In Latin America, execution of our strategy to renovate the beer category has continued and has delivered underlying performance in line with our expectations while laying a sound foundation for future growth. In the year, lager volumes ended 5% up on the prior year despite high comparative volume growth, particularly in the second half. Reported EBITA performance benefited from strong local currencies, particularly the Colombian peso which strengthened by 15% against the US dollar (on a full year average basis). There have been significant fixed cost productivity improvements across the business. Reported EBITA margin was down on prior year due to rising raw material input costs and a 40 basis point negative impact as a result of changes to the basis of recovering distribution costs. On an organic constant currency basis, EBITA growth was 6%, while revenue per hectolitre increased by 4% on a like for like basis. Significant capital investment was incurred to increase capacity, modernise production and logistics assets, upgrade returnable containers and improve product quality.
In Colombia, the brand portfolio upgrade continued with the launch of Redd’s in the premium segment and the relaunches of Aguila and Aguila Light in the mainstream segment. Our Pony Malta brand was also relaunched with a new design and a new 350ml PET container. Premium lager volumes grew by over 60% in the year, largely due to the continued strong performance of Club Colombia. The new 500ml returnable bottle for Aguila and various PET packs for Pony Malta further helped to modernise and widen the appeal of the product range.
Trading conditions softened in the second half, as consumer credit interest rates continued to rise and inflationary cost pressures resulted in retail price increases. Nevertheless revenue per hectolitre improved by 4% on a constant currency basis with revenue management and a focus on price compliance assisting price and mix improvements.
Lager growth rates slowed in the second half of the year, ending up 4% for the full year. However, our share of the alcohol market increased by 190 basis points to 64.7%, gaining share mostly from local spirits.
Further gains were made in operating efficiencies and reducing overhead costs, in order to assist in offsetting rising input costs. The majority of the structural changes to the route-to-market and the product quality investments have now been implemented, while trade marketing capability has been enhanced, establishing a solid platform for future growth.
EBITA growth on an organic constant currency basis
The new Valle brewery was commissioned in March 2008, with an initial annual capacity of 3.2 million hl, which will bring supply and demand into better balance in the western region. Further capacity investment will be required at the Barranquilla brewery and at maltings plants in the coming year. During the year the juice business in Colombia was sold.
In Peru economic conditions have been favourable with annual GDP growth of nearly 9%. Lager volumes were up 8% on the prior year despite major disruptions to distribution due to mudslides and a severe earthquake. The market has become increasingly competitive with the entry of a second competitor in the economy segment. Our Pilsen Trujillo brand has been successfully repositioned nationally to combat low priced competition.
Premium volumes and share have improved with the relaunch of Cusqueña in the premium segment, which ended the year at 8% market share, partially offsetting the mix impact of the growth of the economy segment including Pilsen Trujillo. Revenue per hectolitre has improved 1% on a constant currency basis. Our overall market share ended the fourth quarter at 84% and the beer market has gained share of alcohol and now stands at 51%. The operation continues to enhance its brand portfolio and invest for future demand with capacity and quality upgrades. The renovation of containers and the distribution fleet is now largely complete and the programme of trade marketing enhancements is being rolled out.
Our Ecuador operations delivered a commendable performance despite lower economic growth, political uncertainty and torrential rains in the fourth quarter. The operation has focused on securing channel advocacy by the installation of over 5,000 coolers and our market mapping to identify further opportunities for growth is complete. The change in our route-to-market has commenced with positive reception in the areas affected. Lager volume growth of over 5% was driven by our flagship brand Pilsner, following its relaunch in October 2007, and the implementation of national pricing in the same month. The premium portfolio performed well led by the renovation of the Club brand, which has been successfully repositioned in the premium segment, whilst maintaining previous volumes. Beer’s share of alcohol remained in line with the prior year at 41% and our lager market share improved by 80 basis points on a full year basis to 96%, despite aggressive pricing campaigns from our main competitor. Positive brand and pack mix and increased prices have boosted revenue.
In Honduras lager volume growth of 4% was fuelled by 10% growth in premium segment volumes, led by our brands Barena and Port Royal. Price compliance initiatives and our beer outlet and cooler expansion programmes contributed positively to volume growth. Revenue management was supported by premium volumes growing to over 50% of the portfolio. Renewed focus is now being placed on affordability and the attractiveness of our mainstream brands. Soft drinks reported growth of 9%, with our Tropical brand achieving growth of 23%, following a renewed imaging campaign. Our market share of soft drinks improved by 4% to 55% through improved sales execution activities, despite continuing competition in the soft drink market and the shift in mix to family one way packs.
In Panama lager volumes were up by 13% driven by the relaunch and upsizing of our mainstream brands Balboa and Atlas, implemented with a simultaneous price increase during October 2007. Share gains were strong and share of the beer market increased by 120 basis points on a full year basis to 85%. The positive impact of volume growth and price and mix benefits boosted revenue and were partially offset by increases in raw material costs.
El Salvador was impacted by tough economic conditions but total volumes grew by 1% with market share gains in both beer and soft drinks despite high levels of competition and high comparatives. The operation has also seen success in its premiumisation efforts with premium lager volumes up 9%, driven by Golden Light.
|Group revenue1 (US$m)||5,251||4,392||20|
|EBITA margin (%)||20.4||20.9|
|Sales volumes (hl 000):|
|– Soft drinks||18,484||19,474||(5)|
|– Soft drinks – organic||18,484||18,564||(0)|
1 Including share of associates, US$12 million (2007: US$19 million).
2 In 2008 before exceptional items of US$61 million (2007: US$64 million) being restructuring costs in Latin America, partially offset by the net profit on the sale of soft drink and juice businesses in Costa Rica and Colombia respectively.
Key focus areas
- Continue to raise the appeal of the beer category
- Build well differentiated brand portfolios with national identities
- Optimise and extend distribution network and sales reach
- Embed organisation changes and performance management
- Continue the development of regional operating support platforms