The Lotto, cellphones and gambling are some of the reasons given for the decline in sales
Glenda Daniels and Roshila Pillay
South African throats tingled to a tide of 7,05-billion cans of local beer over the past year but this is 450-million cans less than the previous 12 months.
Changed lifestyle priorities of South African consumers and global competition have resulted in a dramatic decline in beer sales, causing South African Breweries (SAB) to retrench scores of workers and shift its focus to the foreign market.
Consumer spending has undergone major changes, according to SAB’s communications manager David Williams, who cites gambling, especially the Lotto, and the buying of cellphones as short- to medium-term factors contributing to the decline in beer sales.
Other factors include lower disposable household incomes, greater unemployment, buying wine, which has become a cheaper alternative, and the youth market indulging in alcoholic fruit beverages. Williams says: “We anticipate that beer sales for the full financial year will be down and we reported a drop of 6% in volumes for the first six months.”
The decline in sales is bad news for workers. More than 1 500 SAB employees have lost their jobs over the past six months, and about 500 more are expected to lose their jobs, according to the Food and Allied Workers Union (Fawu).
But Fawu general secretary Derreck Cele says the restructuring and retrenching has nothing to do with changed lifestyle priorities or declining beer sales but everything to do with the “effects of globalisation, changing to automation, the company taking business overseas and wanting to maximise profits and become a global player” at the expense of workers. Fawu has tried many times to engage the company to negotiate at a national level but in vain, Cele says. “It is trying to hide behind the fact that their sales have dropped due to the Lotto and cellphone industry. “They are expanding overseas resulting in retrenchments locally,” says Victor Nzuza, Fawu’s negotiating officer. “Last year alone, about 900 employees lost their jobs. This year 600 employees were retrenched. This means that about 1 500 employees have lost their jobs from June 2000. This process is still under way and we might see about 500 more lose their jobs in the near future.”
Williams says that expansion overseas has caused neither a decline in sales nor retrenchments: “Sales in South Africa have nothing to do with our expansion into a global company the idea is absurd. Although we are now a global player, and ranked among the top five brewing companies in the world by volume, SAB is still very much a South African company after more than 100 years, and the South African market remains key to our operation.” Nzuza says: “It is unacceptable that a company of SAB’s calibre, which portrays a progressive image, is contributing so much to already unacceptably high levels of unemployment in our country.” But Williams says that changes in the market and technological innovation may lead to restructuring, and “in such cases we follow a process of consultation with employees which may or may not lead to retrenchments”. If jobs are lost or changed, he adds, effort is made to redeploy.
In the meanwhile wine industry analyst Michael Fridjhon says that the decline in beer sales could be a result of the greater accessibility of lower-priced wine. “The drop in beer sales locally has been attributed to the Lotto, less disposable income, cellphones, gambling and an increased availability of low-priced wine, as a result of the growing wine lake.”
Competition from Namibian Breweries is also is giving SAB a run for its money. At the top end of the market many more people are drinking Windhoek Lager.
A variety of alternatives have snared the younger generation, says Andre Homann, general manager of Namibian Breweries. He says alcoholic fruit beverages and ready-to-drink spirit coolers have siphoned off the 18- to 25-year-old market. “The beer industry has not done an awful lot to excite the young beer market.” Namibia Breweries has proven that it is possible to make inroads in the beer market previously an impossible feat. “We’ve doubled the business every seven months so that we now have a 2% share of the total beer market,” says Homann. In the traditional black market the brewer had growth in excess of 60% for past year. The growth rate is impressive when one considers that the company has only had a Gauteng-based operation for five years. While sales decline locally, SAB is benefiting from a burgeoning overseas beer market especially in emerging markets in Asia and Latin America. China, for instance, is the world’s second-largest beer market.
Tony Manning, a consultant in competitive strategy and change management, says: “It is difficult to be a global player from as far away as South Africa. It is virtually impossible for SAB to grow in this country. There is also the question of being a monopoly; it’s a very unpopular position to be in,” he says. The beer advertisements depicting expatriates drinking a Castle in London seemingly confirm the offshore ambition.