South Africa: SABMiller premium beers to compensate lower South African growth

Brewing giant SABMiller expects the growth of premium beers in South Africa to help offset slowing volume growth with higher-priced beers like Castle Lite and Peroni taking a quarter of the market in five years, Reuters released July 14.

The world's number two brewer gets 31 percent of its profits from South African beer and soft drinks even after buying Miller and Bavaria in recent years, and has a 98 percent share of the South African beer market.

Tony van Kralingen, managing director of its South African business, SAB Ltd, told a briefing in London on Friday that the group is looking for beer volume growth of 1-3 percent in South Africa rather than the 3.5-4.0 percent seen in recent years.

"Unless we get the structural creation of employment and greater wealth distribution we will see lower beer volume growth rates," van Kralingen said.

But he expects the growth of premium beers, which for SAB also include Miller Genuine Draft, Pilsner Urquell and Amstel, to increase to 25 percent of the market from 15 percent at present over the next five years to the detriment of mainstream brands such as Castle, Hansa, Carling and Sterling.

South Africa remains the group's biggest profit centre with its 31 percent share created from just 17 percent of global volumes. Van Kralingen said one of the reason for this mismatch was that there is no economy, or cheap beer, sector in South Africa as this is taken up by sorghum beer and cheap wine.

He expects South African beverages will grow earnings before interest, tax and amortisation (EBITA) in the high single-digit percentages in the coming years at constant currency after seeing a 14 percent rise in the year to March 2006.

He expects an annual EDITA margin rise of 20-40 basis points from the 25.3 percent seen in the year to March 2006.

Beer consumption among South Africa's 44 million people is around 60 litres per person per annum against around 100 litres in Western Europe.

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