food

Africa know-how makes SABMiller a good drinking partner

October 19, 2015

One major test for big brewers in the African continent has been to draw locals away from cheap home-brews onto commercially-made beer. – AFP/Relaxnews pic, October 19, 2015.Africa is hosting its biggest beer festival: a 14-date marathon tour of Johannesburg, Cape Town and Durban serving more than 35,000 drinkers four different types of beer – all of them made by SABMiller.

The annual Bierfest is just one example of SABMiller's strong presence in Africa, which is seen as a key driver of Anheuser-Busch InBev's planned takeover of the brewing giant.

Festival drinkers are encouraged to book tables of at least six people, and bring friends, family and work colleagues to enjoy sausages and live music washed down with beer served by a "dedicated Fraulein".

"We want to bring beer culture to all parts of society," Jon Monsoon, one of Bierfest's organisers, told AFP. "More and more people come to the festival every year.

"We are serving beers from the No.3 Fransen Street brewery and the Newlands Spring brewery – both of which are owned by SABMiller.

"There is such enthusiasm to discover more about beer."

Africa is the world's fastest-growing beer market, expanding at a predicted rate of 5% a year between 2013 and 2017, according to Canadean, a London-based research company specialising in the drinks industry.

That growth rate outstrips 4% for Asia and 3% for Latin America.

"Africa has seen inflation fall, foreign debt shrink and GDP rise in the last few years," Kevin Baker, account director at Canadean, said in a report released this year.

"Population growth – once feared as a major contributor to poverty – is now perceived as an asset, with the working age population set to outgrow that of China and India."

SABMiller, which generates nearly a third of its profits from Africa, operates in 15 African countries, and has a stake in 22 others through a partnership with French drinks firm Castel.

Up-and-coming markets include Nigeria – the continent's biggest economy – Kenya, Ghana, Mozambique and Uganda, where sales are all booming.

"Africa offers a young and fast-growing consumer base and an average annual consumption of nine litres of beer per person, against a global average of 45 litres," Hilary Joffe, a financial analyst, wrote in the Business Day newspaper last week.

"Arguably the juiciest asset on the SAB table (is) its dominant position and deep experience in Africa, a continent in which AB InBev has no presence."

But Africa will pose many challenges for AB InBev if it completes the US$122 billion (RM510.12 billion) purchase of SABMiller, a London-listed company that has its roots in supplying beer to miners during the 1886 Johannesburg gold rush.

One major test for big brewers on the continent has been to draw locals away from cheap home-brews onto commercially-made beer.

To accommodate African tastes – and cut import and tax costs – SABMiller and others have launched beers made from cassava and sorghum, which are easily-grown local crops.

Bootleg alcoholic drinks cause regular deaths across the continent, such as the 75 people killed by poisonous beer served at a funeral in Mozambique in January.

"Homemade alcohol products still dominate the African market, but they pose a significant health risk," said Baker.

"This is an incentive for consumers to move away from 'home brews' and instead turn to commercial beer."

Other key challenges include building breweries with their own electricity, water and waste facilities; and distributing beer via a network of bad roads that link countless neighbourhood kiosks and small stores.

Islamist militancy in Nigeria and Kenya also poses potential risks, as do unpredictable government regulations.

SABMiller has had a rocky experience in Kenya, entering the market in 1998 but withdrawing in 2002 after struggles with a local partner, and returning in 2010 when it bought Crown Beverages.

Since then, it has launched several beers for the Kenyan market, including Castle Lager, Castle Milk Stout and Redds.

SABMiller face tough competition in the region, which is dominated by East African Breweries, part of the drinks giant Diageo, which produces Kenya's ubiquitous Tusker lager, Tanzania's Seregenti and Uganda's Bell.

In Nigeria, SABMiller is pushing hard after its late arrival in 2008, and in 2012 opened a new $100-million brewery to launch Hero beer, which it hopes will take on market leader Star lager, brewed by Heineken.

"Beer is highly aspirational but expensive for most Africans... the intention is to find ways over time to progressively bring this price down," said SABMiller Africa chief Mark Bowman in a recent presentation.

"It is becoming easier to do business in Africa. We have been doing it for many, many years. We have the experience, we know how to operate in Africa. I think it is a growth region." – AFP/Relaxnews, October 19, 2015.