Consumers cut back on beer as food and fuel costs rise

Share current article via EmailShare current article via FacebookShare current article via TwitterShare current article via LinkedInNompilo ZuluConsumer Industries Writer

Opens in new windowOpens in new windowOpens in new windowOpens in new windowEnter fullscreen mode displaying this image.ExpandSAB CEO Richard Rivett-Carnac says the company is preparing for the December trading period, the busiest time for the industry. Picture: Supplied Rising food and fuel costs are putting pressure on lower-income consumers and weighing on beer sales at the country’s largest brewer, South African Breweries (SAB), its CEO says.

Richard Rivett-Carnac said consumers were spending more of their income on basic needs, including transport and food, leaving them with less money for other purchases.

“The lower-income consumer is under enormous pressure in the country,” he said.

His comments follow parent AB InBev’s third-quarter results, which showed that beer volume growth in South Africa trailed the wider industry, even though the group recorded its highest third-quarter volumes in the country.

Rivett-Carnac said SAB’s overall performance was supported by strong growth in premium beer, particularly Corona and Stella Artois. Volumes of its premium and superpremium brands grew by more than 30%, while its Beyond Beer range, which includes Flying Fish and Brutal Fruit, grew by a rate in the low 30s, he said.

He said the growth in premium brands was being driven by consumers choosing to buy them, rather than simply by existing customers trading up from cheaper beer.

SAB has invested in keeping Corona and Stella Artois prominent among consumers looking to treat themselves to a premium beer, he said, and the company expects premium beer to continue growing faster than the wider beer market over the long term.

Higher fuel prices are also adding to SAB’s operating costs. Rivett-Carnac said fuel was increasing the cost of transporting products, while electricity and water prices had also risen over several years.

SAB was working to manage these pressures while limiting the number of price increases passed on to consumers, he said.

He said the company’s ability to grow the wider beer market was also linked to employment and economic growth. Population growth could support demand, but stronger economic growth needed to translate into more jobs and higher incomes for consumers to have more money to spend.

SAB is preparing for the December trading period, which Rivett-Carnac described as the busiest time for the industry. The company is focused on ensuring that enough stock is available and positioned in the right parts of the country to meet demand during the festive season.

But he said fuel prices would remain an important factor for consumers and the business. A fall in oil prices that leads to lower petrol and diesel costs would provide relief across the economy.

“Until that happens, we need to ensure we manage our costs,” he said, adding that SAB wanted to avoid passing too many price increases on to consumers who were already under pressure.

Would you like to comment on this article?Sign up (it's quick and free) or sign in now.

Please read our Comment Policy before commenting.