Africa: SABMiller targeting Africa’s undeveloped spirits market

SABMiller has built spirits manufacturing facilities in South Sudan, Ethiopia and Nigeria over the past year, adding to its successful Tanzanian and its small Mozambican spirits units, Business Day Live reported on March 10.

The world’s second-biggest beer brewer is targeting Africa’s underdeveloped spirits market in an effort to "legitimise" the industry and ultimately to benefit its beer sales, the company’s Africa MD Mark Bowman said on March 9. He said shifting spirits from the illicit to the formal market put the alcohol on a more level playing field with beer.

"If everyone’s paying their share of excise, pricing will start to normalise at appropriate levels for all alcohols," he said, citing a quadrupling of excises on SABMiller’s Mozambican business immediately after it was acquired. He also said, "If we can get a number one or two position in what we call mainstream spirits, then we think we can make a fair amount of money".

SABMiller plans to compete in spirits against cheap, illicit alcohol rather than with more expensive international brands, which are also targeting growth in Africa. Apart from SA, Africa generally had no major "mainstream" spirits suppliers and the industry was "completely fragmented", Mr Bowman said.

SABMiller’s focus on spirits — unique to its African business given the lack of competition in the affordable segment — arose after it invested in developing the fast-growing Tanzanian unit’s brands and exports.

"We noticed a few years ago that that business (Tanzania Distilleries) was growing at 15%-20% a year without much input from us…. We started spending a bit more time and effort on developing some of the brands in that business and we started exporting to surrounding markets," Mr Bowman said.

"Then we went through a lot of debate internally about whether SABMiller wanted to be in spirits as well. In essence, for our business in Africa, we do believe there’s an opportunity."

While South Sudan, Ethiopia, Nigeria and Mozambique were "the most attractive opportunities" for the time being, SABMiller would also look at adding production capabilities in other African markets.

The company’s portfolio includes products such as cream-based liqueurs, vodkas and, as of last year, a three-year-old Scotch whisky in Tanzania.

"We’ve had good success in a few start-ups but this is a long game and will take us many years to get momentum," Mr Bowman said. SABMiller is also growing its focus on soft drinks both worldwide and in Africa, where it is merging its regional soft-drinks units with a South African Coca-Cola bottler and with The Coca-Cola Company’s local operations.

SABMiller on March 9 told investors that it expects its net producer revenue from Africa, or sales less excise and similar taxes, to grow at least 10% on average per year, for the next three to five years. It expects to sell more beer as per capita consumption and economic growth rise, and as it takes market share from cheap illicit alcohols.

"Africans drink 9l of beer per head per year, compared with a global average of 45. So as Africa develops and levels of disposable income rise, we expect the rate of beer consumption to grow significantly," Mr Bowman said.

11 March, 2015