just On Call - SABMiller eyes growth for SA soft drinks unit, but challenges loom
SABMiller's soft drinks unit in South Africa is bullish on growth in the country
SABMiller’s South African soft drinks business is aiming for up to 5% medium-term annual volume growth, but has warned of current challenges such as a weakening Rand and social unrest in the lead-up to elections.
At the company's latest quarterly divisional seminar in London today (31 March), John Ustas, MD of Amalgamated Beverage Industries (ABI), said the unit has “significant” growth potential, boosted by an expanding middle class and a large teen population in South Africa. The division, which has a 91% share in South Africa’s CSD market, is the largest Coca-Cola bottler in Africa.
The unit previously had a medium-term volume target compound annual growth rate (CAGR) of 2% to 5%, which has now been raised to 3% to 5%. "We are very bullish on the future," said Ustas.
He flagged that ABI is expanding the number of packaging options, including offering Coca-Cola products in 2.5-litre, 2.25-litre and 1.5-litre bottles. The company is also upping its focus on other soft drink segments, such as the growing juice, water and energy drinks markets in South Africa.
However, Ustas highlighted a number of issues affecting profits. “What’s really the challenge is the weakening Rand,” he said. “We are also very sensitive to the slow economy.”
Due to the tough economic situation, Ustas said the unit has been “relentless” in looking to be more efficient and make cost savings.
Other factors hitting the business include inflation, “increasing B-brand competition, social unrest approaching elections” and rising commodity costs such as resin, sugar and fuel, he said.
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