SABMiller aims for nine-percent rise in African beer sales
IOL Business/ Reuters - Apr 11th, 10:28
SABMiller planned to boost beer volume sales in Africa by between 7 percent and 9 percent a year by slashing prices, using more local grains and cheaper packaging, and negotiating better tax terms with governments, the company said yesterday.
“On average the African continent [in terms of gross domestic product] will grow 5 percent to 6 percent per annum we think… we would expect to capture maybe 2 to 3 percentage points [beer volume sales growth] above that,” SABMiller Africa’s finance director, Jonathan Kirby, told the Reuters Africa Investment Summit in Abuja, Nigeria.
He said the brewer planned to invest $400 million (R3.5 billion) to $500m a year outside South Africa and open one to two new breweries in Africa in each of the next three years. Countries including Ghana, Nigeria, Mozambique and Zambia were the likely targets for expansion.
Home to some of the world’s fastest-growing economies, Africa has a surging thirst for beer: analysts estimate beer volumes rose around 7 percent last year. Excluding the mature South African market, growth reached more than 10 percent.
SABMiller wants to gain an edge over rivals like Diageo and Heineken by luring consumers who drink cheap locally made home brew that comprises 75 percent of alcohol consumed in the region, company estimates show.
African consumers paid more for beer brands than the global average, Kirby said.
“I think price is a key area. The African consumer will pay on average about $1 a serve and if you benchmark that against the rest of the globe that is at the top end,” he said.
“If we could make beer say 80c to 85c a serve I think the volume opportunity would just jump at you.”
Kirby said the company was looking at using cheaper local crops to make its beer and providing more draft beer to cut the cost of packaging. This had the double effect of reducing its import bill and stimulating local economies, which gave it more opportunity to negotiate with governments on taxes.
“One of the things we want to try and do is develop a long-term local supply structure [to reduce] our reliance on expensive imported and highly tariffed crops,” Kirby said.
He said SABMiller was getting about 30 percent of its supplies locally but planned to increase this to 50 percent within the next two to three years.
SABMiller began selling a beer using cassava in Ghana last month. It mirrors a product launched in Mozambique in 2011, where SABMiller was able to negotiate a reduced excise tax on the root crop and produce a brew 75 percent cheaper than other mainstream beers.
The cassava concoction now made up 8 percent of the beer consumed in Mozambique, Kirby added.
Nigeria is the biggest producer of cassava in the world.
Kirby said it was a less viable business there because Nigeria already had low excise duties on the root.
SABMiller’s stock rose 1.44 percent to close at R465.95 on the JSE yesterday. – Reuters
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