Emerging markets behind SABMiller profit boost

By Neil Merrett

- Last updated on GMT

Related tags: Brand, Sabmiller

SABMiller says that a continued focus on expanding in emerging beer
markets like Africa, Asia, Latin America and Central and Eastern
Europe has allowed it to boost lager sales by 11 per cent.

Speaking this week at an investor presentation in New York, the group's senior management announced that the company's focus on developing markets had helped drive an 11 per cent rise in lager sales during the five-month period ending August. The group's latest figures will come as further encouragement to brewers to seek opportunities in these markets. Brewers are increasingly moving to exploit opportunities in emerging and untapped markets to offset more stagnant sales for its beer brands in more established regions like the North America and Western Europe. Through its European operations, the company said that organic operating profit had risen at a rate of 20 per cent annually over the last six years. The brewer attributed the group largely to its operations in the developing markets of Central and Eastern European, which it aims to exploit further by increasing its portfolio of higher value products. SABMiller announced that it was also keen to profit from the "significant potential"​ of Latin America's beer market through a programme of increased spending. According to the group, brewing infrastructure in the region has been under funded for some time. However, the company expects to reap the benefits of a major investment drive in the market. This spending is designed not only to step up marketing of the group's products in the market, but also to improve its production and distribution networks. These upgrades to the company's operations are expected to generate long-term growth, though an unexpectedly high level of volume growth meant it was already posting strong sales growth in the region. Asia has similarly become another major source of growth for SABMiller, with the company claiming that its Chinese joint venture now holds a 10 per cent share of the burgeoning beer market in the country, through brands such as Snow lager. In other major markets in the region such as India, the group's presence is even stronger, currently accounting for about 35 per cent of the market. With the recent acquisition of the Foster's brand, the group's expects its operations in country to post further sales growth. In South Africa, both the company's lager and soft drink brands posted strong improvements in sales during the period, on the back of an extended portfolio of higher value products. Following the success of introducing the Peroni Nastro Azzurro and Hansa Marzen Gold brands in the country, the brewer announced it was considering additional product launches in the future. There were set backs though for SABMiller's operations in the country as a result of delays to the relaunch of the Amstel beer brand. The company's contract to brew the brand was terminated earlier this year, which has reduced profitability in the country. Elsewhere on the continent, SABMiller said it was committed to extending its capacity and distribution to benefit from the developing economic environment in some markets. Profitability for the company was not exclusive to emerging markets though, with the US division posting a four per cent increase in net revenue per barrel. The group attributed a focus again on higher value beer international beer brands like Peroni Nastro Azzurro, and the success of its Miller Lite brand. Other strong sellers in the region included the Miller Chill light beer, which already sold 75 per cent of its annual sales target, and craft beer like Leinenkugel's, which ousted double-digit sales volume growth. This focus, according to the group, is expected to drive a 0.5 percentage point improvement in operating margins for US operations by the end of the year.

Related topics: SABMiller

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