SUBSCRIBE

Breaking News on Beverage Technology & Markets

News > Markets

Read more breaking news

 

 

'We’re growing in Africa, not fighting for beer share' – SAB Miller

By Ben Bouckley+

04-Sep-2012
Last updated on 04-Sep-2012 at 17:34 GMT2012-09-04T17:34:52Z

Picture Copyright: One Red Eye/Philip Meech
Picture Copyright: One Red Eye/Philip Meech

SAB Miller insists the key attribute of the African beer market is rapid growth rather than competing for share, as in Europe, as the firm opens a new $100m brewery in Nigeria.

On August 30 the Nigerian president cut the ticker tape on a new brewery in Onitsha in Southeastern Nigeria; it has an annual capacity of 500,000 hectolitres and will initially produce local brands.

The first to be brewed is new brand Hero Lager, followed by Trophy Lager, Grand Lager and non-alcoholic malt beverages Grand Malt and Beta Malt.

SAB Miller’s latest analysis of the African market shows steadily rising beer volumes from 2008 to 2012, and the region still only accounts for 12% of group revenues.

Dominant market position

But Africa is a lucrative proposition for SAB Miller, since the region contributes 12% of group EBITA. This compares favorably with Europe, which contributes a lower earnings to sales ratio: 14% EBITA on sales of 17%.

Asked why this was the case, Richard Farnsworth, SAB Miller business media relations manager, told BeverageDaily.com: “Europe is an extremely competitive market, and we saw significant competitive pressures there last year from our main competitors, obviously Heineken and Carlsberg, but others also. We have to respond to that.”

“But in Africa we tend to have dominant positions in the markets where we operate, and while there is competition there, it is less fierce. The key attribute in Africa now is growth rather than competing for share.”

Although Nigeria – a market SAB entered in 2009 via a strategic alliance with Castel – is Africa’s second-largest beer market, Farnsworth said the firm saw significant headroom across the continent given low per capita beer consumption rates.

“We reckon that, across Africa, per capita consumption is around eight litres per year. Nigeria is ahead of that, but there is a big gap between the rest of Africa – including Nigeria – and South Africa at around the 65 liter mark,” he explained.

Growing thirst for beer…

While SAB was pursuing a long-term premiumization strategy across Africa, Farnsworth said the initial strategy atthe Onitsha site was to brew brands already present in Nigeria, before introducing other SAB brands “in the fullness of time”.

Since Africa’s percentage of SAB group sales compared to other regions – Latin America leads the way with 32%, South Africa follows on 22% – did Farnsworth predict that this number would increase further?

“Absolutely, since at the moment, the two fastest growing regions in our business are Latin America and Africa. Africa grew 9% in Q1 2012, and Latin America was around 6% in organic terms,” he said.

“Certainly we expect that to continue and are investing quite significantly in Africa now to increase our capacity. Onitsha is one example of this.”

Discussing other African projects, Farnsworth said SAB started work on a second brewery in Uganda only this year, and also launched Impala, the first commercially produced cassava beer, in Mozambique around nine months ago.

 “As well as growing affordable brands such as Impala, we’re also seeing very significant growth in Castle Light [the Castle brand is pictured in a South African warehouse], which is doing extremely well with mid-20% growth in places such as Tanzania,” he added.