Shebeen smackdown hurts SAB

Johannesburg - Global beer brewer SABMiller has blamed "constraints on the sale" of alcohol in the Western Cape, and the introduction of competition, for losing market share in the South African beer market in the quarter to June.

SABMiller CEO, Graham Mackay, said last week that the South African beer market grew 2%, but his company lost 2% sales volume on lager through lower market share.

"The underlying market continues to be affected by weakening consumer demand, rising unemployment, and constraints on the sale of alcoholic beverages in the Western Cape," said Mackay.

Analysts polled by Fin24.com said the constraints in the Western Cape to which Mackay referred included stricter local government bylaws which were introduced in the period.

Coronation Fund Managers' Dirk Kotzé said the Western Cape "is presently going through a regulatory disruption phase as the provincial and local govt have clamped down on 'illegal' shebeens".

That was in addition to the impact caused by the direct entry of Dutch rival Heineken in the local market.

Heineken, the brewer of premium brands such as Heineken and Amstel, imported those brands into the local market while it is simultaneously set about construction of a brewing plant in Gauteng province.

Craig Pfeiffer, GM of investments at Absa Investments, said the City of Cape Town recently passed a by-law restricting trading hours of licensed liquor establishments.

"In residential areas those establishments (restaurants and bars) can only serve alcohol between eleven in the morning and 21:00 while places like sports pubs have until 23:00," said Pfeiffer.

According to Pfeiffer, that is the challenge that's now facing SABMiller as the policing of regulations improves. "Only illegally can the bylaws be sidestepped."

If more municipalities countrywide were to follow Cape Town's example, companies like SABMiller and Heineken would have challenges where sales are concerned, said Pfeiffer.

"Only those licensed shebeens on the edges of major centres would be tempted to bypass the law and risk losing their licenses," said Pfeiffer. Those are establishments mainly in centres like Gugulethu and Soweto where policing might not be very strict.

Kotzé said SABMiller's BEE transaction in the South African unit was likely to secure or grow the volume base for SABMiller as it gives shareholder establishments an incentive to sell SABMiller products rather than those of a competitor.

However, the BEE deal might have some unintended consequences for SABMiller.

The liquor trade regulations in the Western Cape have shown that licenced establishments generally are poorer traders relative to their unlicensed counterparts.

Trading hours would be reduced for shebeens that have been trading illegally, therefore lowering sales volumes, said Pfeiffer.

- Fin24.com