Will the group decide to divest of some of its soft drinks operations?

Will the group decide to divest of some of its soft drinks operations?

What does the future hold for SABMiller's soft drinks holdings? 

In light of the group's Q3 numbers this week, analysts at UBS have questioned how the UK-headquartered group, more commonly associated with beer, should proceed with the CSD side of its business. 

Soft drinks represents around 19% of SABMiller's group volumes and, according to UBS, has the highest overall future volume growth rate estimates out of all the categories that the company operates in. As SABMiller boasts on its website, it is “one of the world's largest bottlers of Coca-Cola products” and has 41 bottling plants in 18 countries, across Latin America, Africa and Asia. 

The majority of its earnings is through Amalgamated Beverage Industries (ABI) - Coca-Cola, which is the soft drinks division of South African Breweries, and Turkey's Coca-Cola Icecek (CCI), which SABMiller has an effective 13% stake in through its part-ownership of Anadolu Efes. 

However, SABMiller's total soft drinks operations represent only around 8% of its group profits, according to UBS estimates. 

The analysts flag that these two operations are at opposite ends of the growth prospects spectrum. For ABI, UBS suggests, volume growth is starting to “normalise”, which will see it come under pressure from Coca-Cola, while margins may decline.

In contrast, CCI operates in geographical areas where per capita consumption is still low, so “volume growth prospects remain high”, UBS notes.

So, what are the options? Among the most eye-grabbing suggested by UBS is for the company to sell off some of its soft drinks businesses to focus on alcohol.

Another possibility is for SABMiller to “diversify its geographical mix by buying into higher growth drinks areas”; UBS says it could combine these options, or, simply do nothing. 

With global beer growth still sluggish - group lager volumes were up by only 1% in SABMiller's Q3 - the group has plenty to ponder.