‘Bridging beer’ and Chibuku to go: SAB Miller plays Africa’s price ladder
During an investor seminar this week on to Africa, SAB Miller Africa MD Mark Bowman highlighted beer’s status as an aspirational drink across the continent, which supplied 30% of the brewers EBITDA of $6.4bn for FY2014.
SAB wants to build beer volumes in Africa as income levels rise – per capita consumption of beer runs at only 9 liters per annum across Africa, compared with 45% globally.
“When we convert consumers to beer in Africa, we’re converting them from other sources of alcohol typically. So we’re not introducing them to beer, we’re switching to beer from informal or illicit alcohol,” Bowman said.
“Home brew, informal alcohol, illicit spirits is such a big part of where the alcohol consumption comes from – that’s a big challenge, but it’s also a considerable opportunity,” he added.
Beer is highly aspirational in Africa, and consumers would love to drink it if they could afford it, Bowman explained, revealing that SAB’s new focus is on cheaper prices or ‘price moderation’ – to drive volumes and revenues in Africa by converting consumers from informal alcohol to its brands.
“We’ve found via experiments in places like Nigeria or Mozambique that a relatively low priced strategy works really well and drives all the levers of our business quite effectively,” he said, adding that SAB planned to expand its breweries to ease the margin pressure this move entailed.
Sorghum-based Chibuku is SAB’s ‘branded’ beer entry point in Africa, a popular product that the brewer launched in 2012 across several sub-Saharan African markets.
Starting at around $0.30 for 500ml on draft, this traditional-style product has an alcohol level ranging from around 2-4% depending on its age, but SAB has developed a new version in PET, Chibuku Super, priced at $0.80 per bottle.
“What’s interesting about it is that Chibuku as a traditional product ferments in package, so it changes profile from the first day to the sixth or seventh day after which it can no longer be consumed,” Bowman said.
“Some consumers prefer fresh, others prefer slightly more mature. You have this whole system running. Because it vents, there’s a little hole in the package. It doesn’t smell great and you can’t put it into a modern retailer.”
However, SAB began pasteurizing the product to sell Chibuku Super in 1 liter PET, and Bowman said this had completely changed the “whole occasionality” of consumption. “You can now get in a taxi with your Chibuku Super and go home and consume it, which you never could do before.”
“Before you had to sit at a tavern. You can keep this for a week, keep it for a month. Modern retailers – Zambia’s quite well developed in terms of modern retail – were the first to embrace the product.
“It’s become one of their most important lines and is a great draw into the stores. We have now several markets running Chibuku Super, and the margins are double that of normal Chibuku on a straight dollar basis,” Bowman said.
In terms of ‘unlocking middle class’ aspiration, SAB’s price ladder aims sites homemade brews and local spirits in the sub-$0.50 segment, affordable and commercial opaque beer at $0.75/bottle, mainstream beer and spirits at $1/bottle and premium beer at $1.20+/bottle.
Looking beyond Chibuku Super, Bowman said: “The aspiration for most consumers is to move into clear lager. So the idea is to create a series of bridging opportunities. They key one for us is what we call ‘affordable clear beer’,” Bowman said.
One SAB Miller success story in this space is cassava-based beer Impala in Mozambique: the brand’s annual sales have grown from low double-digit sales (in thousands of hectolitres in 2012) to around 70,000 hectoliters (hl) in 2014, with sales of 250,000hl predicted for 2015.
Admitting that commercial opaque beer was probably more a price point (of $0.75/bottle) than a category, Bowman said: “The problem with affordable clear beer is that our brewers make it so nicely that often consumers are tempted to trade down – so we have to be very careful”.
“We try to price this at 75%, which for us is the magic price point of a clear lager. The key difference here, of course, is that this clear beer tends to rely on a lower excise regime because it’s made with local products. And it’s designed in profile as a bridging beer,” he added.
“It’s priced normally at same price point at which you can get equivalent small bottle of spirits for. So of course a small bottle of spirits will deliver much more alcohol, but at least the consumer then can start to make a trade off.
“The work we’ve done in Mozambique has suggested a significant amount of switching out of low-end spirits into affordable clear beer. So even if there is a certain amount of cannibalization, and we measure that at 30-40% typically, we still believe the opportunity makes it worth our while, as the scale of the growth we’re getting out of this is significant,” Bowman said.
“Now that we’ve got the technology in place in Mozambique it’s now 10% of our total volume. We expect that to grow further as we put more capacity in place to service this need.”
