SABMiller defies cost challenges through global growth

In a trading statement for the six-month period ending 30 September, the company said that the resulting improvements in revenues were still being partially offset by higher production costs and increased investment in its operations. The announcement highlights the ongoing cost pressures affecting brewers, due to the higher prices for the metals used in packaging and raw ingredients. Despite these costs, the company said that full year growth forecasts remains within management's expectations. The update comes after the company announced last week that it would be combining its US operations with rival Molson Coors to meet challenges related to brewing and distribution in the country. Through the new entity, to be rebranded as MillerCoors, the two companies will work together to improve cost efficiency in the country. In North America, sales to retailers for the group's flagship Miller brand increased by 5.9 per cent, or by 1.4 per cent organically, excluding the acquisition of the Sparks and Steel Reserve brands acquired last August. On a non-organic basis, sales of the Miller light lager were up by 2.1 per cent, according to the trading update. The US operations were continuing to benefit form an improved focus on higher margin beers, with net revenues up 3.9 per cent per barrel, the company stated. The growth was driven both through product innovation like the company's Miller Chill brand and its premium lagers like Peroni Nastro Azzurro and craft beer Leinenkugel's, which both boosted double-digit volume gains. Through the group's Latin American operations, sales volumes rose by eight per cent during the period. Sales growth in South America was beginning to slow after an initial boon following the company's expansion in the region, the brewer added. In the highly competitive Peruvian market, volumes increased 10 per cent, according to SABMiller. In Columbia, lager volumes were up by seven per cent during the half year from a high base resulting from sales growth the previous year, SABMiller said. The company added that it was continuing to restructure its operations in the country, overhauling its distribution capabilities and re-launching the core Aguila brand. The investments matched the group's plans for the entire region in a bid to continue building brands to meet the potential in the market. Volume growth for the group's lager brands was even more pronounced in Europe. Total sales volumes were up 12 per cent on the back of strong demand in Eastern markets like Russia and warmer weather during the period. Romania led regional growth according to the company, with sales up 37 per cent, due to increased production capacity and the continued success of Timisoreana sales after the product was repackaged in polyethylene terephthalate (PET) bottles. In the region's other key markets, Russia posted an 18 per cent improvement in volumes, while Poland and the Czech Republic achieved growth of 13 per cent and three per cent respectively. In the Africa and Asia division, SABMiller said volumes were up by 20 per cent for the period, due in part to the strength of markets like China, where sales were up by 22 per cent. In its African operations, excluding Zimbabwe, lager volumes increased by six per cent organically. The company reported lager volumes increased two per cent in South Africa, helped by the launch of the premium Hanza Marzen Gold brand in May. However, the company said that sales volume growth in the country had been setback by supply shortages. Soft drinks volumes were up nine per cent on the back of favourable weather conditions, SABMiller added.