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SAB to reinvest in fresh South Africa market push

SOUTH African Breweries’ (SAB’s) new head aims to breathe new life into the brewers’ 16 brands as Heineken turns up the heat in the sector with its new brewery.

Chairman and MD Norman Adami said on Friday the brewer was happy with its portfolio and would invest in its products, especially mainstream brews that were the mainstay of the business. “Consumers don’t drink portfolios, they drink brands.”

Mainstream accounts for about 85% of the market, while premium brews such as Hansa Marzen Gold, make up the balance.

Adami did not discount launching new brands this year, but said his first priority was bringing “brands to life”.

He said South African consumers would see much more of the brands in the market. “There is lots of work in progress.”

Adami said he was comfortable with the brand portfolio but had to entrench the company’s position as it readied itself for competition from Heineken. “The opening of the new plant heralds a new competitive dynamic.”

SAB aimed to be at the front of customers’ minds when they were deciding which beer to buy, and this would mean increasing marketing activity around the brands.

Heineken’s entry into the country, through the long-term commitment in the brewery, meant that SAB could not afford to rest on its laurels.

The company said in March last year that it would construct a brewery near Sedibeng, Gauteng, to brew Amstel locally. The announcement came almost a year after Heineken revoked SAB’s licence to brew Amstel in SA. Amstel accounted for 9% of the local market.

Amstel is being imported from the Netherlands and distributed locally by brandhouse, a joint venture of Heineken, Diageo and Namibia Breweries. Heineken’s total net investment into SA would be about R3,4bn at present exchange rates.

The brewery will be 75% owned by Heineken, with Diageo holding a 25% stake. It would initially have a capacity of 3-million hectolitres.

SAB, which had about 92% of the market, was also entrenching its foundations, said Adami. It would enhance operations and improve productivity. The company would also be bolder in engaging the market, he said.

He said consumers’ realities had changed. Until the recent economic slump, the company had seen a move towards premium beers.

In addition, said Adami, consumers were choosing different beverages for different occasions. This meant that SAB required a diverse range to quench consumers’ thirsts.

Adami, who came back to SA to head up the local division last October, said the company also wanted to ensure that key customers were supported. Out-of-stock issues had been resolved over the last peak period, he said.

However, the cost of inputs such as hops and barley remained a concern, as the products were sold in dollar-denominated prices while SAB sold in rands, which had lost ground against the dollar.

He said the company had been absorbing some price increases for the past three years, which had eaten into margins. The shift towards mainstream beers away from value beers had also resulted in some margin erosion, but he was confident that the market would turn and that SAB would be able to offer it every brew it wanted whenever it wanted.

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Tuesday, January 23, 3:56 pm

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