Interview with Gary Whitlie of SABMiller

This interview appears in the 3 April 2009 edition of the Budapest Business Journal

Gary Whitlie took up the position of Managing Director of SABMiller’s Dreher Breweries on 1 October 2008, as a homecoming of sorts. He had first come to Hungary in 1999 to take up the position of Finance Director for SABMiller's European operation, but left Budapest at the beginning of 2001 to become Director of Finance & Control for the SABMiller group. Then, just over three years ago, he transferred to the operational role of Managing Director, setting up Miller Brands, SABMiller's operating company in the United Kingdom. His career with SAB began in South Africa in 1984, where he moved after being schooled and qualified as a chartered accountant in Zimbabwe. Now back in Hungary, he had mostly good things to say about the local beer trade and his adopted country he has come to love.

Doyle: The global economic crisis is having a pronounced effect on consumption behavior. How is the crisis affecting your business?

Whitlie: A report by AC Nielsen shows that the overall beer in Hungary is slightly down. Our key accounts are currently flat rather than declining. The austerity measures followed over the past several months helps to explain this. People have been spending less and are more likely to stay at home rather than go out. This has spurred improvements in discount sales. The UK has been facing a similar economic slowdown and there we see the economy brands performing better. In Hungary, the super premium brands, such as Pilsner Urquell, occupy a rather small portion of our market share, but their sales have continued to grow, despite the downturn.

Doyle: How is the beer sector in Hungary different from those in other countries?

Whitlie: The trade structure in Hungary is quite different from other markets. Hungary is characterized by a multitude of unconsolidated, independent operators. There are few chains of pubs and restaurants. On the supply side, the market hosts three similarly-sized international players; Dreher -SABMiller is one. Each of us has a similarly-sized portion of this share. Ours is slightly larger than the others. This situation has brought the unfortunate result of chasing volume at the expense of value to the producer.

Competition for market share among producers results in downward price pressure, as does an increasingly competitive retail trade. This is especially evident among the big box retailers who make high volume purchases. The end result is lower profits for producers.

Doyle: What are some of your practices that illustrate your relationship to consumers?

Whitlie: We pay a great deal of attention to the specific needs of each of our target consumers. It’s important to us to keep them relevant. You can see this attention expressed in our products, labels and packaging. Recent innovations have included putting Arany Ászok in 1 ½ liter plastic bottles with re-closeable tops. This way a consumer can pour a glass and put the bottle back in the fridge, something we found is important to Arany Ászok consumers. We’ve also launched a new alcohol-free beverage, Dreher 24, which has recently increased its share of the alcohol free segment. Traditionally, beer has sold in Hungary in half-liter returnable bottles. Our preference is for returnable bottles and kegs. They’re more cost-effective and more environmentally-friendly. The trend toward non-returnable bottles and cans tends to be convenience-driven from the consumer side. The trend was started by the import of cheap German cans. There is a fee levied on non-returnable containers, which was recently simplified to a flat fee from one based on the percentage of non-returnables that a producer sold. But consumers are willing to pay a premium for convenience.

Doyle: It’s clear from what you say that the Hungarian market is distinct. How do you market your products to the local consumer?

Whitlie: We take a 360 degree approach to marketing. This relies on what we know of the consumer of a particular brand. We pride ourselves on our deep insight of the target consumers of each brand. Some consumers spend a great deal of time watching TV, while others will spend more time online. We also reach them at the point of purchase, in the shop, at the pub, in the restaurant. We study their lifestyles and apply what we learn throughout each campaign in our efforts to reach and serve them. Our ads themselves are weighted to reflect the deep insights we have collected about our target consumers. On the Internet we strive to engage them through online contests. We sponsor events such as the EFOT student festival, which featured Kozel, a brand popular with students.

Doyle: What standards do you follow when it comes to the brewing of your beers?

Whitlie: Germany has its purity law, Hungary does not. We abide by our own international standards. We use all natural ingredients in line with HACCP standards of food purity. What distinguishes German beers is that they are generally all barley malt beers. American Budweiser, on the other hand, is made with rice and malt. Pure barley malt beers are heavier. A large percentage of the beers in CE Europe are barley malt beers.

Rumors that the modern beer making process is somehow speeded up are certainly not true at our brewery. The fermentation process is endeavored to be constantly and exactly the same. Both brewing and storage processes are monitored and the beer is tasted; this is done to ensure that all our beverage is produced within specification. Rushing simply doesn’t work. If alcohol is “just added” to beer, then it ceases to be beer. Consistency is important to us.

Doyle: What in particular distinguishes Hungarian beer?

Whitlie: What distinguishes Hungarian beer is that it tends to be less malty, less bitter and more “crisp,” than Czech or German beers. Hungarians beer tends to be more flavorful than American beer. As a rule, the further east you go, the more flavor you find in the beer. While the UK is still famous for its bitter, the majority of beer consumed today in the UK is lager.

Doyle: It is not uncommon to hear complaints from multinational companies doing business in Hungary. What has your experience been with the business environment here?

Whitlie: The bureaucratic burden is high in Hungary. The regulation and tax environment is difficult to follow. Taxes are burdensome and lack incentives for FDI. Nonetheless, we have invested at least HUF 13bn in total in the last 3 years, 10bn into our facility. I see great potential here. The population is well educated and enterprising. I recently sat on the jury of a business plan contest, part of the Young Entrepreneuer of the Future program I have participated in such events in other countries. I was literally blown away. I have never seen such quality and level of preparation.

We are committed to the community that serves us through sponsorship or culture, sport and education. I believe the benefit to the community of a long-term commitment is immeasurable.

Doyle: You have recently come back to Hungary after being away for several years. What do you like about it? What could be improved?

Whitlie: Budapest is a beautiful city. The list is long of what I love about Hungary: the river, the people, the pubs, the restaurants, the opera, the countryside, Lake Balaton, great beer. Some of the roads, on the other hand could use some work. The public transportation system is very good, but could stand some sprucing up. It’s sad about the graffiti. I do like living here. I belive it’s fitting that I met my South African wife here eight years ago.