SABMiller Highlights Growth Opportunities

24/02/06 In a presentation to the 2006 Consumer Analyst Group of New York (CAGNY) annual conference yesterday in Scottsdale, Arizona SABMiller plc Chief Executive Graham Mackay set out why the group’s broad exposure to the global beer industry will underpin future growth.

He said: “The world’s population is forecast to grow to 6.8 billion people by the year 2010, and much of this growth will come from emerging markets.  In most markets, we see strong trade up trends across most consumer product categories.  Here in America and in other developed markets, that means growth in wine and spirits, and a move to premiumisation within the beer market. 

In the rest of the world however, the opportunity is far greater, as consumers trade up from lower quality, cheap beer, into modernised mainstream products and then on into what we refer to as ‘worthmore’ brands.  Consumers are also moving into beer as an aspirational mainstream alternative to cheap spirits, or other types of local indigenous alcohol.  This is increasing beer’s share of total alcohol across the emerging market landscape and there is a long way to go.  Per capita consumption of beer stands at roughly 84 litres in the US, but in our Central and Eastern European markets it is only 60.  In our Latin American markets it is just 31; and it is 6 in Africa, 23 in China and only 1 litre of beer is consumed per person per year in India.  We believe this growth trend will continue for a very long time to come, and it presents us with some exciting opportunities.”

In the same presentation Norman Adami, the President of SABMiller’s North American subsidiary, Miller Brewing Company, confirmed that whilst SABMiller had achieved its three year turnaround objectives in stabilising the Miller business, it now faces new challenges. 

He said: “The Miller business is now moving into what we are referring to as the ‘step up’ phase, in which we will begin to demonstrate that we can indeed restore our overall portfolio to growth.  There are a number of imperatives on which this is built.  Firstly, we will extend the progress made in strengthening our leadership and organisation. Secondly, we will sustain and build on the improved relationship with our distributors, which has been one of the most underestimated factors in our success to date. Thirdly, we will strengthen and clarify the unique, relevant brand position for Miller Lite, whilst simultaneously furthering the dialogue with its principal competitor.  Fourthly, we will establish a clear and bold brand position for Miller Genuine Draft, and at the same time balance brand-building with cost management to ensure that Miller High Life and Milwaukee’s Best weather the likelihood of ongoing price pressure within the economy segment led by the industry leader. Finally, we must create momentum behind Peroni Nastro Azzurro and Pilsner Urquell whilst ensuring we maintain their positioning as high-end imports.”

In the same presentation, Barry Smith, President of SABMiller Latin America, commented on the growth prospects for SABMiller’s newly acquired businesses in Colombia, Peru, Panama and Ecuador.

“Panama, Colombia, Ecuador and Peru together represent a larger region than many people would expect.  Its population of 89 million would make it the largest country in Europe, and its current per capita consumption levels of 31 litres are little more than half those we see in South Africa.  The expected regional 5 year volume growth of c.4% compares favourably with corresponding growth rates in the rest of Latin America and is supported by forecast GDP growth of almost 4%. 

“Our strategy is to invest significant resources in improving the image of the beer category, through marketing, packaging and point of sale development.  We will enhance beer’s image across the market, but we will also target specific consumer segments and channels, which will broaden beer’s role within the alcohol category across a wider range of occasions.  It is worth remembering that per capita consumption in Colombia was 54 litres per capita at its peak and 34 litres in Peru.  The current levels are 34 and 24 respectively and we are confident that with actively managed pricing, we can begin to restore the consumption levels these countries enjoyed in the past.”