Africa: African brewers increasingly use local ingredients in their products
There is a growing trend towards contract farming of cassava and other inputs to the brewing industry across Africa, where seven governments have established special tax regimes to stimulate the use of local crops in beer production, All Africa reported on December 31.
While using sorghum and cassava in Africa reduces the import bill for barley by up to 40%, the special tax concessions negotiated have proved critical to the launch of these new beers, which are priced at around 70% of the cost of mainstream beers.
According to the industry market research company Canadean Ltd, the beer market in western Europe is flat, with its decline estimated at -0.6% a year, while "the volume of beer sold in Africa is expected to grow 4.6% per year on average from 2012 to 2016, faster than any other continent and nearly double the global rate." Accessing this growing market potential in Africa, through the production of lower-priced beer capable of attracting consumers away from traditionally brewed alcoholic beverages, is a critical part of the corporate strategies of companies such as SABMiller and Diageo.
For instance, in Uganda, contract farming of sorghum for brewing purposes was first pioneered in 2008 by SABMiller.
According to reports, contracts negotiated with beverage producers are yielding farmers far better returns than traditional marketing channels.
It is reported that "contract farming has helped increase acreage under cultivation, improved farmers' bargaining power and also widened access to credit for farmers organised in groups."
Total annual sorghum purchases in Uganda are estimated at US$11.3 million, with some big farmers registering incomes of up to US$18,914 per season and small farmers around US$1,891 per season. Some 16,000 farmers are now involved in contract farming of sorghum for the brewing industry. However, land and input constraints are reportedly holding back smallholder participation in the supply of sorghum to brewers. Sorghum-based beer now accounts for half of SABMiller's 55% share of the Ugandan beer market.
In Mozambique, Cervejas de Moзambique now produces its Impala beer largely based on cassava (60%). According to the company CEO, "using locally produced cassava reduces the costs of importing malt, hops and other ingredients in beer production, by avoiding costs related to import and bureaucratic processes".
The number of farmers contracted to supply cassava has increased from 2,000 in 2011 to 10,000 in 2014, with some 10,000 tonnes of cassava purchased annually for use in the production of 30 million small bottles of beer, valued at 14 million meticais (Ђ356,000).
In Mozambique and countries such as Uganda, Zambia and Zimbabwe, SABMiller has secured a 75% rebate on the standard excise tax charged on beer. Diageo has secured a similar deal in West Africa for its Ruut beer, which is produced from yams.
02 January, 2015
