South African Breweries (SAB) says ciders and sweet flavoured beers are growing fast and taking market share from other alcoholic categories, with the trend expected to continue as consumers’ appetites change and new drinkers enter the market.
The company, a unit of Belgium-based AB InBev, produces a range of beer brands, including Castle Lager, Carling Black Label and Hansa, as well as alcoholic beverages such as Flying Fish, Redds and Brutal Fruit.
CEO Richard Rivett-Carnac said the beyond beer category is growing faster than those of beer, spirits and wine. “Historically, there wasn’t a lot of choice, but in recent times there has been significant innovation from the industry. The beyond beer category has grown by mid-single digits in the second quarter of the year,” he said.
“Beyond beer is taking share from other alcoholic categories, and if you don’t have relevant offerings that are appealing to consumers within that important segment, you will start to lose ground.”
The brand positioning and proposition really resonates with consumers, and we are hyper-focused on executing it in the most premium way possible in the trade
— Richard Rivett-Carnac, SAB CEO
SAB’s competitor, Heineken, said earlier in the week that its cider brand Bernini “grew in the 30s” in the first half of the year.
AB InBev said SAB’s half-year revenue increased by mid-single digits. Volumes grew by low-single digits, while earnings before interest, tax, depreciation and amortisation (ebitda) also rose by mid-single digits. AB InBev said SAB continued “momentum and market share gain”.
Rivett-Carnac attributed the performance to the continued popularity and sales growth of premium beer brands Corona and Stella Artois.
SAB has invested heavily in the marketing and distribution of the two brands to attract customers. “With regard to Corona, we invested a lot of money into trade, be it into bars and restaurants and into bottle stores,” Rivett-Carnac said.
“And we’ve been doing that consistently for [about five years], and we started to see the benefits of doing that. The brand positioning and proposition really resonates with consumers, and we are hyper-focused on executing it in the most premium way possible in the trade.”
Stella Artois is focused on premium events and occasions like tennis, padel and golf, Rivett-Carnac said.
He said Corona and Stella Artois are “very important brands for our portfolio” and there is still “a lot of space” for growth.
“We see the premium segment growing faster than the overall beer category. This is a trend, not only locally but globally. These are our two big bets in this very important segment of the beer category. So we will continue to invest and support these brands moving forward.”
Commenting on the performance of the other beer brands, Rivett-Carnac said: “We are very pleased with the kind of balanced growth we’re seeing in our portfolio. Our core brands, Carling Black Label in particular, continue to perform well, and it’s very important for our business because they make up the bulk of the volumes of the business. So we see our core brands growing in the low, single-digit volume.”
He said Castle Milk Stout also showed strong performance during the half-year period.
Rivett-Carnac said that overall the industry was still struggling, which “comes as a bit of a surprise”. He added: “I mean, with low inflation, slightly lower interest rates, lower fuel prices ... we were hoping some of that money would make its way into consumers’ pockets with regard to disposable income, but we haven’t really seen that play out.”
He expects strong performance during the summer, while reiterating concerns about the impact illicit alcohol has on the industry and the possible dangers for consumers posed by fake alcohol. According to a recent report by the Drinks Federation of South Africa, which SAB is part of, one in five alcoholic drinks sold in South Africa is illegal. The illicit alcohol market has grown by 55% over the past seven years, outpacing growth of the legal alcohol market, and is now estimated to be worth R25.1bn.
Casparus Treurnicht, portfolio manager at Gryphon Asset Management said: “I do not think it [AB InBev/SAB] is a bad business, it is simply underdelivering because of trends and demographic shifts. If you look at the gains they are making it is mostly because of pricing; volumes aren’t really moving the needle, and I think we are going to see more of that going forward.”
AB InBev's total beer sales during the second quarter of the year fell 1.9% year on year, while analysts were expecting a fall of 0.3%, said Peter Little, fund manager at Anchor Capital.
“The disappointing beer sales volumes will also keep investors concerned about potential structural impacts of declining beer consumption among the younger (Gen-Z) customers,” Little said.
South Africa makes up only about 5% of group profits, but performed well, delivering mid-single digit volume and revenue growth.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.