As consumers’ disposable income is squeezed by the high cost of transport, food and energy, beers lovers are not ditching their favourite beverages but are opting for bigger cans to get more for their money.
South African Breweries (SAB), which produces beers such as Castle and Carling Black Label, says it is recording growth across most of its brands.
However, buying patterns are changing.
CEO Richard Rivett-Carnac said this week consumers who typically bought non- returnable 330ml bottles were changing to 410ml or 500ml cans.
“We are undoubtedly seeing a very squeezed middle class ... and we are seeing that in people’s buying behaviour. They are still buying brands that they trust but at the right price. Value is becoming more important.
Carling Black Label has been the best performer, recording a 30% increase in sales in the three months to September, and premium brands such as Corona, Stella Artois, Brutal Fruit and Flying Fish are doing well, he said.
“Reality is that in times like this, people stick to brands they trust and love and we are doing better on that front,” he said.
SAB, which was battered by Covid restrictions on alcohol sales, said it had returned to pre-Covid trading levels and continued to record growth. Revenue grew by percentages in the mid-twenties while volumes grew in the high-teens, it said.
By the end of this year, SAB would have invested R4.5bn in South Africa, with plans to invest more next year. Rivett-Carnac would not comment on how much the company plans to spend next year.
He said the R4.5bn would ignite the economies of the Eastern Cape and KwaZulu-Natal “as we have committed R650m to go into the expansion of SAB’s Prospecton Brewery in Durban and R270m will be committed to upgrading SAB’s Ibhayi Brewery in Gqeberha”.
He said this investment alone would provide R3.1bn additional tax revenue and generate 24,000 jobs throughout the value chain. It would also generate R4.4bn in additional GDP for the KwaZulu-Natal economy.
“This all ramps up SAB’s total South African investment commitment to R4.5bn – adding impact to an industry that already contributes 1.3% of the national GDP. And our operations are only going to grow from here,” Rivett-Carnac said.
SAB, which this week unveiled its new logo, said it is in the process of installing more power generation capacity as the country experiences more frequent load-shedding. “Ultimately we’ll move towards a solution that will allow us to run independently of the grid if required,” said Rivett-Carnac.
On the water shortages in some parts of the country, Rivett-Carnac said SAB, which is reliant on water as a key ingredient, was working closely with all the municipalities it operates in.
“There hasn’t been a significant impact on our businesses yet, but it’s something we obviously are watching very closely.”
Reality is that in times like this, people stick to brands they trust and love and we are doing better on that front
He said that in Gqeberha, which experienced severe water shortages recently, the group was working with the municipality “to solve some of the problems they’re facing around installing new pumps and upgrading the infrastructure”.
Two weeks ago, the alcohol industry launched the Drinks Federation of South Africa (DF-SA) to give it a voice in areas such as policy and societal issues related to alcohol abuse. The organisation aims to refresh the industry’s code of conduct and implement a transformation framework, said Angela Russell, the federation's CEO.
DF-SA’s launch comes as the government is looking at amending the liquor act to tighten existing restrictions on alcohol and advertising. The amendment seeks to increase the legal drinking age and restrict the advertising of alcohol.
Rivett-Carnac said the industry understands that it needs to be regulated. “We believe we’ll be able to engage properly with government on any new regulation and hopefully come to a sensible set of regulations that works for the industry, government and society.”
He said SAB had a “very positive relationship with the government. We’ve seen much better relations this year and a real willingness to get together to solve some of the problems that we face.”
SAB is a subsidiary of global alcohol group AB InBev. Asked about the group’s view of South Africa given the challenges, including slow economic growth and the increase in crime, Rivett-Carnac said AB InBev has a good understanding of how different economies work.
“What is important for us as a global company is to understand the macro issues and what’s going to happen over the long term and to take a long-term view.
“AB InBev is very positive on South Africa. They understand the difficulties. They have seen some difficulties in some markets. They understand that countries go through ups and downs ... AB InBev is committed to South Africa and believes strongly in the long-term growth potential in the country,” he said.
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