Africa: SABMiller expects ‘gouble-digit’ growth from its cheaper African brands

SABMiller Plc, the world’s second-largest brewer, is aiming for “double-digit” growth over the next two-to-three years from the less expensive brands it sells in Africa such as Raiz and Eagle lager, Bloomberg communicated on October, 28.

To fuel increased sales, the company plans to cut beer prices in its “affordable category,” Mark Bowman, the head of the brewer’s African unit, said without being specific. The unit excludes South Africa.

The maker of Grolsch and Miller Genuine Draft said Oct. 15 that first-half beer sales fell as markets from Europe to South Africa shrank. Declines were less than for rivals Heineken NV and Carlsberg A/S because of SABMiller’s broader presence in more resilient African and Asian markets. Those two regions have the “strongest organic growth prospects,” over the next three- to-five years, with Africa also having potential to outperform, SABMiller Chief Executive Officer Graham MacKay said.

“Africa has a very relaxed attitude to alcohol, with very few taboos over its consumption,” Mackay said. “In Africa, about 70 percent of beer consumption is of illegal beer, so we represent a very small portion of the pool and we believe there are big opportunities to grow.”

SABMiller will reduce its capital spending in Africa to $200 million in 2011, from the $370 million it plans to spend by the end of its current fiscal year in March, Bowman said. The level of capital expenditure in the region meant the brewer’s African operations have not been “very cash generative” over the past one-and-a-half years, he added.

In an effort to secure the supply of ingredients needed to make beer, SABMiller has agreements with 20,000 farmers across the continent where the brewer provides a “guaranteed market and a guaranteed price,” Bowman said.

30 October, 2009