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SABMiller going big in Africa with $2.5bn budget

SABMiller planned to invest up to $2.5 billion (R19.7bn) in the rest of Africa over the next five years to build and revamp breweries, the beer maker’s regional head has said, as it looks to slake rising demand for beer in the fast-growing continent.

“We are still looking at around $400 million to $500 million a year… for the next three to five years,” Mark Bowman, SABMiller’s MD for Africa, said at the Reuters Africa Investment Summit.

“There’s quite an attractive growth in markets outside South Africa so we will be investing basically to meet and be ahead of demand,” he said.

SABMiller’s Africa business, which excludes South Africa, is the group’s biggest recipient of capital expenditure and its fastest-growing division, with underlying volumes in the last three months of last year up by 11 percent year on year.

Bowman said the London-based brewer, which is also listed on the JSE, would use the money to build two to three breweries each year across the continent, where some breweries were running at or near full capacity.

Africa is home to a billion people and, after a decade of relative political stability, dozens of fast-growing economies. Although still poor, it is increasingly seen as the next big growth market for consumer goods.

But average beer consumption, at 8 litres a person a year, pales when compared with about 70 litres in North America or Europe, suggesting that few Africans can afford the beverage, which is seen as a status symbol.

Bowman said if one included the home-brew market, where the beverage was cheaper, beer consumption on the continent was just as big as in major developed markets.

He said with affordable prices, commercial beer consumption per capita could reach as much as 30 litres over the next 15 to 20 years in most of SABMiller’s markets in Africa, outside South Africa.

The second-biggest global brewer is ratcheting up production of affordable beer by using local ingredients such as cassava and sorghum instead of the more expensive barley to drive growth.

SABMiller launched the first cassava-based beer late last year in Mozambique, an affordable beer blend that fetches up to 70 percent of the price of mainstream beer, with lower taxes keeping prices down.

“Commercial beer signifies reaching some sort of level of status as opposed to drinking a home-brewed beer like chibuku,” Bowman told the summit, referring to a popular sorghum-based brew.

Source: Reuters

Related reading:

Beer in Africa: The race to slake a continent’s thirst

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