E-Malt.com News article: South Africa: SABMiller’s South Africa beer business reports sustained growth

The South African beverage business, the subsidiary of SABMiller, has announced on November 10, EBITA growth of 19% in US Dollars to $375-million for the six month period to end September 2005.

Commenting on sustained volume growth of almost 3% in domestic beer sales, South African Breweries Ltd Managing Director Tony van Kralingen said that the South African economy had been performing particularly well, with low interest rates, low inflation and sustained consumer confidence.

“Beer and soft drink volumes continued to record positive growth during the period, driven by a strong economy, a warmer winter and targeted marketing and sales activity.

Turnover grew 11% from $1,684-million to $1,864-million, with the operating margin increasing from 18.7% to 20.1%, reflecting increased revenue, the strength of the Rand, lower brewing commodity prices and further cost efficiencies.

SAB Ltd’s share of the total liquor market has been maintained at just under 60%, while the company increased its delivered customer base by 10% over the past six months, in line with its market penetration strategy and increased licensing in two jurisdictions.

“SAB’s premium portfolio has shown strong growth. Miller Genuine Draft, Castle Lite and Amstel Lager achieved double digit growth and market share gains are at a five-year high.”

“SAB’s five-year capacity and capability improvement programme is on track and this will help us to build both local premium and international brands in the market. Bulk packs introduced in October for both Miller Genuine Draft and Brutal Fruit will enhance both consumer choice and value, while providing an accessible premium offering.”

Following the acquisition of the minority interest in ABI, soft drink operations were transferred into SAB Ltd. ABI now trades as the Soft Drink division of SAB and the company will merge these businesses where appropriate over time.

Van Kralingen said that the milder winter had also positively impacted soft drink sales, with carbonated soft drink volumes up 10% on the same period last year from 5,384 million hectolitres to 5,922 million hectolitres.

Apart from favourable weather and a positive economy, consumer promotional activity during the winter months, improved market execution and price restraint throughout the period ensured that sales volume accelerated. Distribution reach improved by 4%.

Alternative beverage volume performed exceptionally well, contributing to the excellent volume growth.

“Spending on commercial equity at SAB increased by 37% on the comparable period last year. Earlier this month, we launched SAB’s first two franchised distribution centres, created to enable direct delivery to an increasing customer base and positively impact enterprise development.”

The company had also announced its decision to make 40% of its crown (bottle top) manufacturer, Coleus, available for a BEE deal. The company currently produces some 4.7 billion crowns per annum for the brewing and bottling industries in Southern Africa and is now South Africa’s biggest producer of metal bottle closures.

Turning to the normalisation of the retail liquor market, van Kralingen said that retail liquor licensing – a provincial competence – “remained a key issue.”

“The normalisation of the liquor trade continues to progress slowly in most provinces and temporary liquor permits have been issued to previously unlicensed outlets, a significant proportion of whom are investing to upgrade their outlets to meet formal licencing requirements.”

As part of its drive to motivate the more than 70% of South African liquor retailers who are unlicensed to obtain licences, SAB had increased its investment in its national taverner training programme to 5000 taverners at a cost of R18-million for the year. During the six months under review, SAB provided commercial training to just under 4 000 licencees at a cost of some R14-million.

“We believe that normalisation is still the most important issue facing the industry. Legislation that preceded South Africa’s democratic process has meant that hundreds of thousands of South Africans are effectively working for illegal enterprises. True economic transformation within the liquor industry will ultimately be achieved through the licensing of retailers, of which over 70% remain unlicensed.

“This is particularly important when considering that South Africa’s beer industry generates more than R20-billion worth of economic activity at retail level and maintains more than 800 000 jobs.”

SAB’s KickStart entrepreneurial development programme – now in its tenth year - had also enjoyed additional funding with the total investment in the project now reaching some R36-million, and over 22 500 South Africans assisted to date.

Looking ahead, van Kralingen said that sustained growth in the economy would continue to have a positive impact on consumer confidence. However, the impact of higher transport and energy costs are expected to result in increased input costs in the second half of the year.

“Government’s target of 6% growth by 2014 is achievable, especially if it succeeds in introducing initiatives to boost the economy, particularly major infrastructure programmes, sector investment strategies, education and skills development, entrepreneurial development and interventions in the second economy such as access to micro-credit.

“Although SAB’s growth is encouraging, we would like to endorse moderate and responsible consumption, particularly over the festive season, and to discourage any person under the age of 18 from drinking alcohol.”

During the six months, SAB was voted South Africa’s most admired company by CEOs and top business executives in a survey conducted by Ask Afrika.


16 November, 2005