Licensing backlog holds back SAB's sales
Local lager volumes dip 3%
November 20, 2009
 By Ann Crotty
There are more outlets with on-consumption licences at Cape Town's V&A Waterfront than in all the townships of the Western Cape, according to Norman Adami, the chief executive of SAB, the local subsidiary of brewer SABMiller.
This was a result of the province's inability to process about 3 000 applications lodged by illegal taverners, Adami said yesterday, adding that the situation risked a reversion to the old apartheid era.
"There are only 320 licensed taverners in all of the Western Cape; there are more on-consumption licensed outlets in the Waterfront," he said.
Adami believed that one of the reasons for the seeming reluctance to license township taverns was that they were not in commercially zoned areas. He said the lack of licensed taverns limited sales, particularly of Carling Black Label.
For the country as a whole, a decline in consumer spending contributed to a 3 percent decrease in lager volumes for the six months to September.
"Mainstream volumes, down 2 percent, performed relatively better, supported by strong growth in Castle lager and Hansa pilsener. Soft drink volumes were down 2 percent.
Adami was speaking after the release of SABMiller's interim results, which revealed the global beer group's revenue fell 6 percent in dollar terms while "adjusted earnings" lost 10 percent in dollar terms.
SAB's revenue in the six months to September grew by just 2 percent and earnings before interest, tax and amortisation (Ebita) was unchanged at $ö million (R1.8 billion).
Adami acknowledged that the two price increases implemented in the previous financial year - in September 2008 and February 2009 - had contributed to the weakness in sales growth, but added that they had been essential.
"For the last three-and-a-half years raw material costs have more than doubled in the South African business. We were buying in dollars and spending in rands (and) we needed to recover some costs."
He noted that costs in the South African business had been adversely affected by the fact that contracts to purchase raw materials had been entered into near the peak of the commodity cycle 18 months ago. This also coincided with a period of weakness in the rand.
This double impact on costs was set to continue to subdue results in the second half of the year. "The benefits of the stronger rand and weaker commodity prices will only be felt from April 2010," said Adami.
Elsewhere in South Africa, SABMiller hotels and gaming operations turned in a disappointing 12 percent decline in Ebita, down to $53m.
He said the global group's strong performers were Latin America, which reported a 19 percent increase in Ebita to $566m; Asia with a 24 percent hike in Ebita to $90m; North America, where Ebita was up 7 percent to $379m; and Africa excluding SAB, where Ebita was up 3 percent to $öm.
SABMiller chief executive Graham Mackay described the half as "some of the toughest economic conditions seen for decades". These were expected to continue in the second half.
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