Brewing giant SABMiller is to cut costs sharply in its most profitable market of South Africa to boost marketing ahead of the opening of a rival brewery this year just south of Johannesburg.
Norman Adami, managing director of the group’s South African operation, said it will cut costs by R350-million and plough the savings back to boost sales as Heineken opens the first non-SABMiller brewery in South Africa.
Adami said the savings will restore the group’s productivity edge by cutting manufacturing, distribution and overhead costs in its year to March 2010, but this will not lead to plant closures or job losses in its 5 500 South African workforce.
The move comes as the Dutch brewer with its British partner Diageo plans to open its new plant to brew a range of their brands like Amstel, Heineken and Guinness to compete in a market where SABMiller earns a quarter of its profits.
”We believe we have a clear understanding of their strategy,” Adami told an investor seminar on Wednesday, adding that SABMiller had a range of 11 different beer brands in South Africa to counter the output of the new brewery built by a 75:25 percent Heineken-Diageo joint venture.
Heineken’s chance to expand in South Africa came in April 2007 when it won back the right from SABMiller to brew and distribute its Amstel brand in the country.
The premium Amstel beer accounted for over 9% of SABMiller’s South African volumes before April 2007, and its loss saw SABMiller’s South African beer market share falling to around 91% from 98% previously.
Heineken, the world’s third-largest brewer after Anheuser-Busch and SABMiller, has been importing its beers from Europe ahead of the brewery opening.
Adami expects the new brewery to open between July and September but has four international premium brands — Grolsch, Pilsner Urquell, Peroni and Miller Genuine Draft — to compete with Heineken, as well as three local premiums and four mainstream brands.
SABMiller adds it will use the R350-million of savings and a little more to invest an extra R364-million into marketing to revitalise its beer brands and look to push up overall per capita beer consumption above the 55 to 60 litres a year range it has seen for a number of years in South Africa. — Reuters