E-Malt.com News article: 1824

SABMiller plc, the world's second-biggest brewer, said on November 20 its two top international premium beer brands were proving popular newcomers in South Africa and would help future profit and volume growth, according to Reuters. The two brands Miller Genuine Draft and Pilsner Urquell were launched in South Africa in June to capture a slice of the small but fast-growing premium sector after it lost a contract to brew Heineken's eponymous leading beer. "The brands are doing well, we're pleased with their performance, particularly Miller Genuine Draft," Tony van Kralingen, head of the Beer South Africa division, told Reuters after SABMiller announced half-year results to end-September. "They cost us a lot of money to put onto the market...(but) those brands will replace Heineken volumes for (their first) full year."

The former South African Breweries is now based in London, and has its biggest interest in its U.S. Miller unit. But South Africa is its most cost-efficient operation and accounted for 27 % of earnings before interest, tax and amortisation for the six-months to end-September. That performance was helped by the strength of the South African rand, which so far this year has gained around 30 % against the dollar, the company's reporting currency. But van Kralingen said Beer South Africa made a loss hedging raw materials at 10.50 rand per dollar, well off the 43-month high of 6.53 rand/dollar marked up on November 19.

The company has over 98 % of South African beer sales, but a smaller proportion of the small but lucrative premium sector, which is growing by around 16 % per annum, with SABMiller battling Heineken's new partner Namibia Breweries. SABMiller's beer volumes in South Africa were up 5.1 % year on year for the six-month period, which van Kralingen attributed largely to displacing alternative drinks.

The alcoholic beverage market, as far as we can tell, did not grow, so most of our growth is in market share... beers against wine," he said.

But he said he expected the overall liquor market to start growing again in terms of both volume and value. Van Kralingen said Pilsner Urquell, currently being imported from the company's brewery in the Czech Republic, was priced at a 45 percent premium to the wider market in South Africa, while Miller Genuine Draft was priced at a 20 percent premium, giving it wider appeal and accounting for its higher volumes. He said SABMiller would be ready to start brewing Miller Genuine Draft in South Africa by the end of November. That and other cost-reducing measures, including in procurement, would help underpin the performance of SABMiller's South African unit, van Kralingen said.

SABMiller still brews another premium brand Amstel, for Heineken in South Africa, and van Kralingen told analysts the Dutch brewer would have to pay heavy penalties if it chose to break that contract before it expires in 2008.


21 November, 2003