AB InBev flatters SA beer drinkers
SA might be a developing country, but when it comes to alcohol consumption it acts more like a developed one."Consumers are much more educated than say in Mexico and Colombia," AB InBev's zone president for Africa, Ricardo Moreira, told Business Times. SA's discerning beer drinkers should be mentioned in the same breath as the Americans and British, he says.And he should know. Moreira has been with AB InBev for 25 years and his most recent stint was in Colombia, one of the world's five largest beer markets, where he also oversaw Peru and Ecuador.Moreira suspects local consumers' sophistication could be a side effect of SA's "wine legacy". Having had a wine industry for decades before beer became big, consumers became accustomed to variety and were more aware of different taste profiles. And as beer grew in popularity, drinkers wanted similar choices in beer, he says.AB InBev took over SABMiller in 2016 in a deal worth $106bn (more than R1.5-trillion at the time). But so far SA has been an underperformer in the combined entity's global portfolio.AB InBev has shed some market share on South African soil, with Heineken the biggest winner. The Dutch brewer had been pushing hard into SA since opening a brewery south of Johannesburg.SABMiller had been too focused on core brands - the likes of Castle, Black Label and Hansa - and had not made enough of an effort to build premium brands, says Moreira. "Premiumisation" is a global trend. And though AB InBev has been driving it hard with its portfolio of international brands, Moreira admits that Heineken was ahead of the curve in SA. "They were the ones to start it here," he says.But AB InBev is now approaching 25% of market share in premium beer brands in SA, up from almost zero three years ago, he adds.Even after losing some ground to Heineken, the brewer has more than 80% of the total beer market - a dominant position by any measure.Still, AB InBev says it is "under-indexed" in SA's premium beer market, which is industry-speak for saying it is not as exposed as it would like to be. This is why it is pushing Budweiser, Stella Artois and Corona hard. Both Budweiser and Stella are now brewed locally. Corona, imported from Mexico, has more than doubled its sales over the past year. This also means that AB InBev is "over-indexed" in the parts of the market it refers to as "core" and "affordable". For core, think of Castle, Black Label and Hansa; for affordable, think of the same brands, but in bigger bottles or cans, and add Lion Lager to the mix. These products are aimed at the consumers most affected by weak economic growth, high unemployment and the resulting squeeze on disposable income."We are in a tough environment, but we are also in a negative cycle," says Moreira.This is because excise duties have been increasing faster than inflation, which hurts sales more where consumers are price-sensitive. "Since I arrived, we've been trying to break this cycle," says Moreira.Part of the plan is to persuade the government that growing beer volumes is a good thing. He says AB InBev pays taxes of more than R15bn in SA. With salaries and other costs already rising faster than other consumer prices, Moreira hopes to prevent increases in the so-called sin tax on beer also running ahead of inflation.If price increases could be kept to modest levels - to some extent thanks to slower excise tax increases - sales volumes should pick up, which would benefit both the fiscus and the brewer, he says.