SABMiller’s sales volumes fell unexpectedly in the fourth quarter as cash-poor consumers in emerging markets swapped the company’s pricey brews for cheaper beers.
The brewer’s total sales volumes fell 1 per cent in the quarter to the end of March. Blaming the drop on slumping consumer demand, SABMiller said the quarter had been “undeniably soft”.
The brewer has been raising its prices sharply around the world – the cost of its beers was up 11 per cent in Russia in the 12 months to March, 7 per cent in Colombia and 6 per cent in Poland – to compensate for falling sales volumes.
The price rises, while exacerbating volume declines, have allowed the brewer to stock to its revenue targets, and the group on Thursday said its financial results remained in line with expectations.
Nevertheless, analysts expressed concern over the weak trading update, which comes ahead of SABMiller’s full-year results next month.
Matthew Webb, analyst at Cazenove, said: “With economic conditions in several key markets having deteriorated in the fourth quarter, and unlikely to improve this year, the volume outlook is poor, and SABMiller’s ability to increase prices perhaps more constrained.”
SABMiller also said sales revenues were being hit by drops in emerging market currencies against the US dollar, including the Colombian peso, the Polish zloty, the Czech krona and the South African rand. Emerging markets contribute the bulk of SABMiller’s profits, with just 11 per cent coming from North America.
“The currency effects have been pretty savage,” the brewer said.
In Colombia, where SABMiller is the country’s biggest brewer, the company is feeling the pain of a weakening economy.
Although SABMiller controls about two-thirds of the total alcohol market, and has been gaining share, full-year sales volumes dropped 6 per cent. The country’s total alcohol and cigarette sales volumes were down 11 per cent in January on a year earlier, SABMiller said.
The brewer claimed consumers were not trading out of beer into cheaper kinds of alcohol, such as homemade spirits.
But it said people in some countries, including the US, were switching from expensive imported beers to cheaper mainstream brands.
In the US, sales volumes were up 0.4 per cent in the fourth quarter, helped by good sales of a new low-calorie beer, Miller Genuine Draft 64.
Demand for the company’s beverages was also strong in China, where it owns the Snow brand, with sales rising 20 per cent in the fourth quarter.
SABMiller has been lifting prices in China, which contributes one third of group volumes, but the country still only provides a tiny percentage of group profits.
The brewer’s shares rose 1.5 per cent to £10.79 by the close in London.
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