The Colombian government’s drunk-driving crackdown, which has included fines of up to $14,000 and
jail sentences as long as 18 years, is taking a toll on the
nation’s biggest beer seller: SABMiller Plc. (SAB)

A series of drink-fueled accidents in the run-up to
Christmas, including one case of a motorist who mowed down nine
people in southern Bogota, provoked a national outcry and caused
President Juan Manuel Santos to denounce “the criminal cocktail
of alcohol and gasoline.” The tougher rules, which SABMiller
supports, led to lower-than-expected drink sales in December and
January, according to Grant Harries, president of Bavaria, the
London-based company’s Colombia unit.

“In December, this latest enforcement — and the level of
penalties applied to drinking and driving — has placed the
alcohol industry under a lot of pressure,” Harries said in an
interview last week in Bogota. “What we do see is that its
impact seems to be reducing, but initially everybody just really
stopped their usual consumption patterns.”

December is the biggest month for Colombian beer drinking,
as workers go out to spend an end-of-year bonus that employers
must pay them by law. And SABMiller is the biggest beneficiary
of those sales: It accounts for 98 percent of the nation’s beer
purchases, and the country is its biggest single source of
profit. Globally SABMiller is the world’s second-biggest brewer,
after Anheuser-Busch InBev NV. (ABI)

No Takeoff

This time around, as Colombian drinkers adjusted to the new
policy, the typical sales surge in the second half of December
didn’t materialize, Harries said.

“It’s a peak month,” Harries said. “It starts straight
after they get their payout, and then it really takes off. But
it didn’t take off, and this was the impact that we were
feeling.”

February sales are “looking better,” Harries said. It’s
also unclear whether the effect of the new measures will wear
off over time, he said. The legislation, which includes lifetime
driving bans for some offenders, was signed into law by Santos
on Dec. 19. Bavaria runs its own responsible-drinking campaign
alongside the government’s.

Bavaria’s beer sales will probably grow by 1 percent to 1.5
percent in volume in the year through March 2014, Harries said.
That’s a slowdown from a rate of 3.2 percent the previous fiscal
year. Sales also have been hurt by highway blockades set up by
coffee growers and other producers, which are protesting the
government’s farm and trade policies. That had a “huge impact”
on distribution, Harries said.

Premium Beer

Even with the slowdown, the company gained a larger portion
of alcohol sales in the Andean nation and saw growing demand for
premium beers. Bavaria’s share of the alcohol market — measured
by liquid alcohol equivalent, or LAE — rose for a third
straight year, as drinkers switched from rums and wines,
according to Harries. That helped push December beer sales to a
record level, despite the lower-than-expected demand.

Annual Colombian beer consumption rose 19 percent to 43
liters (11 gallons) per capita over the past decade. That level
remains low compared with the country’s neighbors, partly due to
a culture of not drinking on business days, Harries said.

“Colombia has a very low frequency relative to places like
Brazil and Venezuela,” he said. “There’s very high intensity
over the weekends, but midweek we’re very low.”

Club Colombia

Bavaria sees room to grow in premium beer, a market that’s
dominated by its Club Colombia brand. The sector represents
about 6.4 percent of Colombia’s beer market, compared with about
10 percent in neighboring Peru, Harries said.

At the even higher end — the so-called super-premium
market — Bavaria faces competition from imported brands
produced by Heineken NV (HEIA) and Grupo Modelo SAB. Bogota Beer Co.,
the country’s main craft beer producer, also competes in the
segment. Bogota Beer, which sells craft beers in its 20 pubs as
well as in supermarkets, will open a new brewery this year that
will more than triple its capacity, founder Berny Silberwasser
said in an interview this month.

This super-premium market currently accounts for less than
1 percent of the beer drank nationwide. SABMiller itself
competes in the market area with imported brands such as Peroni
and Grolsch.

As Bavaria adjusts to the drunk-driving crackdown, it’s
looking to get a sales boost from the 2014 World Cup soccer
tournament. Colombia’s national team is ranked fifth by FIFA,
the international soccer governing body, giving fans more reason
to tune in — and drink. SABMiller’s Aguila beer is the
national team’s sponsor.

“Please let them do well,” Harries said. “That would be
fantastic for per capita consumption for sure.”

To contact the reporter on this story:
Matthew Bristow in Bogota at
mbristow5@bloomberg.net

To contact the editors responsible for this story:
Nick Turner at
nturner7@bloomberg.net;
Matthew Bristow at
mbristow5@bloomberg.net