E-Malt.com News article: Africa: SABMiller sees Africa as source of opportunity and growth

World’s second largest brewer, SABMiller is starting to experience very little organic growth, with first half revenue up only 3 percent renewing speculation that the South African company may consider the alleged merger ambitions to offset slowing growth. The company’s head of Africa, Mark Bowman, however insisted that the brewer would maximise the opportunities it has to develop and grow its business, Ventures Africa reported on January 28.

“We see Africa within SABMiller as a source of opportunity and growth and we are trying to maximise that opportunity in a responsible way,” Bowman said.

According to a study by Wall Street’s premier sell-side research and brokerage firm, Bernstein Research, Africa’s brewing industry is yet to be truly tapped. The US-based firm describes Africa, as perhaps, the most attractive region for long-term profit growth for global brewers. “African [profit] margins have more headroom and better (very) long-term growth prospects,” it said in a research note.

Bowman said Zimbabwe has been very challenging for the SABMiller. The company has had to endure strongly negative growth for two years, largely because of weaker economic growth in the southern African country. With a little resurgence of the economy, as the dollar rose, the brewer had reasonable growth for two to two-and-a-half years.

“I think Delta [Delta Corp] – our business there – has been one of the best performing businesses,” said Bowman. “They geared themselves for the growth. We invested behind them to put in capital so we are a well organised business in a very challenged environment. That sort of ran out of steam as there was no real growth in the underlying economy and I think what we are seeing is a reflection of that.”

Bowman explained that despite how well organised the Zimbabwe business is, the poor results being reflected is as a result of the country’s economic situation.

“It’s very uncomfortable for us. I think if there is a light in that environment it does seem to have settled out so we have seen slightly better results in the last few months. In fact, our sorghum, our traditional beer business, is suffering from production constraints – so we don’t have enough capacity actually. What has happened is there has been a swing out of clear beer, which is a bit more expensive, into the traditional beer business and we have some innovations there in terms of longer life traditional beer – Chibuku – which is doing very, very well and we just don’t quite have enough capacity. So in spite of all those challenges, there are opportunities.”

When asked by Bloomberg TV Africa’s Giokos, if SABMiller was experiencing production issues elsewhere on the continent, Bowman said the experience the company gathered in Uganda, where it had been for over a decade has taught the need for localisation of crops used as raw materials.

“The analogy I always say is that beer is a completely colonial product so all the product, all the raw materials were imported – you know, barley malt is just typically not grown in Africa and was imported – so most beer ten years ago was 100% imported in terms of its ingredients. That has changed quite significantly. In the case of Uganda we have gone from 30% local content to 77% and we expect to get to almost 100% in time. So you basically grow the crops locally that you need but the problem and challenge is that these are small holder farmers, they are not organised in a sense that you can buy from them at scale, they don’t have access to finance or to sufficient technology, so we’ve had to work with them to develop that. So sorghum we are getting reasonable scale in, we’re doing quite well in barley as well and the development of that in Africa. Cassava is still quite new for us but quite exciting because it’s a crop that doesn’t really compete with other crops and it’s seen as an emergency crop in Africa so if we can create commercial value for cassava, we think we can actually be a fly wheel for the use of cassava as a powerful crop in Africa.”


30 January, 2015