SAB toasts potential for higher beer sales

SAB toasts potential for higher beer sales

FMCG SUPPLIER NEWS

IOL Business - Feb 15th, 08:36

Despite some “wobbles” the South African economy will remain strong and the macroeconomic trends that are evident indicate significant upside potential in terms of per capita consumption, which will benefit beer consumption. 

That was part of the upbeat message by South African Breweries (SAB) chief executive Norman Adami at an investors’ presentation yesterday.

SAB management is bullish about near-term prospects to revise upwards its forecast for volume growth for the six months to March from between 1 percent and 3 percent to between 1 percent and 4 percent. Soft drink volumes were expected to rise by between 2 percent and 5 percent.

Adami said in the longer term the group was expecting positive economic growth and job creation.

A growing population, rising incomes and urbanisation were all trends to have a positive impact on beer demand, he said, while pointing out that SAB’s affordable pricing policy and South Africa’s “strong beer culture” would underpin strong demand for its brands.

However, he noted that “lower-end” consumers continued to be under considerable pressure from cost increases.

The positive outlook seems set to ensure that SAB remains a major contributor to SABMiller’s overall group profit. SAB accounts for 23.1 percent of SABMiller’s earnings.

Yesterday’s presentation highlighted the extent to which SAB’s aggressive marketing strategy has succeeded in reclaiming market share that had been lost to brandhouse.

Back in 2008, when Amstel was withdrawn from the SAB portfolio, Amstel had 9 percent of the total beer market and was the dominant brand in the premium market segment. For the next two years Amstel was only available in limited imported quantities.

In the two years since setting up brewing facilities in South Africa in March 2010, the brandhouse joint venture between Windhoek, Diageo and Heineken, which owns Amstel, has seen a sharp drop in Amstel market share to 4.5 percent.

Analysts attribute the loss to brandhouse’s decision to significantly reduce the price of Amstel from the premium level, at which it had been marketed by SAB, to mainstream level. SAB’s response was to launch an aggressive marketing campaign around Castle Lite and Carling Black Label.

At the same time SAB dedicated huge resources to beefing up its marketing strategy and capacity. Analysts questioned the efficacy of the brandhouse structure, which attempts to implement marketing and distribution strategies for three different drinks companies.

Adami referred to the encouraging results of an “independent” customer service survey commissioned by SAB, which measured all aspects of customer service, such as frequency and reliability of delivery, brand support and promotional activity. The survey revealed that in the past year SAB had significantly extended its lead, in terms of customer perceptions, over brandhouse.

Adami described brandhouse’s “momentum” as having been “interrupted” but noted that it was “regrouping”.

Business Report was unable to get comment from brandhouse yesterday.