19 March 2020
Outlook for Ethiopia’s beer market is less rosy
Ethiopia | Beer sales have more than doubled between 2014 and 2019: from 5.6 million hl to 13 million hl, says GlobalData. But last year’s blanket ban on alcohol advertising could hamper future growth. Not least, it will make it harder for new entrants to draw attention to themselves.
Local media noted with some surprise that in February 2020, Heineken debuted its eponymous draught beer quietly and without fanfare. Well, how else could it have launched since the usual marketing blitz is prohibited?
The ban on alcohol advertising, although not spelling imminent doom, will have the undeniable effect that late entrants will struggle to gain market shares and significant volume sales. Making matters worse, the government also decided to hike the excise on beer to ETB 11 (USD 0.32) per bottle from ETB 3 previously.
Early mover advantage
In retrospect, Heineken will call itself lucky that it entered the market in 2011, after buying breweries Bedele and Harar for USD 160 million. It has since built a brewery near the capital Addis Ababa to better compete with France’s Castel Group, which continues to lead the market. Over the years, it has quietly snapped up local competitors to bring its number of breweries up to five.
Diageo was also an early mover. It bought the Meta Abo brewery in 2012, while the Dutch Swinkels family (Bavaria) chose to build a brewery instead, which came on stream in 2015.
Dashen, with two plants, is another strong contender. Having solved its problems with Dashen’s original owner, a military fund with strong ties to the government, the UK’s private equity firm Vasari is now firmly in control. Vasari was set up by South-African born Vivian Imerman, who has a long track record in the food and beverage industries, having operated companies such as Scottish distiller Whyte & Mackay, Del Monte International and confectionary firm Nabisco before.
Whereas Castel, Heineken, Meta Abo, Habesha and Dashen will be able to draw strength from their brands’ awareness, the same cannot be said for United Breweries and its Anbessa (trans. “lion”) brand. The USD 50 million brewery was built by the local company Kangaroo Plast with the help of Egyptian investors and began operations only weeks after the introduction of the advertising ban.
Benefitting from a buoyant economy
Ethiopia’s spectacular boost in beer sales was triggered by the country’s economic and demographic growth over the past 20 years. Today, it is the continent’s second most populous country (112 million) behind Nigeria. In 2000, it was the third-poorest country in the world, as measured in GDP per capita. However, between 2000 and 2018, Ethiopia became the third-fastest growing country of 10 million or more people in the world, says the World Bank.
These days, there is trepidation that Ethiopia’s economic miracle could prove unsustainable. The website Quartz Africa reported in February 2020, that the World Bank has revised its projection for 2020 growth down to 6.3 percent from 8.2 percent. In 2021, it forecasts GDP to only rise 6.4 percent, down from 8.2 percent. The World Banks says this slowdown will result from “tighter fiscal and monetary policy aimed at containing inflation.” The Ethiopian government still projects GDP growth in excess of 10 percent in 2020.
“If the government’s investments don’t prove fruitful, and tax revenues don’t increase, the Ethiopian economic miracle could be in peril,” Quartz warns.
More domestic barley
A shortage of Forex has long plagued the country. Therefore, brewers have sought to reduce their dependency on imported barley, which at present covers 90 percent of their need.
For its part, Heineken has partnered with local farmers to help them grow quality barley, while Habesha will receive up to EUR 50 million from the IFC, a member of the World Bank Group, to expand operations and increase local barley sourcing from smallholder farmers.