SABMiller ramps up brewing in Africa

FMCG SUPPLIER NEWS

IOL Business - Aug 26th, 08:21

In a bid to ensure it is able to harness the ongoing strong demand in Africa, SABMiller announced two major investments in the region yesterday.
 

In Uganda, subsidiary Nile Breweries officially opened a new brewery in Mbarara in the western region of the country. The new facility, which is Nile Breweries’ second brewery in the country, involved an investment of $90 million (R918m) and doubles the company’s brewing capacity to 3.6 million hectolitres a year.

Further south in Zambia, the group announced that it was investing $24m in building a “hi-tech opaque brewery” in Lusaka. The new 2.1 million hectolitre brewery, which will be built at the same site where the old Lusaka brewery is situated, will involve a complete overhaul of the old plant that was built in the early 1960s. The construction is expected to be completed by the end of June next year.

In Uganda, Nile Breweries’ single brewery, which is located on the Nile River in Jinja, underwent a $29m expansion in 2009 to double its brewing capacity to 1.8 million hectolitres. That brewery is already near to operating at full capacity. The new brewery in Mbarara is intended to ensure an uninterrupted supply of Nile Breweries’ products to the market.

Africa excluding South Africa has been one of SABMiller’s consistently strong growth regions. In financial 2013 it reported a 20 percent increase in earnings before interest, tax and amortisation (Ebita) on a 6 percent increase in lager volumes. The region also achieved a significant advance in profitability with the Ebita margin increasing to 21.7 percent from 20.2 percent.

A trading statement issued by SABMiller last month revealed the continued strength of the African business and its importance to the group’s performance. In the quarter to June volumes increased by 8 percent and revenue was up by 10 percent in Africa. For the group as a whole, volumes were down 1 percent.

At the time, Alan Clark, the group chief executive, noted that the quarterly figures were adversely affected by unseasonably cold and wet conditions in many of the group’s northern hemisphere markets, adding: “This was offset by continued growth in our Latin America and Africa divisions.”

Commenting on the opening of the new Ugandan operation this week, SABMiller Africa managing director Mark Bowman said: “The growth potential in Uganda, particularly western Uganda, is significant and the new brewery in Mbarara will allow us to realise the opportunity. Building a second brewery in Uganda is part of our strategy to invest in new capacity across Africa so that we are in a strong position to capitalise on the continent’s long-term beer market growth over the coming decades.”

In a statement issued yesterday, the group said that clear beer volumes in Uganda had been growing at a compound annual growth rate of 11 percent for the past six years.

“Growth is expected to continue at this level for the foreseeable future, driven by gross domestic product growth, a rapidly growing population, and currently low per capita consumption.”

The new brewery also offers opportunities for farmers to supply raw materials such as sorghum, barley, maize and sugar to Nile Breweries. An estimated 20 000-plus farmers are already supplying these materials to the company.

SABMiller said Nile Breweries procured about 20 000 tons a year locally, more than 60 percent of its brewing requirements, and it planned to raise this to 40 000 tons by 2017.