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SABMiller Raises Latin American Volume Goal Amid Focus on Affordability

SABMiller Plc (SAB), the maker of Grolsch and Peroni, said its Latin American unit will sell more beer than planned over the next three to five years as it focuses on brews that more consumers can afford.

The company predicts volume growth of 5 percent to 8 percent in the region, up from a previous forecast of 4 percent to 6 percent, Karl Lippert, SABMiller’s president for Latin America, said today at a conference in London. Revenue per hectoliter will increase by 2 percent to 4 percent, down from a previous forecast of 3.5 percent to 5.5 percent.

SABMiller is focusing on an “affordability strategy,” as about 56 percent of the company’s consumers in Latin America have income at or below the minimum wage, Lippert said.

“These countries are sitting with very high prices” for beer when compared historically with the rest of the world, Lippert said. “We’re looking for opportunities to democratize beer.”

SABMiller rose 30 pence, or 1.3 percent, to 2,320 pence at 2:28 p.m. in London trading.

The Latin American unit was the largest contributor to sales and profit for London-based SABMiller last year. The brewer, which sells beers including Cusquena and Aguila in the region, reported growth of 11 percent in so-called organic earnings before interest, taxes and amortization last year, outpacing Europe, while lagging behind the group average of 12 percent. Lager volume was level with the prior year.

Colombia Growth

SABMiller has focused on its affordability plan in Colombia, Honduras and El Salvador, selling beer in larger bottles at slightly cheaper prices to appeal to drinkers in bars, or selling multipacks of cans for consumers to drink at home, which has been successful so far, Lippert said. The company maintained its margin growth target of an increase of 60 to 100 basis points.

The volume of beer sold in Colombia slid last year after the country’s government increased the value-added tax on beer to 14 percent from 3 percent in February 2010, prompting SABMiller to increase prices. Widespread flooding also hurt beer sales in the country. The company said Colombia accounts for more than half its sales in the region. Colombia saw “double- digit” growth last month as the weather improved, Lippert said.

Argentina Team

Latin America’s gross domestic product is forecast to grow 4.8 percent between 2010 and 2015 on a compound annual growth rate basis, the company said, in line with its African markets and outpacing its North America, South Africa and central and eastern European units.

Latin American countries in which SABMiller operates have average alcohol consumption of 38 liters a person, compared with 77 liters in North America, the company said.

In November, SABMiller bought Cerveceria Argentina S.A. Isenbeck, the third-largest brewer in Argentina, entering a market dominated by Anheuser-Busch InBev NV, the biggest beermaker in the world. The integration was “tough at the start” but has “settled down with a good team there,” Rob Priday, president of the company’s Peruvian unit, said today.

The acquisition spurred speculation that the company may also seek to enter Brazil, the third-biggest beer market in the world, including a possible acquisition of Primo Schincariol Industria de Cervejas & Refrigerantes, Brazil’s second-biggest brewer. Diageo Plc, the maker of Guinness stout, dropped plans to bid for the brewer, two people familiar with the matter said July 1.

Brazil
“There is of course some stuff on the table” in Brazil, Lippert said today. “You’d expect us to look,” he said, referring to Schincariol. He declined to comment further.

First-quarter trading in Latin America has been positive, driven by “very good” performances in Colombia, Peru, Honduras and El Salvador, Lippert said. The company’s fiscal year ended on March 31.

SABMiller today declined to comment on its pursuit of Foster’s Group Ltd. (FGL) after its A$9.5 billion ($10 billion) bid was rebuffed June 21 by the Melbourne-based brewer.

7 Jul. 2011

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