows more about beer than anyone else on the planet. That's why he travels constantly - an odd activity, you might think, if the business is so firmly decentralised. But he needs to know what's going on, and who is doing it.

'If he didn't travel so much, he would lose touch with his people,' says David Mayhew, chairman of JPMorgan Cazenove and a long-time confidant.

That way, Mackay can better take advantage of the knowledge his team is accumulating about how the markets are progressing. Then he can set strategy accordingly.

Consistency is maintained by corralling everyone within a loose framework that SABMiller applies to all regions. Mackay describes the approach thus: 'The thing that drives the company the most is the management of local brand portfolios; the glue that binds the company is the set of marketing measurements and templates. There are ways of looking at things and perspectives - all of those are common to our countries.

'Then there is a thing called the marketing way, which is constantly being refined and added to. It governs how we run individual brands and portfolios. That is the real glue, but not the same as the glue of one international brand, not the same as what you hear from Heineken, for instance, where they put lots of effort behind polarising and simplifying the influence of that big international brand.'

It's a strategy that SAB, a one-time conglomerate which sloughed off its other businesses, has adapted as it has grown, moving first across Africa, then into eastern Europe, imposing its template as it bought up national companies. Mackay explains it as a very rational process - it is, of course, a process that reflects the characteristics of its boss.

'What we did was take the local portfolio of brands, pick the champions, cut it down savagely, take out proliferation that doesn't make sense, then create distinct consumer positioning and a coherent model in pricing and image sense. That became our template. And we were ahead of others, because we were buying into emerging markets that were just moving away from state control. Anywhere else, you bought into entrenched positions and were not at liberty to make those decisions, because it had already crystalised out for generations.'

More recently, SAB has taken bigger leaps, acquiring Miller three years ago - a move that took many by surprise but, so far, following the first upturn in sales in six years at the American company, is looking perspicacious.

'Miller is important symbolically. It represented what by most assessments seemed a pretty dramatic change from what we were doing. We didn't think it represented a massive change, by the way, and argued the point futilely with analysts and investors ...'

He sighs, raising his eyebrows as if to note that some challenges are harder than others. Mackay is not an expressive man, nor an emotional arguer - 'I am more a manager of the head than the heart,' he says. But he is persuasive. Long-term colleagues say he controls everything by force of reason and debate, not by command.

'I cannot recall ever being given an instruction by Graham,' says Alan Clark, head of SABMiller Europe, who has worked with Mackay for 15 years.

'But at the same time, I am aware that the strategy I pursue is 100% aligned with what he wants to do.'

Clark describes Mackay as a visionary - 'he's been pretty much on the mark about how the industry will evolve' - and his management approach as that of a choreographer.

'It may sound strange, but he has a way of arranging the steps - thinking about the stage and how the industry will unfold. Then he selects and sets up the dancers in the piece he has designed.

'It's very much based around his style. He gets the process moving, he is very clear as to where he sees the process going. He is there on opening night, then he lets you get on with it.'

Others describe Mackay as shy, thoughtful, competitive, punctiliously polite, and ambitious more for his company than for himself. He is also a man who reveals little of himself to others, a model of restraint, yet runs the tightest of managerial teams, where each member seems able to anticipate the thought processes of others.

Mackay argues that the style developed naturally as the company grew out of its South African base. Given its initial areas of expansion in Africa and then eastern Europe, where telecommunications and transport lagged behind what was available elsewhere, it is probably inevitable that it worked to a decentralised style.

There are also, adds Mackay, a couple of cultural factors pertinent to SAB. Originally, it was a conglomerate, one of the biggest companies in South Africa, but on the beer side, despite holding a near-monopoly in its home market, it was never complacent, either about its hirings or its commercial processes.

'We've always had strong people management, we've always tried to hire the best people and manage them in a way that was much more advanced in HR terms than that seen in other companies. We've also always had a self-critical, dissatisfied culture, and spent a lot of time benchmarking ourselves against rivals across the world, even when our market share in South Africa was close to 100%. We were endlessly trying to find ways to do things better - always great travellers, always conducting conversations.'

