SABMiller PLC Thursday said cold weather hit demand for beer across its developed markets, even as the group's rise in revenue was underpinned by its performance in Latin America and Africa.
SABMiller, which also bottles soft drinks for Coca-Cola Co. (NYSE:KO) , is benefiting from strong demand for beer in developing economies, where rising incomes and populations support beer makers. Higher spending power means consumers in those markets are trading up from home-brewed alcohol to branded beer. Emerging markets account for about 75% of the company's earnings, bolstering its business over rivals which have more exposure to recession-hit Western markets.
Prioritizing higher-margin premium lagers and niche, craft brews is also key for SABMiller at a time when mainstream lager sales are under pressure in Western Europe and North America. Still, the brewer is also looking to play at the affordable end of the market, as it develops beers in Africa from locally-sourced crops like sorghum and cassava.
Analysts say the company has advantages of concentrated market share, a globally-spread business and attractive exposure to developing economies.
"Prospects continue to be encouraging with increasing beer consumption per capita being driven by strong gross domestic product trends, improving affordability and availability, and market share gains from illicit [brews]," says Numis Securities analyst Wyn Ellis.
The maker of Miller Genuine Draft and Peroni Nastro Azzuro said fiscal first-quarter revenue, excluding acquisitions and disposals, rose 2% in the three months to June 30 on a constant currency basis. That compares with 8% growth in the corresponding period last year.
On the same basis, Latin America and Africa revenue rose 6% and 10%, respectively. However, Asia Pacific revenue declined 2% and Europe revenue fell 1%. In North America, MillerCoors LLC--the joint venture between SABMiller and Molson Coors Brewing Co. (NYSE:TAP) -- said U.S. domestic sales to retailers were down 4.4%.
"Our first-quarter revenue growth was held back by unseasonably cold and wet conditions in many of our northern hemisphere markets, which negatively impacted beer consumption. This was offset by continued growth in our Latin America and Africa divisions," said Chief Executive Alan Clark.
At 10.15 GMT, SABMiller shares fell 2.8% to 3151 pence, in a flat London market.
