Brewing giant SABMiller PLC (SBMRY) Thursday reported a fall in comparable third quarter lager volumes as the economic downturn stymied consumption, but the company said cost cutting and higher drink prices meant it had met its own financial expectations.

The London-based company - which counts Miller Lite, Peroni and Pilsner Urquell among its brands - said that its total lager volumes grew 1% in the three months to Dec. 31, boosted by acquisitions. But organic volumes, which strip out the effect of acquisitions, dropped 1%. This compares with a rise of 1% in the previous quarter and is below analysts' expectations.

"Consumer demand has been affected by the current global economic slowdown, and has continued to weaken in many of the group's markets," the company said in a statement.

"The financial performance of the group in the quarter, supported by firm pricing and cost efficiencies, has been in line with our expectations, notwithstanding the relative strength of the U.S. dollar against the group's major currencies," it added, without providing figures.

Shore Capital analyst Andy Blain noted that volumes were deteriorating as the fiscal year progressed despite year-earlier comparatives getting progressively easier.

"They're clearly struggling in a deteriorating global consumer environment," he said.

"If anyone had any doubt, and SAB have never hidden away from it, the trading environment is deteriorating and there is no sign of it getting any better," said Bruce Davidon at Blue Oar Securities.

By 1000 GMT, the company's shares had regained some earlier losses but were still trading down 1 pence, or 0.1%, at 1061 pence in a lower London market. The shares are down 21% in the past 12 months despite a recent rally. The company has a market capitalization of GBP15.9 billion.

SABMiller is the world's second-largest brewer by volume, since losing the No. 1 spot to Anheuser-Busch Inbev NV (ABI.BT) of Belgium, following InBev's $52 billion acquisition of Anheuser-Busch last year.

SABMiller said in November it was scaling back investment in the face of continued cost pressures and slowing demand for beer worldwide.

Demand has been hardest hit in the U.S. and also in Europe, where organic lager volume declined 1% "as the region experienced the impacts of the global financial crisis on consumer disposable income."

Shore Capital's Blain pointed out that the company's previously high-growth emerging markets were also disappointing across the board.

SABMiller's European operations are focused on Eastern and Central Europe, where growth has been stronger in recent years than in Western Europe. However, organic volumes in Russia dropped 22% in the quarter, as wholesaler destocking combined with the effects of a sharp economic slowdown.

Since June last year SABMiller has operated in North America through a joint venture with Molson Coors Brewing Co. (TAP) named MillerCoors. In the three months to Dec. 31, MillerCoors' domestic sales to retailers dropped 2.3% against a weaker market. Worst hit was Miller Lite, with sales to retailers down 7.5%.

In the Africa and Asia business, organic volumes rose 2%, with China volumes flat as the economy slowed.

In the company's home South Africa market, lager volumes grew 1% with a strong performance from the mainstream portfolio as consumers traded down from premium products.

 
   Company Web site: www.sabmiller.com 
 
   -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

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