Beer consumption drops on falling oil prices

The dwindling prices of crude oil which has led to significant reduction in Nigeria’s revenue is taking a toll on beer consumption in the country.

In fact, a report has indicated that the volume of beer consumption in the country has dropped.

Also, SABMiller Plc (SAB) expects beer volume growth to decelerate in Nigeria this year as lower oil prices dent consumption and African markets become more competitive.

Bloomberg quoted Mark Bowman, managing director of the company’s Africa unit,  to have said this in Davos.

The company, which had forecast beer volume growth in Nigeria of about eight percent a year, may see that rate slow to three or four per cent, Bowman said.

“These are normally bumps along the road,” he said. “On balance, we see things getting back to trend.”

Oil prices have fallen more than 50 per cent in the past year, threatening growth in Nigeria ahead of presidential elections next month. The nation, home to more than 175 million people, is the largest oil producer in Africa. SABMiller also expects to raise prices in the country, in line with what its rivals are doing, Bowman said.

For SABMiller, Africa is a bigger source of revenue than Europe, Asia or North America, making the company especially sensitive to upheaval there. The London-based brewer also is shoring up its non-alcoholic business in the region. SABMiller had teamed up with Coca-Cola,  the world’s largest beverage company, to create the biggest Coke bottler on the continent.

As it expands, SABMiller would be interested in strengthening its partnership with French drinks company Groupe Castel, Bowman said. The executive said he doesn’t foresee a change in the relationship with Castel soon, though.

“We don’t expect anything to change in short to medium term,” Bowman said. “Over time, if opportunities arise, we would look at them.”
SABMiller, whose lineup includes the Grolsch and Peroni lagers, agreed to combine bottling operations for non-alcoholic beverages with Coca-Cola in southern and eastern Africa. Castel is often mentioned as a potential takeover target for SABMiller, which already owns 20 per-cent of the French winemaker. In turn, Castel has a 38 per cent stake in SABMiller’s Africa business.

SABMiller, the world’s second-largest brewer, is increasing its focus on sodas and other non-alcoholic beverages as global demand for beer stagnates and targets for consolidation become harder to find.

In addition to the challenges in Nigeria, Zimbabwe has been a difficult market for the company, Bowman said.

“Two years of quite strongly negative growth,” he said. “There was no growth in underlying economy. Very uncomfortable for us. It seems to have settled out. We have seen slightly better results in the last two to three months.”