SAB keen to raise a glass with Pretoria
Brewer reopens spending taps as tensions over Covid booze bans fade
One of South African Breweries’ “important missions” will be to work on building its relationship with the government as it looks to roll out more investments over the next couple of years, says new CEO Richard Rivett-Carnac.
Rivett-Carnac, who has been SAB CEO for four months, said on Thursday at a media round table that even during difficult times at the height of the pandemic the group’s relations with the government were “good”, but there was always room to improve them.
A sum of R4.5bn has been earmarked for investment in local operations this year as the company looks to “grow responsibly” and reduce “alcohol harm”, said Rivett-Carnac, who was previously vice-president of finance, legal & corporate affairs: rest of Africa, for the AB InBev Africa zone.
At times over the past two years there has been tension between the government and SAB, which is owned by global brewing giant AB InBev, because of alcohol bans that were implemented by the state to curb hospital admissions at the peak of the Covid-19 pandemic.
As a result of the bans, which had a severely negative impact on its operations, SAB cancelled investments worth R5bn in 2020 and 2021.
But since then the group has reopened the investment taps, announcing in July last year that it would be investing R2bn in local operations in 2022.
Rivett-Carnac said on Thursday that this R2bn has since been increased to R4.5bn in investments in 2022 as part of the group’s investment pledge announced at the investment conference hosted by President Cyril Ramaphosa earlier this year.
He said SAB will make further investments in 2023 and 2024, but no specific allocations have been decided on.
Explaining the breakdown of part of the R4.5bn, SAB said R1.9bn is going towards returnable packaging that will “enable SAB to continue transforming the industry by employing black suppliers such as Isanti Glass”, and R825m and R510m is being spent on increasing capacity at SAB’s Prospecton Brewery in Durban and its Ibhayi Brewery in the Eastern Cape, respectively.
The brewer said the Prospecton investment will provide R3.1bn additional tax revenue and generate 25,000 jobs through the value chain.
Additionally, the investment will generate R4.4bn in additional GDP for the economy.
The Ibhayi investment will create 14,000 additional jobs in the value chain and will generate R2.5bn in additional GDP for the economy.
Rivett-Carnac said SAB had “relooked at its purpose and the strategy of the company and SA fits very well in the strategy of the company in terms of being able to grow the category and grow it responsibly in SA”.
“We can do that whilst also digitising and monetising the ecosystem that we have. We see a big opportunity to use technology to improve the businesses of taverners and the township economies that we are so important for, while also improving our overall business as well.”
AB InBev global CEO Michel Doukeris said the company sees Africa as an “enormous opportunity” and SA as its base for its business in the rest of the continent.
“We need to be connected to the local communities and to support the local communities,” he said, explaining that beer is “local”.
“We source our ingredients in SA, we employ people here, we have our breweries here, our logistics system is here and we need to be a part of everything that happens in the country and the community in which we operate.”
But since AB InBev acquired SABMiller in October 2016, there have been questions raised by the market as to whether the merger ultimately achieved the synergies and cost savings that had been hoped, considering that it also had to dispose of certain strong performing operations in parts of Asia to get competition approval.
Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said it has been a “long road for AB InBev to get to where they are supposed to be and they are still not there yet”.
He said when the deal was done in 2016, SABMiller’s share price was trading in the region of R1,800. The combined entity’s share price is now hovering below R1,000, indicating the market is still “waiting for the efficiencies and value to be unlocked for shareholders”.
Treurnicht said he is a firm believer in growing a business “organically”, and “headline” mergers and acquisitions in most cases do not achieve their original intended
We source our ingredients in SA, we employ people here ... we need to be a part of everything that happens in the country
Michel Doukeris
AB InBev global CEO
goals.
Rivett-Carnac disagreed, saying the “acquisition had been very successful for AB InBev and from SAB’s perspective synergies have been realised from the acquisition”.
But he said the broader global strategy of AB InBev is towards organic growth.
“This is what we are doing, investing like we are in Prospecton, in the local communities, because we see the beer category growing and we see our ability to grow and execute even beyond beer in products like Brutal Fruit and Flying Fish. We see an enormous opportunity.”