Fuel costs, VAT hikes impact AB InBev’s South Africa business

SOUTH AFRICA – World’s leading brewer, Anheuser-Busch InBev (AB InBev), said that its South Africa’s business posted weaker performance in its 2018 financial year on account of rising fuel costs and the value-added-tax (VAT) hike in the country.

According to a report by Business Report, the multinational brewer said the macroeconomic and consumer environment in South Africa were challenging during the period which further pushed down its beer sales.

“The VAT increase as of April 1, 2018, numerous petrol price increases and rising unemployment levels continued to have a negative impact on consumer disposable income, which put disproportionate pressure on the core segment where our portfolio is over-indexed,” the company said.

The company said that other than South Africa, similar conditions were experienced in Argentina and Brazil which translated to top and bottom line performances falling below its expectations in all three markets.

AB InBev, whose flagship brands include Castle Lager and Budweiser, however said its premium portfolio continued to grow by triple digits and it gained 10 percentage points of market share in the growing high end segment this year.

“In the core segment, which still accounts for the vast majority of our volumes and was held back by a challenging macroeconomic environment, our share remains broadly unchanged, and toward the end of the year we saw an improved performance in volume,” it said.

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The brewer said in the report that it had continued to empower both its small entrepreneurs and its suppliers with advanced business capabilities and access to new commercial opportunities, leading to the creation of more than 2400 jobs.

“This contributes to South African Breweries’ goal to create jobs through enterprise and supplier development, helping drive inclusive economic growth and development,” the company noted.

AB InBev, which operates in nearly 50 countries with 500 brands, posted a 5.3% rise in revenues from its Budweiser brand globally and by 10% outside of the US market, driven by continued expansion into new geographies and the activation during the 2018 Fifa World Cup Russia.

Its Stella Artois continued to see strong, balanced growth, up 5.2% globally, driven by its increased penetration of the meal occasion and successfully launched the Castle Free brand in South Africa.

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