“I still feel much more South African than anything else,” says beer monarch Graham Mackay who transformed South African Breweries (SAB) into the global Fortune 500 giant that is SAB Miller.
Sitting round the glossy dining table in his South African office on the second floor of SAB Miller in Braamfontein, Mackay does not initially talk about beer, not even about his favourite Pilsner Urquel. Instead, he talks about roots and a sense of belonging.
“It’s an unfortunate truth that people who have moved overseas or spent some time there, never feel as settled as those who have retained a single set of roots,” he explains.
Mackay moved from South Africa to England more than ten years ago and is based at SABMiller’s headquarters in London.
“Once you are uprooted you become a different person. You start to view your home country from the outside as well as from the inside, and to judge it to some extent against the framework of other countries. It’s an inevitable process, and it affects your deepest sense of belonging, and what you call home.”
Sporting a pink shirt and purple braces with a well-cut suit and good shoes, he looks like he would be perfectly at home on Savile Row. Yet South Africa is still where he feels most at home, even though he is only able to be here every two months these days.
“To make sense of it all, you need to remain open to new insights about the world around you and about yourself all the time. I believe in reading outside the business world to keep an open mind and to retain a sense of who you are,” he adds as lunch is served.
“It’s real canteen food,” he comments, unapologetically tucking into a piece of grilled steak with a fried egg and mash.
No doubt the residence students from Wits University, situated across the road from SABMiller, are tucking into something similar in their dining halls.
Having enrolled at Wits in 1967 and graduated with an Engineering degree, Mackay knows campus well.
“Engineering teaches you a lot. It engenders a logical, problem-solving mind, and, to the extent that I have developed one, it has served me well in business,” he says. “Occasionally I have been recognised as an engineer because of the way I deconstruct problems. Regrettably, I was a very poor student; I was idle and barely scraped through.
“Some say that if they had their university years over again, they would be more carefree. I say the opposite. If I had my time at Wits over, I would have applied myself more to my studies.”
Be that as it may, the young Mackay of 43 years ago did all right for himself, in a career that had little to do with the engineering profession, but which has taken him all over the world.
From London to Manchuria, with plenty of stopovers throughout Africa between, Mackay is a global man.
SABMiller’s interests and distribution agreements span six continents and 75 countries, and Mackay’s legendary de-centralised management approach, sees him continent hopping round the clock.
Before he left South Africa he lived in Westcliff in Johannesburg, the city where he was born, and where his great grandfather arrived in the 1880s at the start of the gold rush. “He sold honky-tonk pianos for the mining town bars, and had a musical instruments’ business,” Mackay explained.
Down the line, his grandfather, Ernest Mackay, was an early property developer in Johannesburg, establishing suburbs like Bordeaux and Blairgowrie, hence the latter has a Mackay Ave.
A pioneering spirit is in the Mackay genes. If it were not so, Graham could not have transformed the all-South African SAB into the global SABMiller. He did so by leading SAB into uncharted waters in the early 1990s, buying up breweries in emerging markets like Eastern Europe directly after the fall of communism.
“Poland, Romania…these were completely dysfunctional societies, suffering from the awful dislocation that communism had visited upon generations of people. Nothing worked.
“When we first went into Warsaw, you could not even phone from one side of Poland to the other and we had more PCs in our office in Joburg than they had in the whole of Poland. Even the Department of Computer Science at the university was operating without computers.
“As for the breweries…one of them had a fairly modern-looking refrigeration system that had never been commissioned. When I asked why not, they explained that under communism, all the parts for it had to be ordered through the state’s centralised control. Some parts would be approved, others would not, which meant they never got all the parts they needed to get the system going. As a result, the refrigeration pumps rusted without ever having turned.
“The whole centralised control system was a disaster. How it kept going for as long as it did is extraordinary because it did not work.”
What worked for SAB was its willingness to enter emerging markets in Europe, Africa, Asia and Latin America at a time when other companies would not go near them. Some attribute this to SAB’s robust South African roots; a bullishness in the blood of South Africans or an appetite for risk that sees them heading into territories where others fear to tread.
“We went in at the right time. Fifteen years ago many of the emerging markets were commercially primitive beyond belief. It all changed so fast, which gave us a unique perspective on the sweep of history,” says Mackay who started with SAB in 1978 and became CEO in 1999, three years before it bought up the American beer giant, Miller, and became SABMiller.
“We had upwards of 200 South Africans running our businesses all over the world. The numbers are slightly down now because we have management from businesses in other countries that we have bought in our team. You cannot have a global company with senior management restricted to South Africans – a ‘glass ceiling’ as it is called. Accordingly, we have become more inclusive to accommodate many other cultures.”
It makes sense; beer is a beverage without borders. The biggest beer market in the world is China, and the biggest per capita consumers of beer are the Bavarians and the Czechs. Much further down the list is the United Kingdom, the United States and South Africa. Just when we thought we were the frontrunners.
“What is interesting is the drinking habits of different nations,” adds Mackay. “The Chinese are healthy drinkers because almost all of their drinking is with meals – by far the healthiest way. They are also easy in their minds about alcohol. There are no taboos or prohibitions around it. By contrast, there is a ‘social taboo’ about alcohol in India. As a result of alcohol’s poor public image in this country, there is much illicit drinking, including plenty of spirits.”
