Taking beer to its last frontier: Africa

28 June 2015 - 02:00 By BRENDAN PEACOCK

Global brewing giants are in a race to reach every potential customer in emerging markets by tackling illegal producers and providing cheap alternatives to home-brewed beers. Getting low-income earners onto the product ladder and providing as many options as possible - up to the premium product rung - is behind a drive by brewers to insert themselves into as many social occasions as possible.Amin Alkhatib, global industry analyst at Euromonitor International, said Africa remained beer's last frontier because of a lack of transport infrastructure and raw materials from agri-business.story_article_left1"In some territories in Africa there has been no substantial investment in underlying infrastructure, so raw materials like barley required to produce the beer are absent or not of the right quality."Spirit maker and Guinness brand holder Diageo has an innovative solution: mobile brewing facilities housed in repurposed shipping containers.The so-called Cube facilities - which Alkhatib labelled a genius move - can be set up next to raw-product producers to avoid the high cost of transporting materials to existing production facilities."SABMiller and Heineken have high market share in southern and central Africa, but don't dismiss Diageo, which has a presence in Nigeria and Kenya, or Distell."If we're to look at beer only, however, it would be very difficult for other brewers to enter the market because it is currently locked down. I see few opportunities for acquisitions, limited perhaps to craft brewers in South Africa."Alkhatib said any rival beer brands in Africa would have to be started from scratch because there were not many existing competitors to buy.The greatest possibility for an acquisition would be one superbrewer buying another, such as ABInbev buying SABMiller.Alkhatib said more northerly regions may offer opportunities for brewers, but there are local restrictions and regulations."In terms of spirits, we're more likely to see entry at the higher end of the market, like Bacardi or Smirnoff premium products. SABMiller is now producing affordable spirits that prevent new entrants in both beer and spirits so it can monopolise [the market]."block_quotes_start There's a lot of potential demand not yet satisfied by the commercial brewing industry block_quotes_endThere may be opportunities for smaller players in niches such as flavoured or non-alcoholic beers at the bottom of the beer market and SABMiller is also working on commercialising the home-brewing and concoction market."There's a lot of potential demand not yet satisfied by the commercial brewing industry. That market is not illegal, but SABMiller and other brewers want to commercialise these sorghum beers through brands like Chibuku."These products are for those who cannot afford a clear lager. Ultimately all consumers would prefer a clear lager, but affordability is the problem," he said.On Monday, Karl Lippert, SABMiller's president for Latin America, told investors that SABMiller aimed to position beer as a more attractive beverage choice for all social occasions, make it more affordable and accessible, tackle illegal options, and provide greater choice and more premium options.story_article_right2Aside from targeting women, who are in the minority when it comes to beer drinkers, SABMiller also wants to oust wine and spirits as "special occasion" competitors. As in Africa, Latin America's poor struggle to afford its products.The poorest quintile of Hondurans need to work for six hours to be able to buy half a litre of beer. Those in El Salvador need to work for two hours, and Colombians 80 minutes. To capture more of the low-income market, SABMiller intends to "exercise greater pricing restraint".Emerging markets are increasingly important to the company's fortunes: 72% of SABMiller's pre-tax earnings come from emerging market economies, with 20% of sales volumes from Latin America and 28% from Africa.Lippert said per capita consumption of beer was at about 43 litres per year in SABMiller's key markets of Colombia, Peru and Ecuador, and at less than half this in Honduras and El Salvador.In comparison with Panama, Brazil and Mexico, where consumption sits at between 65 and 70 litres, there is still considerable room for growth...

There’s never been a more important time to support independent media.

From World War 1 to present-day cosmopolitan South Africa and beyond, the Sunday Times has been a pillar in covering the stories that matter to you.

For just R80 you can become a premium member (digital access) and support a publication that has played an important political and social role in South Africa for over a century of Sundays. You can cancel anytime.

Already subscribed? Sign in below.



Questions or problems? Email helpdesk@timeslive.co.za or call 0860 52 52 00.