South African Breweries’ (SAB) beer volumes are at an all-time high in South Africa, with the company investing to further expand its capacity in the country despite declining production elsewhere in Africa and a tough operating environment.
SAB’s parent company, AB InBev, released its results for 2022 last week, with the global brewer declaring revenue of $57.8 billion.
$8.1 billion of that revenue came from Africa in 2022, which showed impressive growth led by South Africa.
AB InBev purchased SABMiller for $107 billion in 2016, uniting the world’s two largest brewers to form the largest beer company. Combined, they control roughly half of the entire industry’s profit.
AB InBev’s African operations produced over 90 million hectolitres of beer in 2022, even though supply chain constraints hobbled its Nigerian business.
SAB grew its volumes by “high single digits” in 2022, with its South African operations reaching “all-time high total volumes”.
Beer’s share of the alcoholic beverage market also grew in South Africa to above pre-pandemic levels in 2019.
SAB owns some of the most valuable brands in the country, including the country’s most valuable brand – Carling Black Label.
It also owns the Brutal Fruit, Budweiser, Castle Lager, Castle Lite, Castle Milk Stout, Corona, Flying Fish, Hansa Pilsener, Lion Lager, Smirnoff, and Stella Artois brands in South Africa.
SAB also has selling and distribution rights for Red Bull in South Africa.
Investing for future growth
SAB currently operates multiple breweries, malt plants, and agricultural operations in South Africa.
In 2022, the company invested R920 million into its Prospecton and Ibhayi breweries, supporting over 24,000 jobs throughout the beer-making process.
This is a part of SAB’s total investment in the South African economy of R4.5 billion, with the overall goal of creating 10,000 jobs in the country.
Currently, SAB directly employs 5,657 people in South Africa. The total value chain is estimated to support over 140,000 jobs among its 3,739 suppliers and 1,277 farmers in South Africa.
From farm to bottle, SAB beers are 97% locally sourced.
Tough operating environment
In its annual report, AB InBev outlined the various risks it faces in the countries it operates in, including South Africa.
Developing markets make up 60% of the company’s revenue, exposing it to developing market problems such as political instability, financial risks, government interference, and a “lack of upkeep of public infrastructure”.
These problems result in disruptions to operations and elevated costs of operating.
SAB has largely been able to avoid issues unique to South Africa, such as load-shedding and rail and port inefficiencies, through its emphasis on localised supply chains and investment in renewable energy.
The company’s South African operations are planning to be completely off-grid by 2025, primarily to reduce the impact of load-shedding while also meeting its ESG targets.
To date, all of SAB’s breweries in South Africa are all renewably powered and have backup solutions to mitigate load-shedding.
AB InBev also noted the impact of rising excise taxes in South Africa, which “adversely affects our revenue and margins”.