SABMiller targets cheap beer

Johannesburg - Brewing giant SABMiller said on Wednesday growth in lager volumes may brake in Africa, one of its top performing regions, next fiscal year as the global crisis reaches the poorest continent.

SABMiller's head of Africa told Reuters the brewer of Peroni and Grolsch would keep beer volumes rising given African economies are relatively well cushioned from the world economic slowdown, but said the ripple effects were already being felt.

"For beer, we are certainly expecting volume growth, but the extent to which it matches this year I don't know," Mark Bowman, managing director for Africa, said in an interview.

He said lager growth had already slowed slightly in the fourth quarter compared to a 4% rise in underlying African volumes in the three months to end December.

"My gut feeling is it will be slower (next fiscal year), but we would be very surprised to lose growth."

Excluding South Africa, Africa accounts for an estimated 10% of earnings at London-based SABMiller, the world's No. 2 brewer after Anheuser-Busch InBev.

Bowman said that including its soft drinks and traditional beer business, which together comprise half the region's sales, the firm expects double digit volume growth this year and next.

SABMiller is striving to capture a chunk of the roughly $3bn per year cheap home brew market by using local crops such as sorghum instead of barley to make a low-cost clear lager that could be sold at about 70% of the current price.

"Beer at the moment costs about $1 per serve, which is obviously too expensive for the average working class guy, so the challenge is to reduce the costs to be able to make if more affordable," Bowman said.

"Beer is essentially a colonial product. Affordable, African beer is about local sourcing of ingredients," he added.

- Reuters