What: Brewing and beverage company SABMillerris expanding its beer category in Latin America to increase growth through the expansion and strengthening of brand portfolios. SABMiller’s strategy for unlocking this growth is making beer the drink of choice on more occasions, for a wider group of consumers and with innovation playing an important role.
Why it matters: In the year to March, Latin America generated the largest proportion of SABMiller’s earnings before interest taxes and amortization at US$2.22 billion, representing 35% of the group’s total.
Brewing and beverage company SABMiller is expanding offerings in the beer category in Latin America in line with its strategy to increase growth through expansion and strengthening of brand portfolios.
A shift in consumer-spending patterns, cold weather and pressure on disposable impacted beer consumption in many mature markets. However, in the year to March, Latin America generated the largest proportion of SABMiller’s earnings before interest taxes and amortization at US$2.22 billion, representing 35% of the group’s total. This had to do in part with the introduction of affordable bulk packs, additional light beer brands, new variants and SABMiller’s first non-alcoholic beer in the region, Aguila Cero in Colombia.
In this sense, Latin America, like other developing markets, is still an appealing market for the Miller Lite and Peroni brands as beer drinkers are trading up from informal alcohol to branded products.
To SABMiller, the key for future growth is making beer the drink of choice in more occasions and for a wider group of consumers, with innovation playing a key role.The company expects total volume growth of 3%-6% from Latin America markets in the medium term, and EBITA margin (Earnings before Interest Taxes and Amortization) growth between 10 basis points to 30 basis points.
Latam beer market
SAB Miller has grown beer’s share of total alcohol in Latin American markets from 55% to 59% in the past four years, achieved primarily by taking share from cheaper spirits, and untaxed and inexpensive illegal alcohol, according to Karl Lippert, president of the company’s unit in the region.
Illegal alcohol represents more than a fifth of the total alcohol market in some Latin American countries.Per capita consumption of beer stands at around 43l a year in SABMiller’s key markets of Colombia, Peru and Ecuador, and is less than half this rate in Honduras and El Salvador.This compares with other markets in the region, such as Panama, Brazil and Mexico, where per capita consumption is between 65l and 70l, an indication of considerable room for growth.
“We plan to have an attractive beer choice for everyone, for men and for women, while having dinner with friends, relaxing at home, or out in a sophisticated high-end club,” Lippert said.
With annual consumption of packaged beverages at home estimated at about 100-million hectolitres in core Latin American markets, the company is also targeting more at-home drinkers.