Thirst for beer has AB InBev brewing more
By Colleen Goko - Jul 13th 2017, 10:03
The economy may be experiencing a bad hangover, but that has not decreased the South African appetite for beer.
It is within this context that Anheuser-Busch InBev (AB InBev) has hit the ground running in expanding its facilities in SA.
In October 2016, the world’s top brewer clinched a more than R1-trillion deal to buy SABMiller. Soon afterwards, AB InBev decided to expand the Alrode and Rosslyn Breweries. Alrode is the largest brewery in SA, followed by Rosslyn.
"There was a need to increase capacity at these two breweries in order to meet our future growth projections," SAB and AB InBev vice-president of supply, Trevor Sanderson says.
"We made the decision in October after the acquisition of SAB by AB InBev."
"It took two months to finalise the design and commercial negotiations and manufacture of the lines commenced towards the end of December 2016."
The Alrode packaging line, at a cost of more than R1.3bn, will come on line in August, while Rosslyn’s, which cost R1.5bn, will become active towards the one-year anniversary of the merger. The new packaging lines will have the capacity to bottle 45,000 bottles an hour.
A report by BMI research released earlier in 2016 said brewers were scaling up premium and craft beer offerings as consumer tastes become more sophisticated. The research revealed that craft beer and the premium offering were outperforming other categories of alcohol.
Analysts at JP Morgan say AB InBev plans to introduce more premium beer offerings to the South African market — a move that could boost revenue for the group in this region.
The analysts say premium beer account for 10% of the local industry or 3-million hectolitres of 31.5-million hectolitres of beer consumed on the country.
Global brands that may enter SA include Budweiser, Corona and Stella Artois.
"We estimate that AB InBev can generate $540m of revenue synergies from Colombia, SA and Australia through expansion of the premium beer segment and AB InBev gaining share within that."
JP Morgan says it estimates that the premium segment in SA could expand from 10% to 15% in SA, driven by AB InBev and Heineken, but the analyst says "this could be optimistic".
BMI says SA is the top market for alcoholic drinks in sub-Saharan Africa, while globally, the country is at no17 on its alcoholic drinks risk-reward index.
Looking at AB InBev’s full-year results in March, the market leader had an overall decline in beer volumes in 2016. However, Castle and Flying Fish, two of its premium brands in the country, recorded double-digit growth.
Sanderson says Stella Artois will be the first beer to be introduced in SA in the near future and that there are plans "to introduce other brands in due course".
SAB and AB-InBev Zone president for Africa Ricardo Tadeu says the investment in the plants shows the company’s belief in the future of beer.
"There is a lot of growth still to be had."
"It demonstrates the company’s agenda to invest and participate in expanding the economy," Tadeu says.
AB InBev is expected to release its second-quarter results in the last week of July.
The performance of the company’s shares on the JSE has been muted — up about 1.37% in the past six months.© BusinessLIVE MMXVII
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