South African Breweries, the South African arm of global brewing giant SABMiller (SAB), has confirmed that it will invest R5-billion in its South African operation over the next five years to expand capacity and to improve its ability to meet changing consumer needs locally, underpinning the company’s strong growth prospects.
SAB spokesperson Michael Farr said on Monday that the new investment was based on the belief that the good growth experienced by SAB over the past two years was set to continue over the medium-term, thanks to the outlook for continued expansion of the South African economy at a good pace.
SAB’s volumes in South Africa have grown by 3% over the past 18 months, while its market share of the country’s total alcoholic beverages market has risen to 59,8% from 58,3%.
This has stemmed from rising disposable income amongst South Africa’s middle- and lower-income classes, a switch from sorghum beer to lager, and growth in the premium beer segment as wealthier consumers spend more as well, among other factors.
Farr also said that the R5-billion investment would be funded through a mixture of internal cash generation — mostly at the SAB level rather than the group level — and, where necessary, external borrowing.
He explained that the investment programme, beginning in early 2005, would see approximately half of the funds going toward actual expansion, and half into existing infrastructure, such as for upgrading and maintenance.
All of the group’s seven breweries would benefit, particularly the facilities in Gauteng, where demand was the highest.
“Upgrading capability means improving our flexibility and turnaround time to meet changing consumer demand in terms of packaging, pack size, labels, and other aspects,” Farr said.
“It will allow us to introduce new brands more quickly, widening our portfolio so that almost every consumer demand can be met.”
He said that although no new greenfields breweries would be built, some existing brewing facilities would be upgraded and/or replaced.
SAB’s commitment to upgrading its labeling also represented the second biggest investment ever undertaken in the beverage industry worldwide, behind that implemented by Anheuser-Busch two years ago.
Despite relatively static volume growth over the past decade, the company invested about R4-billion in South Africa over the period, including the construction of its Ibhayi brewery.
SAB has also introduced three new beer brands and two new flavoured alcoholic beverages to the market. – I-Net Bridge