The strong growth in Africa and Asia continued, with lager volume growth of 23% (organic growth of 15%) and reported EBITA growth of 22% (organic constant currency growth of 16%). EBITA margin decreased from 17.5% to 16.9% as a result of the faster growth in the lower margin Asia markets, notwithstanding an increase in Africa margins.
Lager volumes for Africa, excluding Zimbabwe, grew 12% (organic growth of 6%) for the year as did total volumes, benefiting from continued economic growth in all countries, rising disposable incomes, and ongoing brand renovation.
Tanzania posted lager volume growth of 8% in a competitive market and our brand portfolio, sales force and route-to-market have been strengthened to capture further growth. Growth has been led by Ndovu Lager following its re-formulation as a full malt beer. Eagle, our sorghum based lager, was launched in the North East with early success and positive consumer response. Rising input costs were mitigated by improved operating efficiencies and a stable local currency. We have commenced construction of a new 0.5 million hl brewery in the Southern region.
Mozambique enjoyed its fourth consecutive year of strong growth, with lager volumes advancing 8%. The brand portfolio is well balanced and differentiated and affordable draught beer continues to deliver ahead of expectation by reaching new consumers. Major capacity enhancements were completed at both the Maputo and Beira breweries, with operating efficiencies improving, and further depots were opened during the year. Construction of the new road infrastructure along the Zambezi River will yield further growth opportunities in the North and as a result we have started building a new 0.5 million hl brewery in Nampula.
EBITA increase on an organic constant currency basis
Botswana grew strongly after two disappointing years, with overall growth of 15% in aggregate volumes of lager and soft drinks. Key to this result was the successful renovation of St. Louis Lager, the market leader, and the introduction of a new 750ml returnable bottle. The returnable bottle has delivered ahead of expectation in this predominantly one way pack market, and offers the consumer better value for money.
Uganda’s lager volumes grew 4% after three prior years of exceptional growth. After excellent growth in recent years, volumes of our sorghum-based Eagle brand declined following an excise increase, while our mainstream lager brands Nile Special and Club grew in mid double digits. The market continues to grow and has nearly doubled in the last four years, driven by the success of our portfolio extensions.
Angola’s economy continues to grow strongly at approximately 20% per annum. The infrastructure, however, is unable to support the increasing demands for goods and services and our total volume growth of just under 10% was constrained by both the lack of infrastructure and limited capacity. Total volumes for lager and soft drinks for the year were almost 3.5 million hl, including lager volumes of the recently privatised Empresa De Cervejas N’gola in which we invested at the end of last year. We continued to expand our lager and soft drinks capacity, supported by new local manufacture of glass and cans by global suppliers.
In the premium segment, we have launched Peroni Nastro Azzurro in five African markets with good initial results and plan to roll out the brand to other countries in due course. Grolsch will be launched in certain key markets.
Traditional sorghum-based beer returned to growth (excluding Zimbabwe) this year, with excellent results from both Malawi and Botswana. The category continues to play an important part in our African portfolio and is less vulnerable than lager to international commodity cost increases given the extensive use of local raw materials.
increase in volumes of the Snow brand
Castel enjoyed another strong year with total volumes up 11% – lager 16% and soft drinks 6%. Ethiopia and Angola continued to provide above average growth for the group, while further growth was captured in its key markets of Cameroon, Gabon and Morocco. The growth in Angola is linked to underlying economic prosperity, while in Ethiopia the growth has come largely from market place activities including portfolio segmentation and pack innovations. Cameroon volumes advanced in double digits in a competitive market. While underlying EBITA growth was strong, the strength of the Euro further assisted reported performance in US dollars.
EBITA margin for our Africa business advanced despite the impact of rising commodity costs. These impacts on the business are limited due to significant volume growth in soft drinks, which are less dependent on agricultural inputs, and our sorghum beer, which is based on local supply.
In China, our associate CR Snow continued to outperform the industry with full year lager volume growth of 25%, representing organic growth of 15%, and full year market share improving to 18%. Momentum for the first half (where CR Snow’s organic lager volume growth of 30% was well above the industry and peer group) slowed in the second half due to the combined effect of a severe winter, reduced discretionary spend and price increases in this period. The Snow brand is now China’s largest lager brand and it enjoyed exceptional growth again this year of 63%.
EBITA grew but increases in commodity prices and the acquisition of a number of breweries, which typically depresses profits in the initial years, reduced margins. Capacity was further increased with the construction of greenfield breweries and upgrades to existing plants. The non-core water business was disposed of in May 2007 impacting total soft drink volumes.
India grew strongly with lager volume growth of 23% (organic increase of 19%) following strong growth in the prior year. Total volumes of 4.4 million hl were achieved, with national market share gain of 1% despite having no meaningful presence in the key Southern state of Tamil Nadu. The Foster’s business has been fully integrated and the brand led our growth as it was rolled out more widely. The strong beer segment continues to grow ahead of mild beer, with our brands continuing to do well.
Our new Asia joint ventures are building momentum, with Australia ahead of expectation due to strong performances from Peroni Nastro Azzurro, MGD and the recent successful launch of Miller Chill. We recently announced our intention to build a greenfield brewery in New South Wales and we are integrating the recently acquired Bluetongue brewery. In Vietnam, volumes are improving with the addition of Redd’s to the portfolio, and we have commissioned a can line to expand our pack range.
|Group revenue1 (US$m)||3,367||2,674||26|
|EBITA margin (%)||16.9||17.5|
|Sales volumes2 (hl 000):|
|– Lager organic||77,976||68,067||15|
|– Soft drinks||6,977||13,680||(49)|
|– Soft drinks organic||6,977||6,301||11|
|– Other alcoholic beverages||6,022||6,253||(4)|
1 Including share of associates, US$1,514 million (2007: US$1,219 million).
2 Castel volumes of 17,845 hl 000 (2007: 15,407 hl 000) lager, 13,480 hl 000 (2007: 12,744 hl 000) soft drinks are not included. In China, the non-core water business was disposed of in May 2007, impacting total soft drink volumes.
Key focus areas
- Invest in brewing and distribution capacity across Africa
- Expand portfolio of affordable and premium brands in Africa
- Establish an Asian hub to consolidate, and build on, the Asian footprint
- Further build market and brand leadership in China and enhance profitability
- Develop our operations across India, Vietnam and Australia