© SABMiller 2014

SABMiller : Procurement Transformation on the Fast Track March 2015

© SABMiller 2014

SABMiller Profile SABMiller is one of the world’s leading brewers, with more than 200 beer brands and some 70,000 employees in over 75 countries.

2nd largest Global Brewer, USD34bn Yearly Global Revenues

Public Company, listed in London LSE : SABM, of South African origin

Brewing Industry late consolidation : new Multinationals

Positioned for Growth : strong presence in Latam and Africa

Prosper Sustainability Initiative : 5 Shared Imperatives, coalitions for a better World :

3 www.sabmiller.com

© SABMiller 2014 4

• Total Yearly Revenue approx. USD6bn, Total Yearly Spend USD2.7bn

• Volumes 4,500m liters beverages (Beer, Malts, Soft Drinks)

• Presence in 7 Countries : (25 Breweries)

– Colombia (Bavaria)

– Peru (Backus)

– Ecuador (Cerveceria Nacional)

– Panama (Cerveceria Nacional)

– Honduras (Cerveceria Hondureña)

– El Salvador (ILC)

– Argentina (CASA Isenbeck)

“The most local of Global Brewers”

SABMiller in Latam

© SABMiller 2014

Transformation Scope

5

Between 2013 and 2015, Latam

FROM TO

• Procurement is a Local Function, reporting locally under Supply

Chain, generalists profile “Buyers

• Procurement is a Global Function with personnel at Global,

Regional and Local Levels, and with specialized resources

(Negotiations, Transactions, Users) trained and developed under

a formal Competencies Model

• No formal way of developing Procurement resources

• Local Negotiations, few items negotiated above-Market for

Savings,

• Sourcing Projects executed at the value-optimizing level in the

Organization (291 Subcategories, Collaboration Models)

• Commercial leverage mostly

• Strategic, longer-term view of Categories documented on formal

Sourcing Strategy documents by Category, and using Total Cost

of Ownership (TCO) for consolidated volumes – beyond

Commercial leverage (Process, Technical, etc)

• Each Country with own Procurement KPIs, Goals, Processes • Regional Dashboard, periodic reports with common KPIs and

Regional / Country aligned goals

• Local Procurement Policies and Governance Process, manual

approvals

• Integrated Governance for Market and above-Market, Global

Policies in place, IT-enabled

• Little formal knowledge build-up • Knowledge Center website

• Fragmented Procurement speaking different languages • One Single Procurement Organization

© SABMiller 2014

Performance improvement

6

Between 2013 and 2015, Latam

FROM TO

• Spend under Management 40%, negotiated Globally or

Regionally

• Spend under Management 100%, negotiated at the right level

(Local / Regional / Global)

• Automation (Outline Agreements, Catalogue) 13%

• Automation 50%

• Limited, Local Visibility of Purchase Orders

• 100% Weekly Visibility of all Purchase Orders for all Countries

• No visibility of Compliance, ad hoc Audits

• Compliance measured weekly, actioned quickly (education,

consequence)

• Yearly Incremental Savings F13 : USD52m, Free Cash Flow

USD43m

• Yearly Incremental Savings F15 : USD110m total, USD50m

impacting P&L, Free Cash Flow USD40m

• Costs as % of Spend under Management : 1.5% (TBC)

• Costs as % of Spend under Management : 0.8%

© SABMiller 2014

Global Procurement Model – the Core Capabilities

7

Strategic Sourcing

Leveraging scale to source, tender, negotiate and contract

Delivering value engineering projects Managing Suppliers

Procurement Operations Centres (POCs)

Professionalising transactional procurement Ensuring compliance to contracts

Providing spend visibility Driving continuous improvement

In Country Procurement Coaching and supporting end users

Ensuring compliance to the right buying channels Managing demand

Support

Finance Human Resources

Legal CAPE (Capability and

Procurement Excellence)

Accountability is clear

and personal

Our people are our

enduring advantage We work and win in

teams

Our reputation is

indivisible

We understand and

respect our customers

and consumers

Vision

We are bold and relentless in maximizing real value for our businesses through

procurement excellence.

Values - SABMiller

Global Procurement new operating model is delivering significant benefits to the SABMiller organisation

Core

components of

a World-Class

Procurement

Function:

© SABMiller 2014

Key milestones along the journey

8

Latam’s transition to the Global Procurement Model

2007/8

2010

2012

2013

2014

2015

Limited above

country

consolidation

Trinity is formed

March: ExCom

approval for Design

Oct: ExCom

approval for Build March: Latam

team in place

Aug: Category

Transition starts

March: Latam POC

goes live (CO, PA)

April: Regional

Procurement launched

Aug: POC expands to

PE and EC

Aug: Buy Sell pilot in

Ecuador

Feb: POC expands to

HN and SV

March: Category

Transition finalised

Latam Procurement

Transformation complete

Global milestones

Latam milestones

2013: DESIGN 2014: IMPLEMENT

2015: CONSOLIDATE

© SABMiller 2014

One Globally Integrated Function

(Strategic sourcing mainly above market,

Operational procurement leveraged in

POCs)

SABMiller Procurement Org Structure Evolution No major change in headcount numbers, resource mix very different

9

Glo

bal

Re

gio

na

l L

oca

l

Where we started 2007

“Trinity” before Northstar 2012

Today 2015+

R R R

Limited collaboration across regions

(GSC)

Very limited sourcing above market

Global

Global & Regional Sourcing teams

established to source Direct materials

(limited Indirects)

Global Sourcing

R R R R

Global POC

Network Buy-Sell

R R R R

New global / regional teams not well

connected to countries or set up to

manage Indirect categories

© SABMiller 2014

SABMiller Procurement General Org Structure

10

• Overall Structure : Global Team

with Category VPs, Global

Category Directors / Managers,

Global Sourcing Specialists,

Support Functions including

CAPE (Capability and

Procurement Excellence)

