The premium beer market is growing rapidly in SA, as it is in most other countries. And the speed at which the market is growing here has taken many people - including industry leader SA Breweries (SAB) - by surprise. At a recent SABMiller results presentation, CEO Graham Mackay said: "The premium sector in SA is growing far faster and off a much higher base than anyone expected."
Though SAB dominates the beer market in SA, with about a 98% share of the total beer market, that domination is most acute in the so-called mainstream segment of the market, with beers such as Carling Black Label, Castle Lager and Hansa. In this segment there is virtually no competition. And though SAB is the largest player in the premium segment as well, its dominance is by no means as great. Estimates vary but it's probably safe to assume that SAB enjoys a share somewhere between 70% and 75% of the premium beer market.
Enhanced premium beer consumption is an aspirational effect - as people become wealthier, tastes change and the better things in life are sought, even if that means paying a premium for the product. The change from being a "mainstream" beer drinker of brands such as Carling Black Label, Castle and Hansa to appreciating the ever-growing range of premium beers on offer is a reflection of enhanced spending power in the economy. It's not too dissimilar to the migration from traditional sorghum beer to malt beer that provided such a huge engine for growth in SAB's market during the 1970s and 1980s.
The range of premium beers available in SA is large and growing. Bavaria Breweries chief commercial officer Craig MacKenzie estimates that there are more than 300 beers available to SA consumers and most of those are in the premium category. Steve Gilroy of microbrewer Gilroy's Brewery concurs but says the figure is between 250 and 300.
According to SAB marketing director Peter McLoughlin, in a recent interview with the Financial Mail: "Times change and consumers change and as they become wealthier and more sophisticated, they want more than just a commodity. They want brands because brands can give them other things such as status, confidence and self-respect. As much as 30% of premium products are bought by people who can't really afford them.
"Whether they realise it or not and will admit to it or not, image is the key driver for consumers."
Opinions vary as to the size of the premium beer market in SA, as do definitions of "premium beer".
The most widely used definition of premium beer is any beer that commands a price premium of 10% or more to the benchmark mainstream beer. In SA's case, that benchmark is Castle Lager. Using that definition, it's estimated that the premium beer market is about 11% of the total beer market in SA. That total market, based on the assumption that SAB still has a 98% share, is 26,4m hectolitres. Using SAB's last quoted volume of 25,9m h in its year ended March 30 2005, 11% of the total market is about 2,9m h.
Premium beers, using this definition, would thus include Budweiser, SAB's Amstel, Miller Genuine Draft, Castle Lite, Sterling Light, Pilsner Urquell and Peroni. Brandhouse premium beers include Beck's, Guinness, Heineken and the Windhoek range. Also included are all the independently imported beers, such as Erdinger, Stella Artois, Corona and Grolsch, as well as microbrewed beers. Bavaria Breweries produces a surprisingly wide range of premium beers from its Midrand brewery.
Another differentiation between mainstream and premium beers lies in the packaging of the products. Premium beers tend to be packaged in green glass bottles and have metal foil or other labels on their necks - for example, Amstel, Heineken, Peroni, Pilsner Urquell and Windhoek. Mainstream beers are usually packaged in brown bottles with few if any other distinguishing features.
Sometimes premium beers come in flint (clear) glass bottles. These include Corona, Miller Genuine Draft and Sol. Ironically, green and flint glass containers aren't nearly as good as brown bottles at keeping out light from the product inside. The one exception to this general trend is low-alcohol beers, which usually come in brown bottles.
Ultimately, premium beers are providing a win-win situation for consumers, producers and distributors alike. As demand and awareness grow, consumers will gain a greater appreciation of the virtues of beer. Producers and distributors will respond by supplying an ever-increasing range of high-quality, higher profit-margin products.
