SABMiller benefits from upmarket focus

- Last updated on GMT

Related tags: Beer market, Sabmiller, Marketing, Profit

A soaring premium beer market in Russia and growing consumption in
Poland and Romania are driving forward a major international
brewer's European profits by offsetting problems in Hungary and
Slovakia, writes Chris Mercer.

Global brewing giant SABMiller said Russian sales of its premium Miller Genuine Draft brand rose by more than 80 per cent in the first half of 2004 compared to the same period last year. Another of the company's Russian brands, Transmark, grew in volume by 51 per cent, equalling last year's impressive first half figure.

SABMiller's narrow focus on the premium sector of the Russian beer market has paid off in 2004 after this sector grew by 32 per cent in the six months to 30 September, three times faster than the whole Russian beer market which is now the fifth largest beer market in the world and the fastest growing in Europe.

Graham Mackay, SABMiller chief executive, was delighted with the growth in Russia although realistic about future figures: "The enormous growth that we have seen in Russia over the last couple of halves cannot possibly be sustainable, but I don't think we have to broaden dramatically.

"Our Russian business model as a whole is intact, it is growing very healthily. We have no plans to expand into the bottom of the mainstream or the centre of the mainstream market, and I am not necessarily sure that we would want to do that,"​ he said.

The company said it was too early to tell what effects it would feel from Russia's ban on televised beer adverts between 07.00 and 22.00 and the government's proposed ban on outdoor drinking - although the Union of Russian Brewers warned the industry might lose $1.65 billion of its $5.5 billion market if the latter were passed.

Mackay was also pleased with SABMiller's performance in Poland, where company subsidiary Kompania Piwowarska improved its market share by 34 per cent. Strong marketing also helped SABMiller's Lech brand to grab a 6 per cent market share after its relaunch in June this year.

The Polish beer market crept up by 1 per cent in 2004, though most of this has been in lower priced segments. Mackay admitted that SABMiller has cut profit margins to spend more on marketing its premium products, but he said the company had tapped in to lower-priced segments with its Zubr brand.

"What has happened in Poland, in simple terms is that the market has moved up and down. Overall the Polish market is now looking very positive again, both from the point of view of volume and profit growth into the future,"​ said Mackay.

He added that SABMiller had positioned itself well in Romania's emerging beer market by acquiring the SC Aurora brewery for $26 million (€20 million) in June this year. SABMiller's Ursus brand already leads the market and the company is ahead of the Romanian market's 2 per cent growth in 2004.

Varied success in Russia, Poland and Romania has helped to soften blows to SABMiller in Hungary, where the domestic beer market has declined by 13 per cent in 2004 after losing out to "heavily discounted cans imported from Germany following the imposition of a can deposit system".

Slovakia's beer market also dropped by around 13 per cent, in turn forcing SABMiller's volumes down by 8 per cent, whereas volumes in the Czech Republic declined by 5 per cent compared to levels set during 2003's exceptionally warm summer.

Overall, SABMiller's European sales volumes grew by nearly $2,000 hectolitres to $17,961 in the first half of 2004 compared to the same period last year.

Europe was the company's biggest and most profitable market in the first half despite strong growth in the Americas and South Africa. Total company operating profit increased by $200 million to $818 million.

Related topics: SABMiller

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