Beer Drinkers in Nigeria Cut Back as Oil Industry Falters

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SABMiller Plc expects beer volume growth to decelerate in Nigeria this year as lower oil prices dent consumption and African markets become more competitive, said Mark Bowman, managing director of the brewer’s Africa unit.

The company, which has forecast beer volume growth in Nigeria of about 8 percent a year, may see that rate slow to 3 percent or 4 percent, Bowman said in an interview in Davos.

“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 percent 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 nonalcoholic business in the region. SABMiller teamed up with Coca-Cola Co., 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.”

Castel Ties

SABMiller, whose lineup includes the Grolsch and Peroni lagers, agreed to combine bottling operations for nonalcoholic beverages with Coca-Cola in southern and eastern Africa. Castel is often mentioned as a potential takeover target for SABMiller, which already owns 20 percent of the French winemaker. In turn, Castel has a 38 percent stake in SABMiller’s Africa business.

SABMiller, the world’s second-largest brewer, is increasing its focus on sodas and other nonalcoholic 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.”