SABMiller investing $2,5bn in Africa

SABMiller investing $2,5bn in Africa

MARKETING NEWS

Business Day - Apr 17th 2012, 08:48

SABMiller plans to invest up to $2,5bn in Africa over the next five years to build and refurbish breweries, its head for the region said yesterday, as it looks to slake rising demand for beer on the fast-growing continent. 

"We are still looking at around $400 to $500m a year … for the next three to five years," Mark Bowman, SABMiller’s MD for Africa told the Reuters Africa Investment Summit yesterday.

"There’s quite an attractive growth in markets outside SA, so we will be investing basically to meet and be ahead of demand."

SABMiller’s Africa business, which excludes SA, is the group’s biggest recipient of capital expenditure and its fastest growing, with underlying volumes in the last three months of last year up 11%.

Mr Bowman said the London-based brewer, which is also listed in Johannesburg, will use the money to build two to three breweries a year across the continent, where some breweries are running at or near full capacity.

Africa is home to 1-billion people and, after a decade of relative political stability, dozens of fast-growing economies.

Though still poor, it is increasingly seen as the next big growth market for consumer goods.

But average beer consumption, at 8l per person per year, pales when compared with about 70l in North America or Europe, suggesting that few Africans can afford the beverage, which is seen as a status symbol.

Mr Bowman said if one includes the home brew market — where the beverage is cheaper — beer consumption on the continent is just as big as in other developed markets.

He said with affordable prices, commercial beer consumption per capita could reach as much as 30l litres over the next 15 to 20 years in most of its markets in Africa outside SA.

The world’s second-biggest brewer is ratcheting up production of affordable beer by using local ingredients such as cassava and sorghum, instead of the more expensive barley, in order to drive up growth.

SABMiller launched the first cassava-based beer late last year in Mozambique, an affordable beer blend that fetches up to 70% of the price of mainstream beer, thanks to lower taxes.

"Commercial beer signifies reaching some sort of level of status as opposed to drinking a home-brewed beer like chibuku," Mr Bowman said at the summit, referring to a popular sorghum-based brew.

Earlier this year, SABMiller said third-quarter sales increase in Africa and South America had offset poor results reported for US and Europe.

Analysts are bullish about the company’s prospects in Africa, where lager volumes grew 11%, despite strong comparatives (third-quarter volumes grew 12% last year) and capacity constraints in a number of markets.

Reuters, Staff Writer