South Africa-born multinational SABMiller, the world’s second-largest brewery, is to tap into an African market worth over
(R30-billion) by opening four new brewing plants in Mozambique,
Sudan and Angola.
SABMiller will open the new breweries this year to benefit from the various countries’ economical growth, which is estimated at between 4% and 5%.
Speaking on the new ventures SABMiller’s head of media relations, Nigel Fairbrass, says the company decided to focus on continuing its expansion into African countries as they were mainly cash economies, and had not run up exposure to credit like many western countries have.
The brewery has existing operations in Nigeria, Botswana, Lesotho, Swaziland, Tanzania, Uganda, Mozambique, Angola, Zimbabwe, Zambia, Malawi, Ghana, Comoros and Mayotte.
Fairbrass added that the $3-billion (R30-billion) market is about four times bigger than SABMiller's current market. The company aims to become a major role player within that market.
Fairbrass says the company has taken on a “radical” view on making beer more affordable on the African continent.
SABMiller aims to reduce the price of beer, which at the moment is averaging around R10 ($1), by introducing new, cheaper brands.
The brewery will continue its supply of mainstream and premium beers to its international clients.
One strategy, which should cut costs significantly, is researching new brewing technologies by bringing together 55 000 barley farmers to form part of the programme by 2011.
Another cost cutting option is expanding the production of sorghum-based beer, currently produced on the continent under the brand name, Eagle.
Sorghum beer tends to be cheaper as many countries have a lower excise tax for sorghum-based alcoholic beverages.
In order to expand this particular strategy, SABMiller is currently working with 6 000 small-scale local farmers in India to develop a quality source of barley.
In addition to that they have partnerships with small-scale farmers in Uganda, Zambia, Zimbabwe and Tanzania to supply barley and sorghum.
SABMiller started its Barley Development Programme in 2005, using the Eagle Lager success in Uganda as a blueprint.
The main aim of the programme was to establish a long-term reliable source of locally grown quality malt barley.
Despite the economic slowdown, SABMiller is positive that the beer industry will continue to grow, even amidst increased food prices.
In May 2008, speaking at the brewery giant’s announcement of its annual figures for all its 60 operations, SABMiller group Chief Executive Officer Graham Mackay said, it was a stable industry. “Food prices have skyrocketed since the beginning of the year and most businesses are going to be affected, but we believe demand for beer will still be strong.
“Affordability, especially in low income countries, might be compromised to some extent but generally the inflationary environment should be good for our business.”
Mackay spoke about the company’s confidence in its 29 African operations, “I believe the green fields [development] will help Africa and we will continue to pump in money towards innovation so that our products are affordable such the introduction of the sorghum based beer, which is cheaper.”
Beer volumes for Africa grew on average 12% benefiting from three crucial factors of continued economic growth in all the participating countries, rising disposable incomes and ongoing brand renovation.
Although the Botswana market had disappointing figures over the past two years, the figures in 2008 were slightly stronger showing a 15% growth.
Mackay says their growth in Botswana can be accredited to a change in strategy. “Key to this result was the successful renovation of St. Louis lager, the market leader, and the introduction of a new 750ml returnable bottle.
“The returnable bottle has delivered ahead of expectation in this predominantly one-way pack market, and offers the consumer better value for money.”
Tanzania showed a growth of 8%, while Mozambique also enjoyed its fourth consecutive year of growth.
In Angola, the growth was not as high as expected, although there were some tangible factors to this, “Angola's economy continues to grow strongly at approximately 20% annually.
“The infrastructure, however, is unable to support the increasing demand for goods and services and our total volumes growth of just below 10% was constrained by both lack of infrastructure and limited capacity,” he said.
In South Africa, the loss of the Amstel beer licence affected operations although volumes stayed stable. The weakening rand contributed to difficult trading conditions.
Mackay added that the slowed economic in South Africa in the second half of 2007 and the increasing food and fuel costs affected consumer spending. “Revenue grew by 6% on a constant currency basis and price increases were at a level somewhat below inflation for both lager and soft drinks.”