SABMiller is still struggling to fix its Australian beer business

SABMiller is still struggling to fix its Australian beer business

SABMiller is still having problems in Australia with beer. 

In a first quarter trading update, the firm said sales in the country fell by 6%, while volumes slipped by 3%

Bernstein analysts admitted the result was a “big surprise”. “Weak volumes were in-line with prior quarters, but the -3% price-mix was not expected,” the analysts said in a note. 

So what's causing these issues? 

SABMiller blamed “continuing category pressure” from “negative consumer sentiment following May's “tough” federal budget and “competitive intensity”. The group pointed to similar problems after a slip in lager volumes in its Australian beer unit - Carlton & United Breweries (CUB) - in the last full year

CUB has tried a number of things to boost its performance. Last September, for example, the group pulled its “underperforming” 4% Cold lager brand for the 3.5% abv Carlton Cold. No detail was given on the new brand's performance yesterday. 

Could it be that SABMiller is suffering from similar problems to its US JV, MillerCoors? Namely, craft beer. Though Australia's craft market is well behind that of the US, Australians are developing a thirst for more complex brews. The country now boasts over 100 microbreweries. Like the US, however, craft only represents a small proportion of volumes for the overall market. 

The other similarity with the US is the battle over the term “craft”. CUB found itself in hot water with Australia's consumer watchdog in April over its craft-like brand Byron Bay Pale Ale, based on the fact it is brewed 630km from the brewery featured on the label. 

SABMiller's tribulations should not be blown out of proportion. After all, it still has around 40% of Australia's beer market. 

But the group's Asia-Pacific MD, Ari Mervis, said a year ago it has been “fixing” the CUB business since acquiring it from Foster's Group in 2011. 

It seems a quick fix is now out of the question. 

Expert analysis

SABMiller Plc - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

SABMiller Plc - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

MarketLine's Company Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments reports offer a comprehensive breakdown of the organic and inorganic growth activity undertaken by an organi...read more