Global Regional Local

CEO

Category VPs RHoP –

Regional Head of Procurement

Support: Finance & Operations

Support: Human

Resources

RHoP – Regional Head of

Procurement

RCM – Regional Category Manager

Team Lead

CHoP – Country Head of

Procurement

Support: Finance & Operations

Support: Human Resources

CHoP – Country Head of

Procurement

Local Category Manager

Local Procurement Specialist Lead

• Regional Structure with

Regional Heads of

Procurement (RHoPs),

Regional Category Managers,

Regional Sourcing Specialists,

Support Functions including

CAPE : half in Miami, half in

the Countries

• In-Country Structure with

Country Heads of

Procurement (CHoPs),

Local Category Managers

(LCMs), and Local

Procurement Specialists

(LPSs)

© SABMiller 2014

SABMiller Procurement Global Model Design

11

Design Phase :

Project Team included Human Resources, Organizational Design and Change Management experts

• Processes up to

level 3 in ARIS

Tools

• Policies : Global

Procurement

Policy and Source

to Pay Policy

• Defined and documented Roles,

Responsibilities, Job Descriptions, Hiring

Requirements defined

• Defined

Implementation

Timeline,

Governance,

Resourcing,

Support

• Global and Regional Project Team

Members

• Knowledge

Center

established

A

B C D

A

B C D

A

B C D

© SABMiller 2014

SABMiller Procurement Global Model Design

12

Managing the Change :

• Senior Leadership Buy-in at Global, Regional and Country levels

• Well defined Scope, shared Project Goals, clear ambition

• Procurement Resources :

• Constant communication through Townhalls in all Countries

• Explicit principle of resourcing new structure with priority given

to current internal resources

• Managing Job changes inside Procurement : Generalist

Buyers became Strategic Sourcing resources, Local

Procurement Specialists or POC Spot Buyers

• Improving technical skills via extensive training

• Competencies defined, Competencies Assessment executed

• Stakeholders :

• Airtime in Latam and Country Executive Committees to

explain changes and gain buy-in / advocacy

• Regional Meetings

• Country Supply Chain VPs support throughout Transformation

Programme

© SABMiller 2014

Implementation by Capability

13

Strategic Sourcing Implementation :

• 291 Categories allocated under 5 Macro Categories

(Brewing Materials, Packaging Materials, Supply

Chain & Logistics, Marketing & Sales, Professional

Business Services)

• Collaboration Models definition (Local sourcing, Local

with best practices, Region Focused Sourcing,

Globally Leveraged - Regionally Sourced, Globally

Sourced and Global Agreements)

• Collaboration Model decision by Category done jointly

with Business, aiming at negotiating at the right level

for Value

• Project Team allocated specifically to support this

Transition Process

• Waves designed from easy (Direct Materials, Wave 0,

August 2014) to complex (Indirects, Wave 4, March

2015)

• Resourcing in-time for Wave Transitions : Recruitment

and Hiring with huge workload throughout

• Training on Strategic Sourcing Ways of Working

(Procurement Handbook) to all involved

• Category Transparency work, Transition Date, Sign-

off, Maturity

• eSourcing pilots executed

• ARIBA Contracts Management in place and utilized

© SABMiller 2014

Implementation by Capability

14

Procurement Operations Centre Implementation :

• Make / Buy Decision

• Location Decision and physical setup of the POC in

Bogota, Colombia

• Implementation Phases defined Countries grouping :

Phase 1 March 2014 CO, PA; Phase 2 August 2014 PE,

EC and Phase 3 February / March 2015 SV, HN – now

fully implemented in Latam

• Business Readiness including P.O. Automation via

Catalogue and Outline Agreements

• Extensive Training on new Process to Users,

Procurement Employees (Strategic Sourcing, POC, In-

Country)

• Workflow system for Purchase Orders approvals

implemented

• Currently handling 70,000 POs / year

• Now moving POC to Global Business Services (GBS)

© SABMiller 2014

Procurement Operations Centre (POC) Latam

15

Transactional Core of the new Global Procurement Model

Reporting and

Compliance to Policies

Spot Buys

Catalogues and

Automation

Full visibility of every purchasing transaction

and 3rd party spend in each and every

Country continuously.

In-scope Processes :

© SABMiller 2014

Closed Loop Value Realisation ……creating unprecedented cost visibility and

identifying sustainable savings to fuel top line growth

Supplier Performance & Partnering ……transforming engagement with our supplier base

to enhance and unlock new value beyond the scope

of our contracts including delivering against the

Prosper Sustainability priorities and targets

Business Partnering ……partnering with other functions (especially

Commercial and Integrated Supply Chain) to drive

organisational alignment through joint planning, goal

sharing, communication and governance.

What next?

16

Responding to current challenges globally and in Latam

The next wave of benefits requires heightened

levels of cross-functional working across our

operations and value chains

Lost opportunity to influence spend demand

through the budgeting cycle. Value realised in

Indirect categories is not fully visible to the

Business

Our supplier base is an underutilised asset to

SABMiller

© SABMiller 2014

SABMiller Procurement Latam Next Steps

• F16 stabilization and consolidation of SABMiller Global Procurement Model

• Strengthen Procurement Communities of Practice (CoPs)

• Supplier Development and Procurement Excellence improvements

• eSourcing : from pilots to hundreds

• Spend Visibility revamp

• Expand use of IS Tools

17

SABMiller Fiscal Year F16 starts April 2015 and ends March 2016

© SABMiller 2014

Q&A Thanks

18