South African Breweries pulled off a neat trick last quarter: it sold less beer and still made more money. Volumes of its core brands slipped by a low-single-digit percentage and lagged the wider market, as cash-strapped drinkers bought fewer rounds. Yet revenue rose by a mid-single-digit percentage and profit margins widened — because the beer South Africans did buy was pricier.
The magic is in the mix
The driver is what the industry calls premiumisation — nudging drinkers towards more expensive, higher-value drinks rather than simply selling more litres. SAB's premium and super-premium beers, Corona among them, grew volumes in the high twenties and gained market share, while its Beyond Beer range, such as Brutal Fruit, also picked up ground. SAB's local boss, Richard Rivett-Carnac, pointed to exactly that mix as what kept earnings growing, even as marketing spend rose.
A global playbook, brewed locally
South Africa is one corner of a strategy playing out worldwide at parent company AB InBev, the largest brewer on the planet. Globally, the group lifted second-quarter revenue about 6% to $16.6 billion and grew earnings per share 23%, even though total volumes barely moved. Doing much of the heavy lifting: no-alcohol beer, up 27%, and its Beyond Beer range, up 44%. Over the full first half, revenue rose 5.7% to $31.93 billion and underlying profit climbed to $4.3 billion from $3.6 billion a year earlier, while free cash flow jumped by $2.5 billion to $3.9 billion. Corona alone grew 17% outside its home market, and the group reckons it held or gained market share in 70% of its markets, reaffirming a full-year target of 4% to 8% profit growth. Analysts, for their part, judged the numbers ahead of expectations, crediting price increases that stuck.
Not everything went the group's way. China, one of its biggest markets, saw beer volumes fall nearly 10% amid weak demand at bars and restaurants and poor weather, and AB InBev's shares slipped more than 2% on the day. But the message for South African drinkers is clear: with fuller wallets nowhere in sight, expect the brewer to keep pouring its marketing muscle into the pricier brands — because that is where the profit now lives.
