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Can SABMiller Compete With South African Craft Beer?

Can SABMiller Compete With South African Craft Beer?

SABMiller — the world’s No. 2 brewer by earnings — has started its own craft beer in South Africa. The beer —  No. 3 Fransen Street — is named after a brewery SABMiller opened in 1998 to experiment with beer in small batches, according to a report in Euronews.

The strategy is similar to the one SABMiller uses in the U.S., where it sells the Blue Moon craft beer, the report said.

In doing so, SABMiller is competing with Ndumiso Madlala and hundreds of other microbrewers in South Africa’s burgeoning craft beer scene.

Madlala’s brewery, Soweto Gold, is a first for the sprawling township and produces as much beer a month as SABMiller makes every six minutes. But that may be enough to cause a stir in SABMiller’s long domination of the South African beer market, Euronews reports.

South African craft brewers are gaining momentum.

While craft brews are mostly aimed at wealthier South Africans, Madlala says Soweto Gold’s appeal lies in its township roots.

Mauricio Leyva, a managing director at SAB, said there’s space for everyone to play in the growing beer category. “The more people that move into beer, the better for all,” he told Euronews. “We like to see it as a way to develop beer culture in the country through a variety of offerings, rather than a craft beer subcategory in itself.”

Microbrews are sprouting up in South Africa similar to the U.S. craft boom that began more than 20 years ago. The number of craft breweries in South Africa tripled over the last two years, said Lucy Corne, author the blog The Brewmistress.

But microbrews account for just 3 percent of South African beer production, said Ross McCulloch of Jack Black’s Brewing Co. — just a drop compared to the 2.7 billion liters brewed annually by SABMiller.

Leyva said in the Euronews report South Africa is unlikely to see American-sized growth in craft beer, given the smaller economy and lower per capita consumption.

SABMiller enjoys a 90-percent market share, according to Euronews. Craft beer has an appeal among affluent whites, but Madlala thinks he can bring it to a new market: the growing black middle class.

“I looked at the boom of the craft beer scene in South Africa and one thing was terribly missing for me: a brewery in the township,” said Madlala, a chemical engineer who previously worked for SABMiller. “A lot of people who live in the wealthy suburbs are originally from Soweto and on the weekends they always come home.”