Tawanda Karombo Harare
SABMiller commanded a strong market position in Africa and could consolidate it through acquisitions and partnerships, analysts said yesterday, although the sub-Saharan market also posed regulatory and consumer pressure drawbacks for the global brewer.
Declining numbers for other key markets such as China and Australia could force the company to increasingly focus on maintaining its position in its Africa operations, which yesterday reported volume and revenue growth in the half year to the end of September.
SABMiller, the world’s second-largest brewer, manufactures alcoholic and soft drink beverages in Latin America, Africa, Europe and Asia, among other markets.
The company said total beverage volumes for the six-month period grew by a marginal 1 percent “driven by a strong performance across both lager and soft drinks in Latin America and Africa”. Revenue grew by 5 percent.
However, analysts told Business Report yesterday that despite the stronger performance in Africa, SABMiller faced downside risks from rising costs of living and regulatory factors in some regions.
“Although defensive by nature, slow economic growth will mean slower growth for SABMiller in Africa. Rising incomes [however] will lead to more consumers being able to afford to switch from home brews to factory-made beer,” Mark Saner, research analyst at the Imara SP Reid’s Johannesburg office, said.
SABMiller’s Africa operations recorded a 10 percent increase in revenue. This was underpinned by a 5 percent rise in total beverage volumes after lager beer sales increased 2 percent, it said.
Despite growing health concerns over fizzy drinks, the soft drinks segment surged by 9 percent, with notably strong growth from South Africa, Ghana, Nigeria and Zambia.
In South Africa lager beer volumes increased by a marginal 1 percent, in line with analysts’ expectations. This was attributed to “the softening economic environment” during the second quarter.
“Pricing and mix benefits in lager, reflecting growth in our premium lager brands together with innovation, helped to drive group net producer revenue growth,” SABMiller said.
Omair Ansari, the beverages research expert at Renaissance Capital, said by phone from London that SABMiller was likely to pursue an expansion strategy through growth in some of its key markets in Africa.
He said, however, that reduced spending on alcoholic beverages could hobble the company’s full growth potential in markets such as Nigeria.
Ansari added that there could also be some form of “regulatory risk” in some Africa markets, “in addition to consumer spending risks”.
Apart from these potential drawbacks, SABMiller looks set to consolidate its predominant market share.
This was especially so in markets such as Tanzania, where it has 70 percent, and in Nigeria, where it has shown strong growth of nearly 4 percent over the past two years.
During the period, SABMiller’s unit in Tanzania grew revenue by 6 percent although its volume there was down by 7 percent compared with the previous contrasting period owing to “excise-related” developments and a “weak agricultural harvest”.
In Nigeria, SABMiller raised its capacity and revenue soared by a massive 41 percent.