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AB InBev steps up spending in Africa to match sales growth

Anheuser-Busch InBev NV is ramping up investment in Africa after seeing a boom in demand for its beer on the continent, building on the Budweiser owner’s $106 billion takeover of SABMiller in 2016.

Shipments in the region excluding South Africa increased by as much as 20 percent in 2017, putting it among the fastest-growing territories for the world’s biggest brewer. Premium brands like Stella Artois and Corona are growing in popularity in South Africa, according to regional Chief Executive Officer Ricardo Tadeu.

“We have invested hundreds of millions of dollars on the continent this past year, most notably $200 million in South Africa,” he said in an interview on Thursday.

AB InBev cited Africa as a major factor in the decision to buy SABMiller, which has its roots selling beer to miners in 19th century Johannesburg. Jorge Paulo Lemann, one of AB InBev’s billionaire shareholders, said last year that the continent’s rapid urbanization and warm climate could eventually see it overtake the U.S. in beer sales. Rival companies agree, and Heineken NV has hired hundreds of sales staff and invested in growing markets such as Ivory Coast, Mozambique and Rwanda since the SABMiller deal.

Challenges include the impact of weaker oil and commodity prices on key economies including Nigeria and Angola. In the Democratic Republic of Congo, Heineken has closed facilities and taken a writedown due to high taxes and an economic slump last year, while Nestle SA left the country altogether.

AB InBev is building a brewery in Nigeria that will start production by mid-2018. However, there are no plans to add more as the company is able to grow on the back of existing operations, Tadeu said.

The company said it will start distributing its flagship Budweiser brand in South Africa this year and introduce an alcohol-free version of SABMiller’s Castle brand. Castle Lite, South Africa’s biggest selling lager, remains popular, Tadeu said.

Earnings before interest, taxes, depreciation and amortization in South Africa advanced 21 percent last year, even as the brewer had to deal with the effects of a crippling drought at its Newlands brewery in Cape Town.

AB InBev’s overall fourth-quarter revenue rose 8.2 percent, beating the average analyst estimate for 5.3 percent growth, it said Thursday. The Leuven, Belgium-based company produces a third of the world’s beer.

Source: Bloomberg

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