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Heads-up: This is how SABMiller is conquering Africa

Sep 24 2015 13:29
Katie Kilpatrick

The African continent holds a multitude of business opportunities, managing director of SABMiller Africa Mark Bowman told a recent forum at the Gordon Institute of Business Science.

He said the case for Africa was compelling and the group was “fiercely optimistic about our business and our ability to grow”.

SABMiller, which went from a local conglomerate to the second-largest brewer in the world, has primary brewing operations in 17 countries throughout Africa as well as interests in another 21 countries through its joint venture with the Castel group.

Bowman said 5.4% GDP per capita growth across Africa, 6% population growth, a 4.3% increase in urbanisation and a developing middle class meant the continent’s numbers couldn’t look better from a consumer goods perspective.

However, the group has taken bold investment decisions in certain regions: “We cannot wait for the environment to improve before we make investments,” Bowman said.

“We have taken a portfolio view on Africa and try to see through the noise to the underlying momentum. We are in it for the long haul.”

Bowman explained that beer consumption of nine litres per capita across the continent was significantly lower than South Africa’s 58 litres per capita. As a luxury or aspirational purchase, driving down the relative price of beer across the continent presents an opportunity for growth.

The case for Africa

Localisation has been key to the success in SABMiller’s African expansion drive.

Bowman explained that while SABMiller initially developed its footprint in Africa through the acquisition of assets and developing local markets using South African expertise, the group has spent a significant amount of money on new production lines, breweries and malting facilities in order to encourage localisation of the value chain.

Localising costs has reduced foreign exchange exposure, while smaller, modular breweries are able to better serve markets because of unreliable logistics in rural areas.

“We have a core belief in local management running operations, and we always defer to them,” Bowman said.

Shared learnings from across the global group in marketing and manufacturing innovations have meant expertise can be shared and the significant investments made in Africa are held to global standards.

SABMiller has seen transformational beer growth in key markets across Africa, with 92% growth in per capita consumption in Mozambique and 62% growth in Tanzania.

While the group holds first or second position in most African beer markets, it was relatively late into Nigeria, first entering the market in 2008.

“We arrived extremely late in Nigeria after observing the market for 10 years. It is not an easy market to unlock,” Bowman said.

Creating a value beer category by undercutting competitors’ pricing in localised markets outside of the main Nigerian centres, SABMiller carved out a niche in the crowded market. Its new brand, Hero, is now the fastest-growing brand in the SABMiller stable.

“We are an upstart in the market and still a very small player. I wish we had gone into Nigeria 20 years ago,” Bowman said.

South Africa as a gateway to the continent

South Africa still has an important role to play as a gateway to the African continent.

“South Africa is in a unique position on the continent as a centre of excellence and expertise. We must encourage South Africans to go into Africa and leverage their knowledge,” Bowman said.

“Our businesses typically need growth, and the best place for that is close to home.”

South Africans going into Africa must be optimistic, but they must avoid arrogance and complacency, he added.

“South Africans are very good overall managers. They have experienced a level of turbulence not comparable to other markets in the world. Our resilience is a very powerful proposition.”

Threats to the SABMiller Africa

Bowman said the threats to SABMiller’s African business included currency volatility and competitors who are starting to compete more aggressively on the continent.

“Double-digit dollar earnings growth is the goal for our business across all units and markets. We have to deliver strong, consistent growth as part of a multinational group and local currency volatility against the dollar can make this difficult.”

» The Gordon Institute of Business Science forums are sponsored by City Press


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