SOUTH AFRICA: SAB taken on by UK's Bulmers on home turf
South African Breweries, which controls 98% of the local beer market, faces the UK' s HP Bulmer, which has been buoyed by its success in the UK, a success it believes it can now repeat in South Africa.
While the local beer market is showing static growth, the cider market is growing in excess of 20% annually. Currently the cider market in SA is the second largest in the world (after the UK), making it an irresistible opportunity for the likes of Bulmers as it looks to increase its turnover.
The SA cider market is dominated by SFW (Stellenbosch Farmers Winery) and Distillers Corporation (presently engaged in merger talks) with around 70% of the market, followed by SAB with 18% and HP Bulmer with just over 2%.
A joint venture has been set up with Bavaria Brau, a family-owned brewery near Pretoria, in which HP Bulmer owns 70% although it takes 90% of the distributed profits.
However, there have been problems in the first months of operation resulting in a R4m operating loss on turnover. Reasons for the depressed profits are in part due to distribution problems, "slow penetration of the mass market" and not least to the ravages of nature - unseasonal rains and a tornado struck the brewing plant in December.
Despite these setbacks HP Bulmer remains optimistic it can succeed and break even well within the next five years.
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