Fortunately for SABMiller, even in economic storms people drink. “We took a bit of a knock with the economic crisis, but we still managed to deliver good results,” says Mackay.
It is partly due its experience of emerging markets that SABMiller weathered the global super-storm. The company is used to operating under difficult conditions; in fact difficult conditions contributed to its meteoric rise.
In 1999 when it listed on the London stock market, the Asian currency crisis at the time had shaken investor confidence in emerging markets. Despite this, the company prospered and achieved the international expansion that its listing was intended to facilitate.
From 1999 to today, SABMiller has moved from 88th to 17thplace in the FTSE 100. Its market capitalisation has grown from US$5,503 million to US$22,415 million as at 31 March 2009, and total shareholder return over the period stands at 204% compared to minus 12% for the FTSE 100.
At the helm, Mackay adapts to changing times while retaining the key elements that have contributed to his success: hiring the best people to lead the company’s breweries and brands within each market, and continuing to develop the company’s international portfolio of businesses, with new ventures and mergers extending from the United States to Nigeria to the Ukraine.
“The best people are not just clever people,” he elaborates. “They are all-rounders with strong business skills and leadership ability.”
“Leadership,” he elaborates, “Is a contract you enter into with the people you lead, where you undertake to do the best for them individually and for the institution you lead, by drawing on the power of ideas and intellect. The misuse of positional power and any hint of self-interest, taints the contract. This applies whether you are running a university, a church, a business or a country.”
Regarding business skills, Mackay says: “What is interesting about business is that the decisions you make can never be arrived at through pure analytical reasoning alone, because you cannot possibly have all the facts at the time. Neither can you reduce business solely to numbers. If you take China and many of our other emerging market expansions these past years, we positioned the business well but there was a huge amount of subsequent adaptation that had to take place. This is what determines your success and your path to future expansion. This requires skill.”
In addition to evolving the complex, region-specific framework of SABMiller’s business, Mackay is highly proactive about broader global issues, such as climate change.
In partnership with the world-renowned conservation organisation, WWF, SABMiller is has set itself ambitious carbon footprint reduction targets, notably in its use of energy and water.
“We are closely monitoring the quantity, efficiency and geographical context of the water used to produce our beer so that it can then be better managed from the farmer to the bottle,” he explains. “We are proud to say that we have significantly reduced our water consumption. The global average, not long ago, was probably around fifteen litres of water to produce one litre of beer. We have reduced ours to four litres of water.
SABMiller has set itself a 25% reduction target in its average water use per hectolitre of lager by 2015. And it has set itself a 50% reduction target for fossil fuel emissions from its on-site energy use per hectolitre of lager produced by 2020.
“Despite the difficult economic conditions, we will not compromise our commitment to sustainable development,” he says. “We will all have to play out part because our planet is going to go through a lot of stress in the next couple of years. We have to move into a post-industrial age, away from a carbon-based economy and we have to solve the issue of perceived free-for-all rights to water, the deep sea and the air.”
“Because of this pervasive sense of entitlement to natural resources, our children are going to go through extremely testing times,” says Mackay who has three adult sons from his first marriage and three sons, aged nine, eight and four from his second marriage.
Fatherhood, he smiles, is as taxing as all the above.
“You don’t want anything to happen to your kids, but neither can you engineer their lives for them. Kids are very complex. Even when they receive exactly the same upbringing, they turn out very different to one another,” he explains.
“Take my older sons…one is focused and ambitions, another is laid back and introspective; one is highly attentive to detail while the other is more interested in the big picture.
“It’s the same in all families. I turned out shy, while my brothers and sisters were not. My parents did not set out to make me shy; differences simply emerge.”
Mackay’s adult sons were all raised in South Africa while his young sons are being raised in England.
“I see far too little of them. The business is so intensive today that I am on a plane three weeks out of four. A lot of people live like this, but I would like to spend more time at home with my wife, Bev, and the boys.” Their home is in Hampshire, which Mackay describes as “absolutely beautiful, rolling countryside”.
He would also like to have a bit more time to devote to a favourite pastime (and preoccupation) of his: the workings of the universe.
“The universe is the most fascinating and engaging examination, and I enjoy reading about deep space and scientific exploration,” he says. “There is still so much to be done in terms of pushing the boundaries of fundamental particle research, but I like to believe we will find ways to access the as yet inaccessible domains in which some of the answers lie.”
In the meantime we have some work to do at home.
“Apart from heading into troubled times physically, I am downbeat about government interventionism, and the ever more intrusive invasion of business and society by government and politicians over the past ten years. It breeds a passive, victim mentality society, and a country like England is in a bad way because of it.
“South Africa does not have this problem to the same extent, but it does have crime. Unless the crime in South Africa is brought under control, it is going to be hugely damaging for the long-term prospects of this country.”
Regarding his own professional future, at 60 Mackay says that one of these years he’ll start thinking about what he will do when he retires, but that is not something he is contemplating right now.
“The oldest worker in one of our breweries in the united States is 91, so I have a long way to go,” he smiles.
Until then he will lead SABMiller to new successes and greater heights, drawing on two qualities in which he believes:
“Some confidence in your own judgement is important, and to be your own man.”
Labels: Graham Mackay SAB Miller, South African Breweries