AB InBev says it's shielding beer lovers from rocketing prices

May 13, 2022

AB InBev CEO Michel Doukeris has assured beer lovers that they will be protected from inflation led price increases, thanks to the to the group’s risk policy.

Consumers and businesses alike have been grappling with rising inflation, due to the Covid-19 pandemic and Russia’s invasion of Ukraine. And while the South African Breweries (SAB) owner is not exempt from the impact, its long-time hedging policy is paying off.

Doukeris, who was speaking at a media roundtable on Thursday, explained that its exposure to different economies across the world means that it has had to deal with inflation as low as 1% to 2% and a staggering 50% to 60% in other countries.

Ab InBev has operations across all the major continents in the world.

As part of the policy to limit risk, the world's largest beer maker buys its raw materials in advance, which allows the group to plan its pricing in advance and shields it from rising costs.

The yeast they can do

Doukeris explained that as a result, the company can hold off product price increases for a long time and then phase them in when required, instead of doing so at once.

"Beer ... is lagging inflation, meaning the price increases that we put in the market ... are falling behind inflation," he said. 

The CEO added that the company has tried to organise its price actions in ways that not only consider costs but also the overall industry, economies, and consumer pockets.

"So far, it’s working … and we’ve been working very hard on our side at managing costs very tightly, so we can protect the industry, we can protect the beer prices and we can have our consumers continue to enjoy our products across the world," he said. 

The Brazil native, who has been at the been at the beer maker since 1996, was appointed as CEO in July 2021, taking the reins from Carlos Brito, who stepped down from the company after a 32-year stint, having served as CEO for 15 of those years. 

Doukeris was joined by SAB CEO Richard Rivett-Carnac, who took up the position at the helm of the South African business four months ago. 

Rivett-Carnac said in South Africa, SAB has seen growth across its full portfolio, including its premium brands.

The local brewer’s brands include Hansa Pilsner, Carling Black Label, Lion Lager, Flying Fish and Castle Milk Stout.

"What we are seeing is a slight shift in consumer behaviour, where people are living a little bit more for the now, so I think the pandemic has driven some of that change in behaviour, and the reality is that people can afford premium products," Rivett-Carnac said. 

The continued premium beer sales come as South African consumers grapple with high unemployment in a tough economy, but people who can afford premium products continue to buy them.

"What’s good about the SAB portfolio is that we have very strong brands that are well known to all of our consumers, and we have offerings at a wide range of price points," Rivett-Carnac added.

Neither Doukeris nor Rivett-Carnac would not be drawn into the possible implications of Heineken’s acquisition of Distell. But they reiterated the company’s commitment to growth in Africa, using South Africa as a springboard.

Both CEOs' appointments come at a challenging period, which in South Africa has been marked by tensions between the government and SAB. 

Government’s repeated bans on the sale of alcohol were at the heart of SAB’s gripe with it, leading to the beer maker taking government to court.

But both parties seem to be putting the past behind them, with Doukeris and Rivett-Carnac having a telephonic meeting with President Cyril Ramphosa on Wednesday. 

The meeting was with regards to the R4.5 billion investment pledge SAB made at the the South Africa Investment Conference this year. The investment will go towards returnable packaging, which will take up R1.9 billion of the total amount, while R825 million will go towards expanding SAB’s Prospecton Brewery in KwaZulu-Natal and creating 25 000 jobs in the value chain.

An additional R510 million will be invested in upgrading SAB’s Ibhayi Brewery in the Eastern Cape.

"President Ramaphosa welcomed AB Inbev and SAB’s commitment to South Africa and to working with government to fashion a regulatory regime that would facilitate growth in the sector and reduce social harm,” said the Presidency in a statement on Thursday.-fin24

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Last modified on Friday, 13 May 2022 15:19