Ethiopia: Ethiopia’s beer market becoming more and more competitive
This month Ethiopia’s beer market witnessed another milestone. Vasari, a UK-based asset management firm Duet Group (Duet) with 51% share in Dashen Brewery inaugurated a 2 million hectolitres beer production capacity per year plant, New Business Ethiopia reported on December 12.
At the inaugural of the country’s largest brewery plant in Debre Birhan city, 100km north east of Addis Ababa, Vasari announced its new investment of $150 million in Dashen Brewery. “We have brought the most advanced brewery in Africa – and one of the most advanced in the world – to Ethiopia. This is a clear sign of our confidence in Ethiopia and it complements our growing portfolio in the country,” said, Vivian Imerman, CEO of Vasari Global.
The new plant is expected to hire 500 permanent and 1,000 temporary workers. The new brewery followed the $156 million Walia Brewery’s plant with 1.5 million hectolitres of beer production capacity inaugurated a year ago by the Dutch’s multinational, Heineken.
Beer industry in Ethiopia has been growing in recent years including a surge in demand associated with increased urbanization, population growth, and rising incomes. From a level of just one million hectolitres in 2003/04, total beer production in the country has increased to nearly 3.1 million hectolitres by 2008/09. Dashen’s new brewery plant will now boost the total annual production capacity of the breweries in Ethiopia to around 10.5 million hectolitres. In addition, the country has also been importing beer from different countries.
One of the major milestone for the growth of the industry came in the past few years when the government transferred all state-owned breweries to private companies only keeping 49% share of Dashen Brewery, which still belongs to Tiret Endowment Fund that is owned by Amhara National Democratic Movement (ANDM) - one of the four member parties of the ruling party coalition (Ethiopian Peoples’ Revolutionary Democratic Front).
With a population closer to 100 million, Ethiopia’s per capita consumption of beer stands at eight litres and is expected to reach nine or 10 by the end of 2015/16, which is very small compared to Kenya’s above 15 litres and South Africa and around 60 litres.
On the consumer side, beer lovers in Addis Ababa have now the choice to drink a 330 millilitres bottle of beer for around half a dollar in small bars, and up to around two dollars in clubs.
Except St. George Beer of BGI (France’s Castel Group), which was operating in Ethiopia since 1922, all breweries in Ethiopia were owned by the government. The 42-year-old brewery in the country, Meta Abo, was sold to Diageo for $250 million in June 2012 while Bedele and Harar breweries are handed over to the Dutch-based Heineken $178.3 million.
Since 2012 some breweries have been engaged in very aggressive marketing campaigns such as, ‘buy one and get another for free’ and covering a week-long expenses of Ethiopian football fans to Seychelles with chartered plane.
“The growing competition definitely means we have a challenging battle ahead for all players in the beer industry in Ethiopia,” says Francis Agbonlahor, Managing Director Meta Abo Brewery of Diageo.
Meta Beer of Diageo is known more for focusing on promotion of corporate social responsibility activities, entertainment sponsorships and campaigns like, ‘don’t drive if you are drunk’ as well as engaging with local malt producing smallholder farmers who supply only half of the demand of breweries in the country.
“We look forward to the continued success in pushing the boundaries to develop innovations that meet varying consumer preferences and demand, while also leading the way in responsible marketing and innovation in Ethiopia,” Mr. Agbonlahor says.
On the other hand, BGI is mostly known for sponsoring holiday TV programs, helping artists and sponsoring entertainment programs, concerts, music albums etc.
But a ground-breaking promotion was witnessed when Heineken’s introduced Walia Beer, taking the national football team’s name, ‘Walia (Anthelope)’. After successful market control with its new brand for over a year, the company recently fully sponsored Ethiopian football fans to Seychelles with a plane labeled with Walia Beer logo to travel and support their national.
A few months ago, two new breweries Habesha and Raya have also joined the market. With its innovative labeling and promotion that takes back people to the old days of Ethiopia’s history and the old days of patriotism, Habesha managed to win the minds of most of beer lovers at least in the capital, Addis Ababa, which consumes about half of the country’s total beer production.
But another creative marketing came las September, when Dashen Beer signed a partnership with British’s Arsenal football club. The three-year-partnership agreement makes Dashen Brewery Official Beer Partner of Arsenal Football Club.
Following that Dashen launched a TV commercial with three famous players of Arsenal (Theo Walcott, Per Mertesacker and Nacho Monreal) dancing ‘Eskista’ with Ethiopian traditional music.
In addition to bringing closer Arsenal fans closer to Dashen Beer, the partnership aims to help Arsenal to get closer to its fans in Ethiopia while supporting Dashen Brewery’s community based initiatives with coaches from the club taking part in grassroots football development projects in Ethiopia.
Dashen Brewery will also directly engage with supporters in Ethiopia through the club’s digital platforms, promotional activities and marketing initiatives featuring Arsenal first-team players and club legends.
Though there are several breweries operating in the country, fierce competition is expected among the three – BGI Ethiopia, Dashen and Heineken, each with production capacity of over 2.5 million hectolitres of beer.
BGI Ethiopia’s production capacity stands at 3 million hectolitres from its three factories in Addis Abeba, Hawassa and Kombolcha. While Dashen has close to 3 million hectolitres production capacity per annum from its two brewery plats. Heineken, which owns Walia, Harar and Bedele breweries, has a capacity of 2,450,000 hectolitres.
On the other hand, Diageo’s Meta Abo Brewery has a one million hectolitres of beer per year capacity followed by the newcomers, Habesha and Raya breweries, with production capacity of 650,000 and 600,000 hectolitres, respectively.
“In such aggressive and costly marketing campaigns, I think the breweries with a small production capacity may soon be swallowed by the big ones,” says Aster Alemu, a small hotel manager in the capital.
“Their profit margins will not be as it used to be in the old days. For some of them survival depends on their marketing strategy and winning the minds to secure loyal customers,” she says.
Temesgen Alemayehu, Director at membership affairs of Ethiopian Marketing Professionals Association, has a different opinion. “I don’t think, there will be a merger or one being swallowed by another at this stage of Ethiopia’s beer industry because the market is fragmented and unserved,” he says.
“Product and brand awareness in Ethiopia is not that much developed. As a result, there is no brand loyalty on the beer customer side. It is easy to switch one beer brand consumer to another brand through promotion and we have been witnessing this,” he says.
Melaku Kinfegabriel, an independent business consultant in Addis Ababa, also believes that beer market in Ethiopia is not yet saturated indicating that there are many unserved markets in the country.
“I don’t think that the big companies will try to kick the emerging small ones by selling at a breakeven for longer time. Why would they sell at breakeven? The market is not mature. This kind of behavior can only be seen in highly competitive matured markets,” Mr. Melaku says.
With growing number of players, product offerings, quickly-evolving marketing techniques, many agree that beer industry of the second most populous nation in Africa is expected to continue its fastest growth.
“As a global business with over 220 outstanding brands in spirits, beers, wines and non-alcoholic adult soft drinks and operating in over 180 markets, we are used to tough competitive environment and as we have successfully done in many markets across Africa and the world, we look forward to coming out on top in Ethiopia,” says Mr. Agbonlahor of Diageo’s Meta Abo Brewery.
16 December, 2015
