Patrons drink beer at a Maputo nightspot in Mozambique Photo: Corbis
Tapping into growth
By Eleanor Whitehead | Published: 15 November, 2011
Surging demand is fast turning Africa into a major growth region for the world’s biggest brewing companies
Africa is thirsty. Fuelled by a decade of economic growth, alcohol consumption on the continent is now as high as in the rest of the world. Ugandans and Nigerians consume twice the global average of alcohol per head. Yet much of what is drunk across the continent remains illicit – at $3bn, Africa’s illegal alcohol business is estimated to be worth significantly more than some of its economies.
Today, however, a combination of population growth and rising incomes are driving a rapid increase in the proportion of consumption of commercial drinks. In Tanzania, the World Health Organisation estimated in 1997 that 99.5 percent of total alcohol consumption was attributable to informal beverages, with the figure declining to 90 percent in 2000. Illegal drinks now account for 66 percent of Tanzania’s total intake, emerging markets investment bank Renaissance Capital says.
For brewers working on the continent, capturing value from consumers trading up the ladder is a huge opportunity. According to conservative estimates made by Renaissance in a recent report, beer volumes should grow at an annual rate of 9 percent between 2010 and 2015. “You can easily achieve high single digit to double digit growth in those markets, because you’re still not in a situation where even half of the alcohol market is commercial beer,” explains the group’s head of research for sub-Saharan Africa, Nothando Ndebele.
“The demographics are in our favour,” agrees Mark Bowman, managing director of SABMiller Africa. “You’ve got very low per capita consumption of beer and quite high per capita consumption of alcohol, so as GDP improves on a per capita basis there is a shift over time – informal and illicit alcohols are replaced by beer, which is highly aspirational in these markets, and the first step up from any informal alcohol. That’s a big opportunity for us.”
With strong growth, money is being poured into the region by Africa’s leading brewers. SABMiller, the world’s second biggest brewer by volume, has invested over $1bn in the continent in the last five years. The group recently lifted its medium-term financial targets for the region – raising revenue per hectolitre growth targets from 1-3 to 3-5 percent.
Competition has been heating up among the continent’s major players. This summer, Heineken bought two breweries – Bedele and Harar – from Ethiopia’s government for a combined $163m. In a clear indication of what an appealing market Africa’s second most populous nation represents, Diageo has since won an auction for the country’s third largest brewer – the state-owned Meta Abo brewery – with a bid of $225m.
Diageo has been busy elsewhere in East Africa this year, completing the purchase of Serengeti Breweries in Tanzania.
Across the continent, high alcohol consumption, a preference for beer, and a huge drinking population see Nigeria touted by analysts as Africa’s most exciting beer market. Here, SABMiller has sought to boost its number three position by investing $100m in the creation of a greenfield brewery in the south eastern city of Onitsha this year. Heineken has also purchased five Nigerian breweries from the local Sona Group for an undisclosed sum. Nigerian Breweries – which Heineken majority owns – has invested around $135m annually in the country over the last four years.