Africa upgrades boost SABMiller

2010-01-20 12:38

Johannesburg - Brewing giant SABMiller [JSE:SAB] has said it will rely on the strength of its brands and the looming economic recovery to win back lost market share in South Africa, while capital investments will extend its reach through African markets.

"We expect the economic situation to remain challenging in South Africa, but once economic growth returns we shall see an improvement in beer sales," SABMiller spokesperson Nigel Fairbrass told on Tuesday after the company announced its trading update for the quarter to end-December.

He said his company commanded more than 90% market share before the quarter, which has now been reduced to "less than 90%" as a result of competition in the premium segment from Dutch brewer Heineken.

Asked if its recently announced black economic empowerment transaction - in which SABMiller will sell shares to black South African beer retailers - would help shore up market share, Fairbrass said the deal was not meant for that purpose.

"It's not to improve sales, but is intended to fulfil a long-standing company objective of economic empowerment and transformation as well as a legal requirement," said Fairbrass.

SA, Tanzania and Botswana were the only African regions in which SABMiller experienced a negative growth in beer sales, with -4% and -29% in the case of Botswana.

In the rest of southern Africa, SABMiller achieved double-digit growth (between 11% and 17%) in sales, which it attributed to recent capital investments in those countries.

Uganda takes top spot

"We have built a new 500 000 hectolitre brewery in the north of Angola, which will be opening in March," said Fairbrass. He said the 17% sales increase in that country was aided by recently increased brewing capacity (to 800 000 hectolitres) in the capital Luanda.

The new brewery will help overcome the logistical challenges of getting its products to the north of the war-ravaged country with little road or rail infrastructure. Luanda harbour also often experiences long delays in moving the premium products SABMiller has had to import.

Additional brewing capacity helped propel sales in Mozambique and Uganda, with Uganda claiming top spot with a 30% sales increase. Fairbrass attributed Uganda's growth and Zambia's 17% sales increase to a combination of lower beer prices - a result of using locally-produced ingredients in the case of Malawi, while Zambia saw a reduction in excise duty - and good economic conditions despite a global recession.

"Economic conditions across Africa remained different to those in South Africa," said Fairbrass.

All in all, Africa came in with a 7% beer sales increase, making it SABMiller's best-performing region. Latin America came in third with a 4% improvement, following on the heels of Asia (5% growth).

"The economic situation is not getting any worse across the globe," said Fairbrass. He added his company remained hopeful of selling more beer in the developed world, where the recession has been severest.

Fairbrass remained "very confident" China would lift volumes again, after heavy snow and wet weather slowed sales growth to 6% in the quarter.