SABMiller steps up African investment

SABMiller has announced an expansion programme in Africa worth US$260 million.

Further investment in the continent will likely go ahead next year as well said the brewer’s CEO, Graham Mackay.

It will be the group’s subsidiaries in Uganda, Tanzania, Zambia and Ghana that benefit the most from this expansion with volume growth in each market growing in 2011 by 23%, 20%, 22% and 80% respectively.

According to the Wall Street Journal, Mackay said that Africa is an “attractive market” with high profit margins, which are actually higher than those in China – if not Latin America.

As previously reported by the drinks business, emerging markets, with Africa chief among them, now account for 80% of the company’s earnings.

In the first half of 2011 to 30 September, SABMiller reported volume growth of 15%, driven by what it called, “continued investment in diverse product portfolios, enhanced distribution and consumer occasion activations.”

The company’s Castle lager brand has seen growth of 34% and the brewer has expanded the range of its more affordable brands such as Eagle sorghum, Chibuku opaque and Impala cassava beers.

Mark Bowman, managing director of SABMiller Africa, commented: “The positive economic backdrop in Africa, very favourable demographics and current low levels of consumption underpin our confidence in making additional investment to meet the strong demand for our products in the region.

“This investment is in addition to the US$1.5bn that we have already invested in Africa in the past five years and our continued development of affordable products such as a cassava-based beer will allow us to continue to drive growth in the business and in the communities in which we operate.”

Mackay added: “Africa as a whole is by and large a beer continent…growth in Africa is partly to do with so many people coming into the cash economy.”

Many drinks groups are turning greater attention to Africa for the same reasons.

Diageo recently completed the acquisition of Meta brewery in Ethiopia – a market set to rise by 10% per annum to 2015 – and has also recently pledged to expand the brewing capacity of its Guinness subsidiary in Nigeria.

Not that Africa is without difficulties. Mackay reported that currently infrastructure development was not able to keep pace with the growth of respective consumer markets and the continent is very deeply split into single markets, which makes the movement of goods between nations extremely difficult because of fluctuating tariffs, not to mention bad roads and other dangers.

The brewer – and others – has, however, been accused of dodging its taxes in developing markets.

Earlier this year Edinburgh University students voted to ban the company’s products in student union bars at the instigation of ActionAid.