Some of it, you suspect, must be in the blood. In South Africa, they like to sort things out themselves, without others weighing in, from head office or elsewhere.

And beneath SAB's now affluent front, many of its executives have worked their way up from modest means. Mackay himself is a third-generation South African, the son of a farmer and former World War II pilot who ran farms for others after the family business collapsed.

'My father was shot down at El Alamein, then in POW camps, and not in great condition physically and mentally by the end,' says Mackay. 'He went off to find his soul in the African bush on plantations. He farmed in Swaziland and Natal, and ended up in the Zambesi valley in the then Rhodesia running a Tate & Lyle sugar plantation. To say it kindly, we lived from hand to mouth, you know?'

Despite the family's financial problems, Mackay was privately educated.

'It was the traditional school my ancestors were all sent to, more than my parents could afford - we were not among the moneyed. I suppose that did affect my outlook on life.'

Mackay studied electrical engineering at university and took a job with BAT's South African subsidiary, working with computers. He swiftly decided he 'wasn't really tech-y' and switched to management. When his bosses changed, he decided to move elsewhere and jumped into SAB. At that stage, the conglomerate had interests in retail, shoes, glass, matches, furniture, hotels, gaming, beer and manufacturing of all kinds. 'But only the beer business had a depth to aspire to some kind of international standing.'

That, however, was an ambition that couldn't be fulfilled while South Africa's apartheid regime consigned the country to political isolation.

'Then,' adds Mackay, 'when the Berlin wall came down and, not coincidentally, South Africa started to move away from apartheid with the release of Nelson Mandela, we started furiously pondering where to take the company.'

'Suddenly you had a change in the state-run economies across the world. Latin America came out of state-run control of everything, Africa lost its communist supporters, there was a change of heart in Chinese communism. And small beer companies, badly run, became available for privatisation.'

But why the South Africans? Surely the Europeans and Americans were better placed to build up global beer businesses?

'I think it was because we were under the radar screen,' says Mackay. 'It was also a buyers' market and the Brits and Americans turned their noses up at it because the companies on offer were in grimy countries.

They were small profit pools and very unglamorous places to be. They were also business turnarounds in devastated economies, where the sellers couldn't pick or choose.

'And we knew the world was moving against conglomerates, and that many of the conglomerates in South Africa would have to be broken up to make the parts more competitive, so we were lured by the opportunities of all these privatisations elsewhere. Also, we came from a pretty compromised part of the world ourselves, so the risks of moving into the rest of Africa or eastern Europe didn't look that bad compared to staying at home.'

Mayhew puts it another way. 'I think the SAB team just had an appetite for risk that you simply wouldn't have had if your business had been based in Burton.'

Now, as growth-rates in emerging markets outstrip those in America and western Europe, that risk-taking looks prescient. But the land-grab is almost over, and the bigger companies are starting to eye each other for possible merger and acquisition.

So let's run through the permutations. Scottish & Newcastle brews the Millers brand here under licence. There's been long-running speculation that Mackay wants to buy S&N. Truth or fiction?

He smiles. 'Oh, that just gets talked up by the market. I can't say too much about it, but one of the reasons why there is so much talk about S&N is that it is the only other beer major listed on the London Stock Exchange, and one of the very few that has an open share register. In other words,' he adds, there's nobody with effective or outright control.'

How about merging with Inbev? His hooded eyes narrow. 'Well, we wouldn't be too big to do it; the only thing we couldn't do was merge with Anheuser-Busch. But, really, you can merge with anyone, it just depends what you give up to achieve it - the value leakage, as bankers put it. A combination between ourselves and Inbev could be contemplated, as could a combination between ourselves and Heineken, and ourselves and S&N and Carlsberg. It's all possible - that's why there is so much speculation.

