COMMENT: SABMiller’s emerging markets key
SABMiller's volume growth has been primarily driven by higher disposable incomes in its emerging markets. With an ever-challenging on-trade environment characterizing its core developed markets, the London-based group should consider acquisitions to strengthen its position in untapped markets such as South America.
Excluding acquisitions, SABMiller's beer volumes climbed 4% from a year earlier in South Africa, almost 10% in the rest of Africa and Asia, and 5% in Europe. US performance was disappointing by comparison, with an 11-month rise of 0.9%.
Beer manufacturers are faced with challenging market conditions at present. Maturing markets, an ageing population and increased health awareness have contributed to the slowing of growth in the on-trade to 2.0% per year across Europe and the US. This is expected to continue, with other issues such as potential smoking bans and a crackdown on alcohol advertising adding to brewers' woes.
The large brewers are looking at squeezing as much revenue as they can out of these developed regions, and in the US this has led to a major focus on light and supposedly 'healthier' beers. While SABMiller continues to enjoy growing sales of Miller Lite, an increasingly acrimonious rivalry with US market leader Anheuser-Busch may prove counter-productive in the longer run.
Rival InBev has arguably taken the more constructive approach to getting consumers back into beer: the Belgian group is set to launch a Brazilian lager called Brahma across much of Europe and the US next month. The firm hopes that the beverage will bring a hint of Latin flair to a premium beer sector dominated by brands with European or Antipodean roots.
It is no coincidence that Brahma is the first product launch born of the Interbrew-AmBev merger last year. Indeed, that deal could prove a key turning point for the brewing industry: serious sales growth in the future is likely to be generated in emerging markets such as Latin America and Russia. SABMiller would be well advised to target these regions to drive profits going forward, and rumors of a possible bid for Bavaria, the second biggest brewer in South America, suggest it already has its eyes on the prize.
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