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Johannesburg - Cash-strapped South Africans have spurned pricier premium lager brands and stuck by traditional brands like Castle and Black Label.
According to a sales update from global brewing giant SABMiller, lager volumes for the three months to end-December 2008 rose by 1% when compared with the same time in 2007.
SABMiller said its mainstream portfolio put in a "strong performance... as consumers traded down in the light of tougher economic conditions".
"Given tough times, there has been a clear swing to mainstream brands and lower growth in the premium segment," said Dirk Kotzé, a portfolio manager at Coronation Fund Managers.
SABMiller's local operation, SA Breweries (SAB), produces premium brands like Hansa Marzen Gold, Pilsner Urquell, Peroni, Grolsch and Dreher for the South African market.
In 2007, SAB lost the right to brew and distribute Amstel in SA to Amstel's parent in SA Brandhouse Beverages, the local joint venture company owned by Heineken, Diageo and Namibia Breweries. Brandhouse is gearing up to compete with SAB and is building a brewery south of Johannesburg.
Economic crisis hurts volumes
"SAB's strategy is to roll out an increasing number of premium brands ahead of the launch of Heineken's new brewery. This appears to be working as Amstel's volumes seem to be disappointing. It will be tough for Heineken to take SAB on in the mainstream area, which is SAB's strength."
SAB, which owns local Coca-Cola, Fanta and Valpré producer Amalgamated Beverage Industries, said soft drink volumes grew 11% over the prior year. It noted that 2007 had been affected by stock shortages.
The brewer said it recorded a 1% decrease in lager volumes on an organic basis for the third quarter. This excludes volumes for acquired businesses for the first 12 months after an acquisition.
It said consumer demand had been affected by the global economic slowdown, and continued to weaken in many of the group's markets. It also said its financial performance had been supported by firm pricing and cost efficiencies, and that it was in line with the group's expectations.
The marginal decrease in lager sales has been "exacerbated by country-specific issues", Kotzé. In Colombia and Russia, volumes were down 6% and 22% respectively from the previous year.
Analysts expect positive forward growth for 2009, barring issues that held back demand in specific countries like Russia and Colombia, said Kotzé. Brokers' consensus forecast for earnings, as polled by data service McGregor BFA, is for full-year earnings to rise to 1 054c/share.
- Fin24.com
