SAB’s lager volume dip shows poor go thirsty

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BR SAB 549[1] Supplied SAB's lager volumes dipped 2 percent in the quarter to December last year as unemployment, muted wage increases and debt took a toll on consumer spending. However, its premium Castle Lite and Castle Milk Stout brands grew volume sales more than 10 percent. Photo: One Red Eye/Philip Meech

Johannesburg - Further evidence of the pressure on consumer spending came yesterday in the form of news from SA Breweries (SAB) that the volume of lager sales was down 2 percent in the three months to December last year.

Analysts said the disappointing performance was affected not only by the general weakness in consumer spending but also by “topping up” that had taken place ahead of the mid-September beer price increase. In addition, a strike that began in the last week of September and continued until late October may have had a slight adverse impact.

Sustained high levels of unemployment, muted wage increases and soaring debt have combined to push consumer confidence to its lowest levels in a decade. Figures released last week by Statistics SA revealed that retail sales in November last year were up by 4.2 percent in real terms from a year earlier. For the three months to November, retail sales rose just 0.1 percent.

SAB’s 2 percent decline in lager volumes followed a 3 percent volume increase achieved in the six months to September. When releasing the interim results in November, Norman Adami, the executive chairman of SAB, referred to the “topping up” that lifted sales ahead of the mid-September price increase and cautioned that this might affect post-September sales.

Although overall lager volumes were down 2 percent in the three months to December, SAB reported a substantial increase in the premium portfolio with sales of Castle Lite and Castle Milk Stout achieving a combined growth in excess of 10 percent.

This indicates that it is the lower-income consumers who are suffering most. Sales of soft drinks were significantly stronger than overall lager sales, with volumes up 5 percent. This helped to underpin an increase in SAB’s net producer revenue of 7 percent on an organic constant currency basis.

No values were provided with the quarterly volume figures but analysts said yesterday that the sharp decline in the rand against the dollar since September last year was likely to put considerable pressure on SAB’s contribution to the dollar-based income of its holding company, SABMiller.

Commenting on the group’s overall performance in the three-month review period, Alan Clark, the chief executive of SABMiller, said growth was driven by the emerging market businesses “where we are successfully targeting new consumers through affordability and premiumisation initiatives across our brand portfolios”.

SABMiller’s total beverage volumes in the quarter increased by 2 percent on an organic basis, with lager volumes up by just 1 percent and soft drink volumes up 7 percent.

Latin America and Africa – outside South Africa – were again key contributors to overall performance. In Latin America, lager volumes increased 2 percent and soft drinks grew by 8 percent. In Africa, lager volumes increased by 6 percent.

The continued weak performances in Europe and North America are in line with Clark’s concerns, expressed last September, about the generally weak economic conditions in those regions. However, the UK broke this weaker trend with a 9 percent volume increase attributed to strong demand for imported beers, such as Peroni Nastro Azzuro.

The weaker-than-expected volume figures saw the SABMiller share price drop as much as 2.6 percent to a low of R534.50 on the JSE yesterday, but it recovered these losses to close at R549.68, a gain of 79c on the day.

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