E-Malt.com News article: Ethiopia: Five major international brewers expected to submit bids for Meta Abo Brewery till December 6

The Privatisation and Public Enterprise Supervision Agency (PPESA) has given five major international breweries three weeks to submit their financial and business proposals for the joint venture (JV) acquisition of Meta Abo Brewery, Addis Fortune reported on November, 15.

Heineken, BGI, Diegeo, SABMiller, and Unibroue in a JV with Habesha Brewery (HB) were shortlisted by the PPESA on November 7, 2010, after they had responded to the call for expression of interest (EoI) it had issued. They were given until December 6 to submit their proposals.

Meta Abo, one of the three state owned breweries, has the second largest share of the Ethiopian beer market at 16%, research conducted by Access Capital in May 2010 showed. Established in 1967 by the government and private individuals with a capital of two million Br, the brewery has a production capacity of 600,000 hectolitres (hl) which comes to 60 million litres, according to the research data.

BGI Ethiopia, a private company with a capacity of 1.5 million hl, has the biggest market share of 48%, according to the research, which puts the total production capacity of BGI, Bedele, Meta Abo, Harar, and Dashen, the local breweries, at 5.6 million hl.

Ethiopia’s four litres per capita consumption of beer is much lower than that of Kenya’s 12 litres and South Africa’s 59 litres. The country’s low consumption rate is expected to reach 12 litres per capita by 2020, the research estimated.

“With the second largest population in Africa, and showing steady economic growth, Ethiopia’s potential is very attractive to breweries,” a source close to one of the international companies, who requested anonymity as he was not authorised to comment, said. “This is evident from the interest shown in Meta Abo by international companies.”

Three of the local breweries are expanding to meet the current demand, including Meta Abo which has done it three times before. It launched its latest expansion in 2007/08.

Its first expansion, in 1970, increased annual production from 50,000 hl to 120,000 hl. Five years after the company was nationalised in 1975, its second expansion increased production capacity to 301,000 hl. After its third expansion in 1997, production reached 350,000 hl.

Although the three state owned breweries were slotted to be auctioned in 2013/14 in the PPESA’s five-year plan, the high demand from the private sector pushed the date forward.

Out of the companies which have shown interest to buy Meta Abo, only BGI, bought by Castle Group 10 years ago, manufactures beer locally. HB, a new company, is trying to establish a brewery but was unable to participate in the JV by itself as the tender requires bidders to have at least three years of brewing experience.

“Although the requirement is unfair, we have entered the bid with a JV with a foreign company,” an official from HB, who was not authorised to comment on the record, is quoted as saying.

HB, with a paid-up capital of over 80 million Br, has sold more than 150 million Br worth of shares. The company has floated 250,000 shares since October 19, 2010, to fund the construction of its brewery in Debra Berhan, 130 km north of Addis Abeba. The project is estimated to cost around 360 million Br.

Diegeo, a United Kingdom (UK) based company and the owner of Johnnie Walker Whisky, entered the bid on its own despite its subsidiary, East Africa Breweries, being based in Kenya. It has also aggressively been marketing Johnnie Walker through Everyday Block, its local agent.

SABMiller, the South African brewery, is not new to the Ethiopian market. Recently, it acquired a 20% share of Ambo Mineral Water, which is to release four flavoured brands in two weeks’ time. Heineken, a Dutch company, has been introducing its brand to Ethiopia through Kangaro Plast, its local agent.

The move by these companies, each an international heavyweight in its own right, to acquire a local brewery, is indicative of the investment potential the country holds, according to industry observers.

Although the PPESA has not yet revealed at how much they valuate Meta Abo, the agency has estimated its sales volume for the 2009/10 fiscal year at 355,550 hl and its profit before tax at 38.6 million Br.


17 November, 2010