just On Call - SABMiller plots more capacity for Africa
- Brewer to expand capacity at slower rate
- Sees fewer opportunities to enter new markets
- Confirms "first refusal" on Castel beer ops
SABMiller expects "solid" year in Africa
SABMiller expects to add more capacity to its African beer operations in its next fiscal year, but the brewer's rate of investment will slow.
SABMiller has invested around US$1.5bn in Africa over the last four years, but expenditure is set to slow now that the brewer has installed much of the extra capacity it needs to satisfy growing consumer demand for beer in the region.
"We're planning to put in more capacity, but the quantity (of capacity) will be much lower," said SABMiller's MD for Africa, Mark Bowman, when questioned on expenditure plans for the group's next fiscal year, which begins on 1 April.
"Two years ago, we were near to [full] capacity in pretty much all of our plants," he told analysts at an investor meeting hosted by the company today (22 March). "In this period, we've put capacity into every single one of our markets," he said. "The capacity we've put in has been designed to be expandable in smaller doses," he added, which means that extra capacity "can be expanded relatively cost effectively".
For the brewer's current year, Bowman said that SABMiller is confident of reporting a "solid" 12 months for its African beer business, which contributes around 11% of group net sales and 12% of EBITA.
The last two years have marked something of a beer rush across Africa as SABMiller, Diageo and Heineken have sought to position themselves for future market growth. African consumer spending is set to rise to $1.4tn in 2020, versus its current $860bn per year, according to SABMiller. Excluding South Africa, average beer consumption in Africa is seven litres per capita, compared to 77 litres in the US.
However, despite the clear potential for growth, Bowman was cautious on opportunities in new African markets, via acquisitions or otherwise. "There's not many targets left in Africa, this is the tail-end of what's available," he said.
He said that only four or five larger markets, including Nigeria where SABMiller plans to build a greenfield brewery, have the demand to sustain greater competition. "It's expensive to go in and consumers are fiercely loyal to brands."
That said, speculation remains that SABMiller could transform its African beer business by acquiring the beer arm of Castel. Both groups already work in partnership across several countries and their respective geographic strongholds are largely complimentary.
Bowman did not comment on the potential for a buyout of Castel, but he confirmed that SABMiller has "a right of first refusal", should the French firm wish to sell up.
Earlier today, SABMiller said that it expects to make more revenue per hectolitre in Africa over the next four years.
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