Last Updated
Thursday 18 December 2014, 13:05 pm.
Sales Of Beer Go Flat In Emerging Economies

A Russian, a Brazilian and a South African walk into a bar. None of them buys a beer.
By Staff Writer Fri 19 Dec 2014, 08:29 am (GMT +2)
Mmegi Online :: Sales Of Beer Go Flat In Emerging Economies








Beer sales in emerging economies are cooling, sapping a key source of profit growth. The abrupt weakness, especially in Eastern Europe, is putting pressure on brewers' profits and could accelerate consolidation in an industry that has seen several multibillion-dollar deals in the past few years.

Beer titans ratcheted up investments in emerging markets in recent years, partly to offset weakness in mature markets such as North America and Western Europe.

But recent high inflation and slowing economic growth are prompting consumers in some developing economies to buy less beer.

On a recent evening at Ilarco in Bogota, Colombia, bartender German Delgado said some customers have switched from beer to aguardiente, a less expensive local spirit.

"They get drunk faster and spend less," he said. "People are taking good care of their money."

Kris Kippers, an analyst with Petercam, a securities firm in Belgium, said the shift is "a serious hit for brewers." In Russia, especially, "we've seen a huge setback."

InBev NV, the brewer of Stella Artois and Beck's, said Thursday that beer unit volume in Russia dropped 11 percent in the third quarter, compared with a 14 percent increase a year earlier.Carlsberg AS Wednesday said unit volume in Russia, where it has a major presence, fell 1 percent in the third quarter.

s And London's SABMiller PLC - which has one of the heaviest presences in developing markets - next week is expected to report slowing growth in some of its markets when it reports earnings.

Three of its worst-performing markets are Russia, Colombia and South Africa.
Dawn Gourcia, manager of a popular beach bar called Dizzy's in Cape Town, South Africa, said sales of SABMiller's Castle Lager have fallen in recent months. "I think there is less money around," she said.

Beer sales in some parts of the emerging world are still strong, including Peru, where SABMiller reported a 10 percent increase in sales by volume for its first half, which ended Sept 30.

Because beer is something of a luxury product in the emerging world, sales are more likely to fall in a slowdown, analysts said. Drinkers in poor countries can turn to less-expensive alternatives, including vodka in Russia, aguardiente in Latin America and sorghum wine in China.

The weaker growth in developing markets has coincided with rising costs for brewers for such items as barley, glass and aluminium. However, those cost pressures are starting to ease, which may help blunt the impact of softer sales.

The beer market in Latin America generally appears to be in better shape than those in Russia and other Eastern European countries. But there are reasons for concern.

Until recently, the resource-rich region was riding a surge in commodity prices. Those prices have collapsed, prompting economists to slash growth forecasts for the region in recent weeks.

Part of the reason for slower sales growth in Brazil is a tough new "dry law" that punishes drivers caught with any detectable trace of alcohol in their blood. Enforcement has hurt sales of chopps, beers in tiny glasses with copious froth that are popular at Brazilian happy hours.

Inti Landauro in Bogota, Colombia, contributed to this article.



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