Peru: SABMiller to expand Peru Brewery by 20 % to meet demand

SABMiller Plc, the world's third-biggest brewer, plans to spend $100 million to expand output at its Peruvian unit by 20 percent to meet rising demand, Bloomberg communicated on December 1st.

London-based SABMiller, which acquired the Union de Cervecerias Backus y Johnston SAA unit when it bought Bogota-based Grupo Empresarial Bavaria in 2004, is upgrading two of its six Peruvian brewhouses and is adding more distribution trucks and warehouses, Backus Chief Executive Robert Priday said in a Nov. 27 interview at his Lima office. The company expects to complete the expansion by the middle of next year.

The $5.6 billion purchase of Bavaria helped boost first-half net income by 22 percent to $790 million, or 52.6 cents a share. Latin America contributed to one-fifth of earnings before interest, tax and amortization as economic growth spurred consumer spending in the region.

``We're more than matching the growth of the total market in the country,'' Priday said. ``Our results in the first half of the year have exceeded our expectations.''

Peruvian beer consumption per capita has risen to 28 liters from 21 liters last year as a result of competition from Leuven, Belgium-based Inbev NV, the world's second-biggest brewer, he said.

Inbev bought a local Pepsi bottling plant last year and sold a 25 percent stake in AmBev Peru to the country's Romero group in March to increase its distribution network. The company this month added the Stella Artois and Becks brands to its Brahma beer currently distributed in Peru.

Backus, which increased net income by half to $24 million in the third quarter on a 33 percent increase in sales volume, cut beer prices this year after InBev built a $40 million brewery outside Lima last year.

`Growth Potential'

Peru's beer consumption still is among the lowest in the region. Venezuelans drink 75 liters per person a year and Brazilians and Mexicans consume about 50 liters each, according to Lima-based consultant firm Maximixe.

``Peru's a small market that has growth potential,'' Gustavo Urrutia, an analyst who tracks the company at Lima brokerage SAB Centura, said in a phone interview. ``Both SAB Miller and Inbev will have to work to develop consumers' taste for beer with more of their worldwide brands.''

Backus, Peru's biggest brewer, controls 90 percent of the local market, said Priday, who has worked in Honduras, South Africa, Poland, and Slovakia.

``That's manageable for us,'' Priday said. ``I see growth coming across the board in both Lima and the provinces. The whole country's growing at an equally steady rate.''

Peru's beer market is set to grow 15 percent this year, while gross domestic product will expand an estimated 7 percent, he said.

New Brand

Backus, which has installed capacity of 9.6 million hectoliters a year, bottles eight beer brands plus a range of soft drinks and mineral water. The company in September introduced its Central American brand Barena in the local market. In November, Backus said it was investing $30 million to change all its beer bottles.

The SABMiller group, which has operations in the U.S., Europe, Russia, Africa and Latin America, produces more than 150 beer brands including Amstel, Carling, Miller, Pilsner Urquell and Peroni.

SAB Miller's London-traded shares fell 18 pence, or 1.7 percent, to 1,063 pence at close of trade on Nov. 30. The stock has gained 0.2 percent this year, compared with a 22 percent gain in the 35-member Bloomberg World Beverages Index. Backus' Lima-traded shares were unchanged at 2.8 soles and have gained 44 percent so far this year.

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