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Liquor ad ban could hurt new brands

Decline in overall sales would cut government revenue

Megabrewer Anheuser-Busch InBev has the benefit of scale and a portfolio of some of the most recognised beer brands on its side, but it is anticipating some impact when the government’s proposed ban on liquor advertising takes flight.

AB InBev holds almost 30% of the global beer market and 62.7% of the South African market, with brands that include Stella Artois, Peroni, Corona and Castle Lager in its portfolio.

Newer brands, such as alcohol-free lager Castle Free and craft beer Flying Fish, are on the rise. But AB InBev Africa and SAB Zone president Ricardo Tadeu said on the sidelines of the 2017 results presentation on Thursday he expected tardy sales if a bill to ban liquor advertisements were implemented. “[Sales] might be slower, it might be more difficult.”

The cabinet is considering the Liquor Amendment Bill, which may ban liquor advertisements on TV and radio between 6am and 10pm. The drinking age limit would be increased to 21 years from 18 years. The Department of Health wants a complete ban on advertising.

Castle Free, a non-alcoholic lager, was unveiled as the headline sponsor for the Rugby Sevens “Blitzbokke” on Wednesday. Tadeu said: “This is a product that we have great expectations of. The acceptance from the public has exceeded our expectations. We are investing capacity this year. Every- thing we produce for Castle Free is sold in less than three weeks.”

AB InBev planned to sell packs of nine beers that consisted of Castle lagers and three Castle Frees to drive greater acceptance of the product.

“If there’s an advertisement ban I believe that what’s going to happen is more investment into the trade where the consumers are. They have the awareness that the brand is there, it’s available. Building brands from scratch may become more difficult and this is one negative side,” he said.

AB Inbev’s beer revenues in South Africa grew 6% last year but beer volumes rose by only 0.9%. Its premium brands saw tripledigit growth. “The good thing about global brands is people already have them at the back of their minds,” Tadeu said.

Per capita consumption levels at 60 litres in South Africa was relatively mature compared to other countries in the region. But there was room for improvement in sales for inhome consumption as opposed to consumption in taverns, he said.

Sibani Mngadi, chairman of the South African Liquor Brand Owners Association, said competition among brands would be skewed. “In places where advertising is banned then your market freezes at that point in terms of brand equity. Whatever is the strongest brand remains the strongest.”

The act recognised the need for diversity and the need to create opportunity for small entrants. But Mngadi said there was growth in the small craft brewers category, particularly gin, which was the strongest-growing spirit category, mostly in the Western Cape. “All of them are coming up with brands that are largely unknown, which then will require marketing over time for them to challenge established brands.”

A study by Genesis Analytics indicated the ban could result in a 7% decline in sales by volume, which would ultimately affect government revenues. The impact could be felt in the first year of the ban and those brands targeting specific age groups would be affected adversely, Mngadi said.

Euromonitor International research analyst Christele Chokossa said a ban may have “detrimental short-term effects on AB InBev, considering the fact that the company has lately been using aggressive marketing strategies to mitigate intensified competitive pressures from Heineken South Africa.” But in the long run the impact would shrink considering the equity of the core brands.

The proposed liquor act will include beverages with 0.5% alcohol content by volume and higher. Anything with a smaller alcohol content would fall under the Foodstuffs, Cosmetics and Disinfectants Act, Chokossa said. “AB InBev could benefit from the expansion of its low-alcohol range. In 2017 already, the company introduced Castle Free, an alcoholic beer with only 0.05% ABV.

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