S AMERICA: SABMiller in premium beer assault
SABMiller has said it expects premium-priced beers to account for 15% of sales volumes in its South American markets in five years' time.
The London-listed brewing giant, which enjoys dominant positions in Colombia, Ecuador, Panama and Peru, wants to boost sales of "worthmore" beer in order to increase margins across its business on the continent.
The brewer arrived in those four markets in 2005 with the acquisition of a controlling stake in South American brewing giant Bavaria for US$4.8bn.
That move signalled SABMiller's keenness to tap into the region's emerging beer markets. Yesterday (17 January), the group reported a 12% rise in beer volumes in South America for the three months to 31 December. Over nine months, volumes in the region have risen 11%.
Nevertheless, the brewer is looking to drive value from its business in South America. The "worthmore", or premium, beer segment only accounts for 3% of beer sales in Colombia, SABMiller's largest market in the region. In Panama, the figure falls to just 1%.
"Worthmore" beers are generally priced at a 20% premium to mainstream beers, according to SABMiller estimates.
Mark Luce, senior vice president, marketing for SABMiller in the region, said that, within the next 15 months, the brewer would look to revamp its portfolio to promote a more "aspirational" image of the beer category.
"In some parts of South America, beer is seen as a poor man's drink and only drank on a limited number of occasions," Luce said.
SABMiller had already "renovated" brands including the Peruvian Cristal, Luce said, and the brewer is looking to take that programme across its stable.
Luce said: "We're adding value to brands; we aim to make the brands more attractive, more appealing and more relevant to the consumer, so ultimately, consumers buy into the brands more often and so pay a higher price in so doing."
He added: "Over the course of the next five years, we expect we can increase the worthmore segment to 15% of volumes. We believe there is a significant opportunity."
SABMiller's investment in its brand stable forms part of the brewer's US$1.8bn cash injection into its South American business over the next five years.
Some 25% of that investment will go to sales and marketing, while a further 45% of the investment will go into expanding SABMiller's breweries in the region in anticipation of meeting the growing demand for beer.
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