SABMiller completes Bebidas sale, sets out to quench Africa's thirst

The brewer will also be opening four new breweries this year as it seeks to benefit from countries economies' growing at about 4% and 5%.

Nigel Fairbrass, head of media relations, said Monday, 30 March 2009, that African countries were mainly cash economies, and had not run up exposure to credit in the same fashion as other countries had.

The brewer has operations in Nigeria, Botswana, Lesotho, Swaziland, Tanzania, Uganda, Mozambique, Angola, Zimbabwe, Zambia, Malawi, Ghana, Comoros and Mayotte.

Together with French partner Castel, SABMiller also has operations in 32 out of 53 African countries.

Fairbrass said that — in the countries in which it operated — there was an informal, backyard market worth $3bn.

This market was four times bigger than SABMiller's market and the company wanted to tap into it, he said.

Fairbrass said the company would open breweries in Mozambique, Tanzania, Sudan and Angola. He said the company had seen that beer was only affordable to a small number of people on the continent. He said SABMiller had taken a “radical” view with the affordability strategy.

SABMiller aimed to “radically” reduce the price of clear ale, although it was not yet able to indicate a new price point. At the moment, a unit of beer is about $1.

However, the brewer would continue to supply mainstream and premium beers to the countries in which it operated.

The company aimed to bring down the cost of beer by investigating all input costs and looking into brewing technology, he said. As a result, about 55,000 barley farmers would form part of the programme by 2011.

Grant Swanepoel, an analyst with BJM, said the strategy could be high risk in certain markets where the company ran the risk of people buying down from the mainstream brews already available. However, it could be an entry point into Nigeria where SABMiller had recently bought a plant and would spend a small amount on modernising the operation, Swanepoel said.

Sorghum-based beer, which was not clear, was being produced in Africa under the brand name Eagle. It was often cheaper as many countries had a lower excise tax for sorghum-based beer. The company already works with 6000 small-scale local farmers in India to develop a quality source of barley. It has also created opportunities for small-scale farmers in Uganda, Zambia, Zimbabwe and Tanzania to supply it with barley and sorghum.

In 2005, SABMiller India started its Barley Development programme, using the Eagle Lager success in Uganda as a blueprint. The objective of the programme was to secure a long-term reliable source of locally grown malt- quality barley.

Its project to support local barley farmers may lead to tax cuts, said Fairbrass, which would benefit growth of the product and job growth. The breweries were being encouraged to source locally.

Consumption in African countries was low, which meant there was space to grow the market.

SABMiller had not ruled out changing its packaging. In eastern Europe where the company has economy beers, the packaging is plastic. Absa Investments analyst Chris Gilmour said the company had experience of economy beers in eastern Europe.

Its local subsidiary, South African Breweries, did not see room for an economy beer in SA.

Last year, the brewer said its capital expenditure programme in Africa included greenfields breweries and soft-drink plants, expansion of existing operations as well as replacing containers.

However, the group said spending in Africa would drop to $200m a year from $370m in this financial year.

Source: Business Day

Bebidas sale complete

On Monday, the brewing giant also announced that subsidiaries of its Colombian subsidiary Bavaria S.A. have completed the sale of Bebidas Aguas Gaseosa Occidente SRL (Bebidas), its Pepsi bottling operations in Bolivia, to subsidiaries of Quilmes Industrial (Quinsa), Societe Anonyme for approximately $27 million.

Bebidas was acquired by SABMiller as part of its Latin America transaction, which completed on 12 October 2005. Quinsa is a subsidiary of Companhia de Bebidas das Americas AmBev, one of the leading Pepsi bottlers in Latin America, and a member of the AB InBev group of companies.