SAB Miller is available in 38 African countries and controls 90 per cent of the South African beer market. Last month, the world’s largest beer company, AB InBev, agreed to buy SAB Miller for $104 billion.
‘CNN Marketplace Africa’ this week examines how this development impacts South Africa’s beer industry and creates opportunities for craft breweries, which are showing signs of growth in the market.
Belgian company AB InBev is offering a 48 per cent premium for SAB Miller. Chris Gilmour, an investment analyst for Barclays Africa explains why to ‘CNN Marketplace Africa’: “The one big missing piece – Africa – they had nothing here, so what do you do? Do you start from scratch? No… you buy out the single best operator in Africa. Ab InBev couldn’t have done any better.”
Other beer makers in Africa may view the deal as increased competition, but Wesley Whitehead, owner of Craft, a bar in Johannesburg which gets 25 per cent of their revenue from craft beer sales, sees it as an opportunity. He tells the show: “If you look at what’s happening in the States, you’ve got a good example of what will happen here…we don’t do any commercialized brands no mass produced products at all. No SABMiller, no Amstel, no Heineken.”
According to the Brewer’s Association in the U.S. craft beer sales in the United States grew 18 per cent in 2014 alone, and now accounts for 20 per cent of total beer sales. In contrast, the South African craft beer industry makes up less than 1 per cent of the market with about 140 microbreweries, according to Standard Bank. Sales have risen since 2011 and the industry is expected to grow by 30 per cent this year.
However, Ndumiso Madlala, founder of Soweto Gold, who gave up a successful career at SAB Miller to join the craft beer revolution tells the programme: “There’s quite a fierce competitive environment in the micro brewing space…what’s amazing is that your craft beer drinkers are quite experimental and switch between us and other brands.”
The industry is on the rise, as Madlala explains to ‘CNN Marketplace Africa’: “In the three financial years that we’ve had ,we’ve seen an exponential growth from first to second year to the tune of 1500 per cent and all the volume that we sold in the last financial year, we sold in first five months of the year.”
Despite being more expensive than commercially produced beer, craft beer has given birth to a new breed of beer connoisseurs globally. Chris Gilmour tells the programme: “People want to express themselves. They’re aspirational and they’re very upwardly inclined.”
SAB Miller still dominates the South African Market and it comes down to affordability. When asked by Giokos who is buying Soweto Gold, Madlala tells her: “Well it’s a super-premium product but it’s targeted to the middle class.”
Ironically, SAB Miller has contributed to the growth of South Africa’s craft beer by being a long-time supplier of malt to micro-breweries. Madlala tells ‘CNN Marketplace Africa’: “SABMiller has supported us for a long time, obviously with the new owners in town it will be interesting to see what happens.”
Gilmour doesn’t believe the current situation will change, telling ‘CNN Marketplace Africa’: “Malt is in short supply… SAB probably uses most of the malt in this country and it will sell on to smaller players.It’s in their interest to keep up this relationship.”
As SAB Miller and AB InBev raise their mugs to a potential new beer giant, micro-brewers like Soweto Gold are thinking about exporting in new markets in Africa. Now, many are expecting a frothy fight between beer makers trying to win over even the most discerning beer-drinking palates.
‘CNN Marketplace Africa’, Friday 6 November at 1915 on CNN International
The show also airs at the following times:
Saturday 7 November at 1915
Sunday 8 November at 0400 and 1015
Monday 9 November at 0500 and 2045