Black Label-owner booming while competitors suffer

South African Breweries (SAB) is producing and selling record-high beer volumes, while its premiumisation strategy drives strong profit growth. 

This was revealed in the results of SAB’s parent company, AB InBev, for the second quarter of its 2024 financial year. 

AB InBev purchased SABMiller in 2016, uniting the world’s two largest brewers to form the largest beer company.

This allowed the company to take the fight to Heineken in the premium space through AB InBev’s global brands, which include Stella Artois and Corona. 

Meanwhile, its local brands, such as Carling Black Label and Castle, have cemented their position in the market. 

AB InBev’s latest results showed that, as a whole, the company posted a net decline in total volume, with its core beer segment down by 1.3% year-on-year. 

The company’s revenue grew marginally by 2.7%, with the world’s largest brewer posting a profit of $1.8 billion for the three months. 

The South African unit stands out, with another record performance and growing margins. 

SAB’s revenue increased by the low teens in the second quarter of 2024, driven by its established Black Label and Castle brands. 

The AB InBev-SAB merger enabled the local business unit to move into the premium end of the beer market, something it had struggled to do in the past. 

This merger enabled SAB to sell AB InBev’s global premium brands, such as Stella Artois and Corona, in South Africa. 

In its latest results, this has driven margin growth as revenue per hectolitre of beer produced grew by high-single digits. 

“Volumes grew by mid-single digits, continuing to outperform the industry in both beer and beyond beer segments, according to our estimates,” AB InBev said. 

“The momentum of our business continued, with our portfolio delivering another quarter of record-high volumes and gaining share of both beer and total alcohol.” 

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 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. 

SAB employs 5,657 people directly in South Africa. The total value chain is estimated to support over 140,000 jobs among its 3,739 suppliers and 1,277 farmers. 

From farm to bottle, SAB beers are 97% locally sourced.

SAB’s stellar performance for the first half of 2024 comes at a time when its main competitor, Heineken, has come under increasing pressure in South Africa. 

Heineken’s local unit merged with Remgro-owned Distell in April last year to form Heineken Beverages. 

This unit retains an industry-leading position in the beyond beer category thanks to its dominant Savanna and Hunters cider brands. 

However, its core beer portfolio of Heineken, Heineken Silver, and Amstel has performed poorly in recent years in South Africa. 

Their poor performance forced parent company Heineken to write down the value of its local business by R10 billion last year. 

Remgro, which owns 18.8% of the Heineken Beverages business, blamed this poor performance on the brand’s beers being heavily weighted to the premium end of the market. 

This has prevented it from being able to compete on price with SAB’s established Black Label and Castle brands. 

The poor results from Heineken Beverages and the decline in the business’s value resulted in its contribution to Remgro’s earnings, which resulted in a R386 million loss in its latest interim results. 

It said the company was also forced to increase spending on promotional activity to compete in a more challenging competitive environment than expected.