![#](www.e-malt.com/images/left_top_corner16x200.gif) | E-Malt.com News article: Africa: SABMiller ratcheting up production of more affordable beers using sorghum and cassava![Brewery news](https://e-malt.com/Images/BeerBullet2.gif)
Africa's biggest brewer SABMiller is ratcheting up production of more affordable beers in the continent using sorghum and cassava in place of more expensive barley to drive growth in what is already the group's fastest growing region, Reuters reported on March, 13.
The London-based brewer's Africa region - minus South Africa - produces 13 percent of group profits, and strong beer volume and earnings growth is being driven by its biggest markets such as Tanzania, Mozambique, Zambia and Botswana.
A large part of the strategy directed by its African regional managing director Mark Bowman is to make beer more affordable and less of a luxury product than when it is priced at around $1 a bottle across the continent.
"By African standards, beer is expensive so we look at sub-inflation pricing and to develop an affordable category," Bowman said.
He says that the outlook for the beer industry in Africa is sound with strong GDP growth of 4-6 percent per annum and population growth of 2.5 percent, and within that framework a low priced entry to beer drinking is extremely important.
The world's second largest brewer and maker of brands such as Castle, Miller Lite and Peroni has set ambitious annual targets for Africa to grow volumes 6-8 percent and earnings by over 10 percent, and Bowman says the main limiting factor is capacity constraint after a recent spurt of growth.
Using locally-produced sorghum and cassava rather than pricey imported malting barley is key to this strategy as is the increasing use of keg beers rather than bottled ones and encouraging traditional cloudy sorghum-made Chibuku beer.
Although sorghum and cassava is around 60 percent the price of malting barley, there still needs to be a cut in excise tax to reduce the price of these beers significantly which has seen them sell well in Uganda, Kenya and Mozambique.
SABMiller's Tanzania managing director Robin Goetzsche says tax breaks are key to producing more affordable beer as only 17 percent of a bottle of beer is the liquid inside, with the rest accounted for by packaging, marketing, distribution and tax.
In 2004, SABMiller introduced its first sorghum beer Eagle in Uganda which now accounts for half of its 55 percent market share, and with major competitor Diageo also seeing success, around half of Uganda's beer is sorghum-based.
In the East African nation, the sorghum beer enjoys half the excise tax of barley-made beers, and so with lower production costs and tax its Eagle beer sells at 70 percent of the level of mainstream beers such as Nile Special and Club Pilsner.
"We need to get the price down to 80 percent of mainstream to get a big kick in demand," Goetzsche said.
The strategy has not worked as well in Tanzania as the nation has a more moderate excise tax regime and the cut for sorghum-based Eagle was only to 75 percent that of barley beers, and so only allowed Eagle to be priced at 88 percent of its mainstream national beers brands Kilimanjaro and Safari.
This was not sufficient to boost demand and Goetzsche says the brand which accounts for around 5 percent of the group sales has seen a volume decline of 12 percent, in a country where SABMiller expects its overall beer volumes to rise 17 percent in the year to end-March 2012.
This has been offset by the success of its mainstream beers and the recent launch of Castle Lite, and he is expecting annual earnings up 15 percent in SABMiller's biggest market in its Africa region where its market share has risen to 73 percent.
While sorghum has been used in Uganda and Tanzania, and by Diageo in Kenya to replace barley as a source of starch, further south in Mozambique, SABMiller is using the staple root crop cassava with encouraging results over the last few months.
Its first cassava beer, named Impala, was launched in late October and within just over 2 months had taken 1.7 percent of Mozambique's beer market and has boosted output at SABMiller's third and newest brewery at Nampula in the north of the country.
SABMiller's Mozambique managing director Grant Liversage says the group negotiated with the government to pay a quarter of the excise tax for its beer, and is planning that cassava beer will soon make up a third of production at Nampula which would see its national market share rise above 5 percent in a market where the brewer has an overall share of over 90 percent.
The use of cassava and the tax break allows the beer to be priced at 70 percent of mainstream beer brands like 2M and Manica and its success has encouraged him to believe that the beer brand could replace its barley-based economy brand.
The cassava crop is processed by a mobile operating unit close to the growing crops and transported to the brewery where it makes up 70 percent of the starch requirement for brewing with the other 30 percent coming from malting barley.
"There is a huge cassava crop in Mozambique, and cassava growth and some barley development will be our major initiatives for the coming year," Liversage said.
14 March, 2012
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