Following the acquisition in December 2004 of all of the shares in ABI which the group did not own, a programme of work has begun to establish and leverage the benefits from the combination of our beverage businesses in South Africa. Future financial announcements will include segmental results and commentaries for South Africa Beverages.
For the year under review, economic conditions remained positive for our South African operations. Lower inflation and interest rates, taken together with lower taxation and benefits from improved social grants, led to an increase in disposable income.Beer South Africa
|EBITA margin (%)
|Sales volumes (hls 000s)
Reported lager volumes achieved strong growth, ending the year 3% above last year. As noted at the half year, during 2004 the management responsibility for exports to Angola was transferred to the Africa division, and on a pro forma comparable basis the increase in volume was 4%. A programme of renovation of our mainstream brands including packaging changes and focused consumer communication contributed to this volume growth. This has been achieved through innovation, maximising opportunities presented by the marketing mix, price management in trade and improved availability following a 19% increase in customers receiving a delivery service.
The general consumer shift to more premium offerings continues to gain momentum, with growth of 50% achieved in the premium segment by Beer South Africa. Developments in packaging, promotions and merchandising combined with a highly differentiated route to market and focused consumer engagement helped to maximise this growth. The deliberate drive behind our international brands, MGD and Pilsner Urquell, within the South African premium portfolio has delivered results and contributed to this growth. In addition, Beer South Africa now holds a market leadership position in the fruit alcoholic drinks category following 36% growth during the year under review.
Turnover increased by 13% in local currency, reflecting higher volumes, price increases and significant growth in premium brands. This translates to a 10% increase in domestic turnover per hectolitre over last year.
Good control of operational costs and improved efficiencies assisted by the strong performance of the rand which resulted in reductions in raw material costs, helped boost the EBITA margin to 28.1% up from 26.6% a year ago. EBITA was significantly up at US$708 million, an improvement of 36% on last year, and a constant currency increase of 20%.
Strong sales growth and changes to both pack and brand mix have resulted in the need to increase both packaging and brewing capacity as well as flexibility capability. Plans are well advanced to bring the first tranche of capacity on line before the 2005 summer peak. While capacity upgrades are restricted to certain breweries, a general enhancement of our packaging capability is planned for all breweries.
Good progress has been made by the liquor industry on the formulation of a Black Economic Empowerment (BEE) Charter for the industry. Internal targets to finalise the Charter by later in the year are, however, being hampered by Government’s delay in publishing the full BEE codes of good practice.
Progress in licensing the previously unlicensed shebeen trade has continued to be below expectations, given delays in provincial licensing legislation. In the Eastern Cape, however, increased temporary licensing has resulted in a doubling of licensed customers during the year. We have continued to engage with the relevant licensing authorities and assist shebeeners to increase the pace of licensing across the country and are investing in training to enhance the business skills of taverners.
|Carling Black Label|
|Alcohol content by volume
|South Africa’s best selling brand. Carling Black Label’s key market is blue collar males over the age of 25. With its market share at record levels, the main focus is to continue to strengthen the brand through a packaging upgrade in 2005 and new TV advertising coupled with additional marketing support. |
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