Hangover for SABM as sales disappoint

By on January 22, 2014

Investors expected more beer sales from the global lager giant, especially when compared with rival Diageo.

Third quarter sales at SAB (the world’s second-largest brewer) disappointed investors as volumes were held back by weak demand in Europe and North America.

South African Breweries’ (SAB) lager volumes grew just one percent in the three months to the end of December, holding total volume-growth down to two percent. US sales to retailers fell 1.9 percent, while wholesale revenues dropped 2.2 percent.

The brewer, whose beers include Grolsch and Coors Light, said “challenging market conditions” in Europe sent “net producer revenue” down six percent and lager volumes down five percent.

However, Europe was not an entirely “unfavourable performance” for SAB – British thirst for imported beers like Peroni Nastro Azzurro pushed UK volumes up nine percent. Emerging markets also guzzled more: total volumes were up 13 percent in China, five percent in Africa (minus South Africa) and three percent in Latin America.

Investors were clearly expecting more quaffing though – shares fell as much as 2.5 percent in early trading, and were down one percent at midday.

SAB’s so-so performance contrasts with rival Diageo, whose beer brands include Guinness and Red Stripe. The winner of the Britain’s Most Admired Companies top gong last year had net sales growth of six percent in the year to June 2013 and volume growth of five percent.

Like SAB, Diageo is growing fast in Africa. Unlike SAB, Diageo has double digit sales growth on the continent, mainly fuelled by beer – revenues were up 13 percent to R27 billion last year. 

However, no one in the drinks industry seems to be able to party all the time. Last April, Diageo got a slap on the wrist from shareholders after posting weaker-than-expected sales growth. It could be SAB’s turn to get the rounds in next.

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