Beer giant SAB anticipates the Rugby World Cup will boost sales in South Africa as fans flock to pubs and restaurants or gather around braais at their homes with family and friends to cheer on the Boks.
The tournament started on Friday in Paris, France, with the Springboks, who are defending the title, playing their first game against Scotland today.
“We will undoubtedly see a spike,” said SAB CEO Richard Rivett-Carnac. “We have done a lot of work to ensure all the bars, restaurants and taverns are well stocked. Hopefully we go far in the tournament because it will definitely boost sales.”
SAB’s products include Carling Black Label, Castle Lager — one of the Springboks’ sponsors — Flying Fish, Hansa pilsener, Lion Lager, Brutal Fruit and Redd's.
“We hope to get similar results or even do better than the previous World Cup in Japan in 2019, given the same time zone South Africa has with France,” Rivett-Carnac said.
Though sales were good during the last tournament, the different time zones meant games were broadcast earlier in the day in South Africa, which had an impact on consumption.
Excluding 2020 and 2021 this is the toughest year we have seen in a very, very long time. We are in the eye of the storm
— SAB CEO Richard Rivett-Carnac
Different events have varying impacts on beer sales, with football still by far the biggest in terms of support across the country, but rugby is improving significantly, said Rivett-Carnac.
Gains from Rugby World Cup sales will be welcome in a tough trading environment.
Since the beginning of the year, sales volumes in the alcohol industry, including spirits, ciders and wine, are down 5% with beer recording no growth.
“This is a very material number. Typically the industry grows in line with drinking age population growth and the GDP growth as a general rule over a long period of time. With the industry declining by 5% it will put an enormous strain across the full value chain from farmers and manufacturers to retailers. Some alcohol manufacturers will be required to make difficult choices, so we are in a very difficult point right now,” said Rivett-Carnac.
The expectation was growth in line with GDP but there is a “deviation from where we expected to be and ultimately, if the industry does not grow, that impacts on investments”, he said.
Excluding 2020 and 2021, this is the “toughest year we have seen in a very, very long time. We are in the eye of the storm,” said Rivett-Carnac.
High inflation, especially in food, and soaring interest rates have eroded the purchasing power of consumers in the past year.
The industry is defensive and resilient, but in a constrained environment “we are seeing consumers making the right choices” — putting food on the table and paying for transport to go to work rather than spending on alcohol.
Rivett-Carnac expects a recovery with inflation falling and interest rates expected to start declining. Annual consumer price inflation was 4.7% in July, down from 5.4% in June.
This week SAB released its annual report on the state of the beer economy, conducted by the Bureau for Economic Research (BER). It found that beer prices increased by far more than the CPI inflation rate between 2013 and 2019 and rose more than any other broad liquor categories.
BER economist Linette Ellis said “changes to income and prices impact the volume that is sold in the market more than what has been seen in the past”.
SAB has asked the government to consider an excise tax adjustment in line with or below inflation at its medium-term budget policy statement in October.
“We need strong policy certainty around excise tax. We know the government is under pressure from a budget perspective and for 10 years we have seen at times massively inflated excise increases when compared to inflation. Right now, with industry declining, consumers under pressure, the industry can't afford the government to walk away from policy, which is [an] inflationary increase,” Rivett-Carnac said.
He said the industry is not saying the tax should be scrapped or not increased every year but wants “certainty on how that increase will be applied over the short term. It will make a massive difference to the industry in terms of capital planning.”
Detailing the contribution the beer industry makes to the economy, Rivett-Carnac said R1 in every R79 of GDP is from beer and the industry has created 250,000 jobs across the beer value chain. The industry contributes around R43bn in tax.
“We understand that excise taxes are an important part of fiscus and take the contribution seriously.”
He said two excise adjustments in line with projected inflation over the last two budgets have allowed SAB to invest almost R12bn in the past two years.
“It is now more important than ever for the government to adhere to policy and for excise increases to be linked to CPI”, said Rivett-Carnac.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.