SABMiller sees a major opportunity in China

SABMiller sees a major opportunity in China

SABMiller is predicting medium-term mid-single digit volume growth in its Asia Pacific region, with China driving the rise but Australia impacting more on its bottom line.

At an investor presentation in London today (17 July), the group revealed that it expects volumes across Asia Pacific to grow by between 5% and 8% in the next few years. Despite this, the region's MD Ari Mervis, said sales by value in the period will be “flat to slightly positive”. 

Margins in China, where SABMiller owns 90 breweries, are still being held back by “large inflationary pressures” such as raw material prices and rising wage costs, Mervis said. “The revenue-per-hectolitre is also comparatively low,” he said. “If we can increase that in the long term, we can see the real profit coming through.”

SABMiller is focussing on a premiumisation strategy in the country, including new variants such as Snow Draft and Crystal Draft. It currently holds 22% market share in the country.

"There are encouraging signs, but still a long way to go in China," said Mervis.

In Australia, the group revealed it has implemented US$90m of cost synergies since acquiring the business from Foster's Group in 2011. It currently has 41% market share in the country.

Mervis said that, since completing the purchase, the group has been “fixing” the business, including re-building a “fractious” relationship with retailer Woolworths. He later said that earnings in the region are being driven by the group's Australia business.

In India, the group revealed that beer still accounts for only 4% of the alcohol market by volume, with sales controlled at state level, meaning that there are 35 seperate excise tax regimes. The brewer is focussing on package innovation in the country, such as selling its Knock Out and Foster's brands in PET bottles.

Meanwhile, its re-launched Indus Pride brand, containing Indian spices, is being sold in eight major cities, with early sales indications looking "positive”.