'But you have to understand the weight we give to the fact that we have a clear and consistent management culture, a way of operating that works reasonably well, and we would be wary of transactions that would complicate that.

'That's not to say we would never merge,' he adds. 'I just think in some of the combinations it would be more difficult to see what sort of culture would emerge and how you would keep it constructive and purposeful.'

But surely SABMiller, being listed in the UK, should at least have more beers here? He nods. 'We would like to have greater representation here, but we are not going to be overly aggressive about it. We have got ambitious plans for imports here. The Millers brand is already S&N's premium draft lager in Scotland.'

As for the rest of western Europe, he says, there are some advantages to not being in it at the moment, as the markets are tight. But it is a big-value pool with plenty of beer heritage, so don't rule out SABMiller steaming in soon. 'Even if nothing else were to happen,' he says cautiously.

'We hope we'd be somewhat bigger.'

And is the rise of the global beer giants good for beer drinkers? He doesn't bristle at the change of tack, just smooths the table again. 'The quality of beer is fine in Britain. And in emerging markets, consumers and citizens are better off for our presence - and that applies to many multinationals: better quality, better branding, better dress and image of beer.

'I suppose there is a question behind your question as to whether multinationals like ourselves bring along a dead uniformity, but I honestly don't think it is so. We invest a great deal of time and money in brand marketing.

We make the brands come alive, we try to create stronger emotional attachment to them, all to the benefit of the consumer, without that great range of pretty much undifferentiated and not very interesting beer brands to which they show not much allegiance.'

And how would he describe his own management style? Others say he is obsessed with people and team-building. He scowls. 'My style? That would be difficult for me to describe. I am pretty much a low-key manager, I try to be ... aaagh' - he agonises again - 'thoughtful, and I think at the centre we try to provide a style of intellectual leadership, we try to provide a vision for the company, a coherent view of the world, a making sense of things.'

So how does he relax? 'Ah, yes,' he sighs. 'I am one of the busiest people I know, but my ideal Sunday is a game of squash and to spend as much time as I can with the wife and kids.'

The new family, in particular, makes some believe Mackay may call it a day soon. He makes a face when I bring it up. Others suggest there may always be one more big deal to negotiate, another set of figures to top.

'I don't think Graham is interested in SABMiller being the biggest,' says Mayhew, 'but he would want it to be the most successful beer company in the world.'

That probably means biggest by profit and volume. And if he achieved that? 'I am 56,' says Mackay, 'and have no particular plans to retire in the near future, but the life I lead is pretty gruelling and companies need a change. I represent my generation of management here; we have taken the company to where it is.'

At some time, he adds, it will be appropriate for others to take it on.

Bringing through that new talent, and promoting a greater mix of non-South African senior managers, is the biggest challenge the company will face over the next five years.

But enough of that. Our time is up, and Mackay is as polite in exiting as he is in welcoming. 'Good,' he says. 'I enjoyed talking to you.' He looks gently relieved, until he realises what's next. 'Photos, argh, God!

My least favourite thing,' he mutters, as he straightens his suit jacket and prepares a smile for the photographer.

FOUR CHALLENGES FACING MACKAY

1. To exploit consumers' tastes for stronger and more profitable premium brands.

2. To maintain the pace of SABMiller's relentless growth over recent years.

3. To adapt the company culture as it moves away from its South African origins and heritage.

4. To get some more shuteye - either at home or on the road.

MACKAY IN A MINUTE

1949: Born 26 July, Johannesburg. Educated University of Witwatersrand (BSc in Engineering)

1978: Systems manager, then management services manager, SAB Ltd

1982: General manager, then regional director, Northern Transvaal & Orange Free State, SAB Ltd

1987: Managing director, SAB Ltd

1992: Chairman, SAB Ltd

1994: Chief operating executive, group central management, SAB

1997: Group managing director, SAB

1999: CEO, South African Breweries plc (renamed SABMiller Plc in July 2002).

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