Fighting back!

SAB takes on illegal Peru brew

Backus has taken the fight to illegal producers on several fronts

SABMiller is determined to fight back against illegal alcohol producers in Peru.

The beer giant said recently it wants Peruvian fuel producers to buy locally produced ethanol as part of its drive to combat illegal alcohol, which makes up almost a third of the total alcoholic beverages market in Peru.

The good news is that this illegal market appears to be feeling the strain, with illegal alcohol’s share of the market having fallen from 41% to 31% over the past 13 years, as more people can afford legal alternatives. Another reason for the decline is that beverage companies have extended their reach into new areas across the country.

SABMiller is determined to fight back against illegal alcohol producers in Peru. The beer giant said recently it wants Peruvian fuel producers to buy locally produced ethanol as

Illegal alcohol, though, is up to ten times cheaper than beer, so SABMiller, and its Peruvian operation, Backus, has a big fight on its hands. The company, along with other producers in Peru, is determined, however, to reverse a culture that is deeply entrenched in Peruvian society.

Illegal alcohol, which is widespread in various Latin American and African nations, is mostly made in Peru from ethanol derived from sugar cane, according to Felipe Cantuarias, Backus’s vice-president of corporate affairs.

Backus has taken the fight to illegal producers on several fronts, recently having launched a cheaper entry level beer and campaigning with government and other producers to highlight the health risks associated with illicit alcohols.

And that’s not all. It also wants buyers from Peru’s 10 major sugar cane suppliers to be placed on a public registry, while beer producers are putting a business case forward to government and fuel refiners on the merits of sourcing ethanol locally, Cantuarias said.

It is hoped that ethanol prices will rise in time, by diverting much of the ethanol supply to new sources and cutting back on imports, thereby restricting supply.

To understand how important it is to SABMiller to take action against illegal alcohol production in Peru, it is important to understand that Backus has about a 96% share of the Peruvian beer market, which in turn has a 62% share of the total alcoholic beverages market. This means that illegal alcohols are SABMiller’s biggest competitor in the Andean country. Peru is SABMiller’s second-largest market in Latin America, behind Colombia.