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SAB Miller challenge to hit African beer ‘sweet spot’

By Ben Bouckley , 11-Oct-2012
Last updated on 11-Oct-2012 at 13:55 GMT

SAB Miller says it wants to slash the cost of its mainstream beer brands in Africa to drive growth, as it identified a $3.7bn value opportunity as consumers move away from informal or illicit alcohol.

Speaking during a quarterly division seminar held in London, UK, yesterday, SAB also announced the launch of traditional African beer brand Chibuku into 10 new countries (12 in total) to drive this shift.

Opaque beer Chibuku – made using maize and/or sorghum – is unusual in that it is a short shelf life, low alcohol beer (sold at 50-70% less than lager) that ferments within a new PET package (previously it was sold in cartons) with alcohol content rising from 0.5% to 4% ABV the day before its expiry date.

The world’s second-largest brewer and its most diversified geographically, SAB Miller is the biggest operator in Africa (well ahead of Heineken and Diageo), which brings 12% of sales and 13% EBITA.

But SAB ($31.4bn sales: 2012) is keen to unlock massive untapped potential in the African market, due to the still underdeveloped beer category, rising populations and consumers with growing incomes who saw beer as an aspirational drink.

Senior vice president, investor relations, Gary Leibowitz, told investors that estimates suggested up to 80%of alcohol in Africa was informal, and thus subject to commercialization as wealth grew.

Meeting the consumer halfway…

SAB would meet consumer needs at lower price points, Leibowitz said, “meeting the consumer half way between where traditional lager has been priced and traditional subsistence alcohol”.

Mark Bowman, MD, SAB Miller Africa, also repeated SAB’s regional “rallying call”, to halve the price of beer to focus on affordability, double premium segment prices and localize supply chains.

Bowman said SAB would strive wanted to hit the African beer “sweet spot”, whereby a serve of beer was priced below the wage paid to the average African for two hours of work.  

Jonathan Kirby, finance director, SAB Miller Africa, added: “One of the things is pricing. Beer is very expensive in Africa – one of the things we’re trying to do is to bring that down over time,” he said.

 “We’ve seen evidence in other markets – South Africa is a case in point – where for 15-20 years we priced at or below inflation deliberately, we doubled that market in that period.”

Meanwhile, Kirby said, SAB was “getting a lot better at talking to the consumer, reminding him of his favorite brand, talking to the intrinsics of each. Five years ago I think that wasn’t the case.

Kenya and beyond?

Asked by one analyst about ‘obvious’ big markets that SAB Miller was not involved in but could enter, Bowman said that Africa was “largely spoken for”, and that the firm (along with strategic partner Castel) has positions in most markets.

“One has to be circumspect in some of these smaller markets if it’s worth investing against a major competitor given the size of the market,” he said.

Bowman added: “Perhaps Kenya – obviously we have plans to develop our brands there. Whether that results in a brewery I don’t know, but certainly not in the short term.

“Our brands don’t have a strong position in Kenya, so our process over the next few years is to build up our brands there slowly but surely, to run our business profitably on a quarter-by-quarter basis.”

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