SABMiller expects more consolidation

FMCG SUPPLIER NEWS

IOL Business - Sep 24th, 11:40

The consolidation of the global beer industry, which took SA Breweries from a dominant South African player to a dominant global player in just 10 years, had not come to an end, Alan Clark, SABMiller’s recently appointed chief executive, said this week. 

In the latest “quarterly investor seminar series”, he sounded an upbeat note to analysts in London about growth prospects for the group, the second-largest beer company by volume.

Clark acknowledged that acquisitions were becoming more difficult to achieve and there were fewer assets available but added: “We have not seen the end of consolidation in the industry.” He noted that in Asia there were still “substantial operations” in the hands of independent companies.

While not ruling out merger and acquisition activity, Clark indicated that management’s focus would be on securing greater sales and profit from the businesses it already held.

Improved market penetration was a key factor in management’s earlier forecast for continued margin growth in the medium term, with Latin America and Africa expected to show the strongest advances.

Clark said 75 percent of the group’s footprint was in emerging markets, where attractive growth opportunities were available in the form of increasing the per capita consumption of beer from comparatively low levels.

In Africa, “informal alcohol” accounts for about 75 percent of alcohol consumed. Clark said this presented an opportunity for SABMiller if it was able to make beer available at the right price.

In Latin America there were also significant opportunities to grow sales by making beer more affordable.

The importance of the affordability factor and the socio-economic background to beer consumption is highlighted by the fact that in Tanzania it requires five hours of work to pay for a mainstream beer.

In Zimbabwe, 2.8 hours of work are required and in South Africa and Colombia 1.1 hours is required. In the US, only 0.3 hours of work is required to pay for a mainstream beer.

In Asia-Pacific, Clark said, there had been a good response to management’s efforts to reinvigorate its recently acquired Carlton & United Breweries brands. He said there was talk of a slowdown in China “but we’re not seeing it”. In India the challenge was about “opening up the market”.

A major challenge in the North American market was for SABMiller to boost its share of the premium market, where it was under-represented. Only 8 percent of its portfolio is in the premium space, compared with a level of about 23 percent for its major competitors.

Unlike German Finance Minister Wolfgang Schaeuble, who told the UK’s Financial Times that the euro zone was “clearly on the mend, both structurally and cyclically”, Clark said SABMiller saw no uplift in Europe.

Schaeuble said the “world should rejoice at the positive economic signals the euro zone is sending almost continuously these days”.

However, there appear to be no such positive signals in the form of beer consumption.

Clark described the European market as subdued. “There is a lack of consumer confidence and we don’t see any improvement coming through.” He said a large portion of beer sales in Europe was achieved via promotions. © Independent On-line 2013. All rights reserved.