Olly Wehring

Amstel - some home comfort for SABMiller

By: Olly Wehring - 14 March 2007 10:09

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The loss of the Amstel licence in South Africa to Heineken is a blow to SABMiller in a market that accounts for almost a third of its annual profits.

However, investors may have been a tad hasty in hitting SABMiller’s share price when the transfer of the licence was announced yesterday (13 March).

SABMiller has time on its side to rebuild its presence in South Africa’s booming premium beer segment while its Dutch rival frantically builds a brewery in the country to enjoy the full benefits of Amstel’s standing in the market.

Some 2.5m hectolitres of Amstel are sold in South Africa each year and the high margins commanded by the brand have boosted SABMiller’s earnings while mainstream beer sales remain flat.

When Heineken gets its South African brewery up and running – within two years, it hopes – it will have made something of a dent in SABMiller’s almost complete dominance of the market.

In the meantime, however, Heineken will find it tough to generate any money from selling Amstel in South Africa. Some 80% of all beer consumed in South Africa is sold in returnable bottles, which means Heineken needs a direct manufacturing presence in the market to sell and collect them.

And while Heineken and its venture partners Diageo and Namibia Breweries are busy turning the South African soil, SABMiller is well-placed to benefit from its knowledge of the local market, its distribution muscle and its global beer portfolio to bolster its position in the premium beer segment.

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