SOUTH AFRICA – South Africa’s beer industry is facing a notable downturn in consumption, with a growing preference for flavoured alcoholic beverages (FABs) among consumers.
A recent study conducted by the Bureau of Economic Research (BER) on behalf of SAB revealed that FABs have become a more financially attainable choice for many consumers compared to traditional beer.
“The income elasticity of Flavoured Alcohol Beverages (FABs) remains significantly higher compared to beer and other liquor products,” Economist Linette Ellis from BER highlighted.
“With a plethora of new product launches and various pack sizes hitting the market, the FABs category has been expanding at a pace outstripping real disposable income growth. This underscores the higher income elasticity for FABs.”
This shift in drinking habits has primarily been attributed to the rising cost of beer and the allure of more affordable and varied FABs.
As South Africans seek cost-effective alternatives amid challenging economic conditions, the beer industry is calling on the government to adjust alcohol excise duties in line with inflation to ensure its continued viability.
Between 2013 and 2019, South African Breweries (SAB), one of the country’s largest beer producers, observed beer prices skyrocketing above the Consumer Price Inflation (CPI) rate, making beer less accessible for many consumers.
In response, SAB has recently urged the government to align excise duties with inflation rates when he presents his Medium-Term Budget Policy Statement.
Richard Rivett-Carnac, CEO of SAB, stressed the importance of policy certainty, stating that the industry requires more policy certainty around what those increases are going to be in line with policy.
“We believe they should be linked to CPI and some kind of commitment to the treasury over the medium-term to say 3 years that they will implement inflationary increases on excise. that will allow the industry to recover from where it is now.”
The shifting landscape of alcohol consumption patterns in South Africa has shown to be closely tied to the country’s ongoing economic struggles.
The persistently high inflation rate has eroded disposable incomes, prompting alcohol consumers to explore more cost-effective options.
However, as South Africa grapples with these complex challenges in the alcohol industry and its societal impact, it remains to be seen whether government policy adjustments will help stabilize the market and steer consumption patterns in a healthier direction.