Prudent SAB mulls spirits business

SOUTH AFRICA – Though synergies between beer and spirits businesses are often difficult to find, SABMiller could grow its spirits portfolio in Africa with a “measured” approach, CEO Alan Clark said last week.

SOUTH AFRICA – Though synergies between beer and spirits businesses are often difficult to find, SABMiller could grow its spirits portfolio in Africa with a “measured” approach, CEO Alan Clark said last week.

The world’s second-largest brewer has relatively small wines and spirits units in Mozambique and Tanzania and is making a small investment in the Nigerian spirits market. It also has an investment in JSE-listed spirits and wine group Distell.

In response to a question about the investment case for spirits, Mr Clark said last week: “What you would be looking at is: are there opportunities as with softdrinks where we can capture more of the beverage profit pool?

“In spirits it’s come down to Africa. We have said that we will, where appropriate, participate in spirits in Africa.”

SABMiller had the necessary scale to do so, while it could look to take advantage of “the relatively underdeveloped nature of spirits” in Africa, particularly in the premium segment. But SABMiller would be “very selective and measured in our investments”.

Finance director Jamie Wilson said synergies between beer and spirits tended to be limited, as they targeted different drinking occasions, different consumers and often had different route-to-market channels as they were not always sold in the same places.

In most cases this made it difficult for the businesses to leverage off each other, while each had different sales teams.

In July SABMiller started integrating its South African business into its rest-of-Africa region. Africa was SABMiller’s fastest-growing region in its six months through September, with organic, constant currency earnings growth up 9%.

However, as has been the case for some time, weak emerging-market currencies against the dollar watered down Africa’s contribution at a reported level.

Mr Clark said the integration process “is moving ahead very successfully and we think there’s a significant opportunity for us, particularly on the revenue side, through the way we’re thinking about the integration of those businesses over time”.

Up to 35% of SABMiller’s beer volumes in the former rest-of-Africa region were South African brands such as Castle Lager, Castle Lite, Castle Milk Stout and Redd’s.

November 18, 2014; http://www.bdlive.co.za/business/retail/2014/11/17/prudent-sab-mulls-spirits-business

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