Durban - Here's good news for local beer drinkers: Norman Adami, MD of SABMiller's South African subsidiary SAB, said the price of beer in SA remains one of the lowest in the world.
He intends to keep it that way. "We look at affordability in SA. Relative to many other countries, affordability is a factor here. Price increases are kept below inflation."
Responding to questions on 11% revenue growth in SA, Adami conceded that while there was a slight mix of factors involved, the increase came mainly from higher prices.
"There were two small price increases last year. This year the increase is 4.7%, despite the sharp climb in input commodity prices. We believe we'll have to absorb a lot of those costs in the short term."
This is consistent with the group's global revenue growth, up 6% to $25.30bn. Much of that came from price increases.
What wasn't that pleasing for SAB in SA was a 2% reduction in lager volumes. Lager dominates SAB sales at 25.9m hectolitres (hl). Soft drinks - among others SAB bottles Coca-Cola - were up 4% to 17.3 million hl, followed by other alcoholic beverages with a 13% increase, though off a low base, to 1.3 million hl.
Adami said lager volumes were largely affected by the Easter trading season slipping out of the financial 2009 reporting period, as well as a decline in premium and flavoured alcoholic beverage volumes.
Ebitda takes a tumble
Regulatory issues were a problem as well, where provincial government is obstructing sales to shebeens in the Western Cape.
"We are proactively engaging authorities at provincial level, and continue to do so. I'm optimistic on the outcome."
SA earnings before interest, tax, depreciation and amortisation (Ebitda) margins were savaged, down to 19.3% from the previous year's 23.1%. That saw Ebitda fall by 8%. Once again higher raw materials input costs were the culprit, leading to a 23% increase in rand-based production costs per hl.
"For example, the price of malt increased by 76% in rand, due to a 30% increase in US dollar prices and 25% depreciation of the rand over the period. But there are also areas at our breweries where we can perform better; we are chasing these opportunities," said Adami.
Adami adds though that the "mainstream category" which accounts for most of lager sales continued to grow, buoyed by strong performances from Hansa Pilsener and Castle Lager.
Sales declines accelerated in the last quarter of the financial year, painting a gloomy picture for the year ahead.
Adami said a five-pronged strategy is in place to deal with this and he remains confident about the medium-term outlook for the SA market, saying it has great potential despite current economic pressures. "We are making good progress on the new strategy; we have momentum, and beer is pretty resilient," he said.
Despite its rapid geographic diversification the SA market remains important to the SABMiller group, accounting for about 18% of global group earnings.
And guess which is the top selling brand in SA? Still Carling Black Label, having overtaken Castle Lager about four years ago. Which seems to confirm we're still a nation of cowboys and cowgirls.
- Fin24.com