Ethiopia: The battle of the brewers

Ethiopia, one of the fastest growing countries in Africa, has become the arena of fierce competition among multinational beverage companies slugging it out for a bigger share of an expanding market. This trend is being replicated across the continent as companies reach out for new markets to offset slow growth in the West. James Jeffrey, in Addis Ababa, has been investigating.

When I first came to Ethiopia in 2000 I stayed in the outskirts of Addis Ababa where if you wanted a drink you went to a shack by a muddy track – it was the rainy season. Admittedly those makeshift bars did the job and I had the first of many enjoyable Meta beers during my stay.

When I returned in 2013 to the same area – no longer in the outskirts, subsumed into the expanding city, with mud tracks replaced by tarmac roads – I noticed a new distribution warehouse for Meta beer, with the Diageo emblem beside the entrance; I felt a tinge of pride that a company from my homeland the UK, and with a global presence in about 180 countries, had finally come to Ethiopia.

Diageo Plc certainly isn’t alone. Ethiopia’s rapidly evolving beverage market has attracted big hitters from the West looking to seize market share in what is undoubtedly a buoyant scene and, most importantly for marketers, still particularly malleable.

‘The beauty of competition is it is great for everyone: the consumer, the country, socio-economic development. Sure, it’s going to be tough for us, but we’s not new to this – we’ve competed in more than 180 countries before. Bring it on’

Like Diageo, the French brewing giant BGI Castel, and Dutch behemoth Heineken have recently stepped up investment in Ethiopia and pursued aggressive programs of mergers and acquisitions as they try to muscle away the opposition.

BGI has been in Ethiopia for more than 15 years, while Heineken entered Ethiopia in 2011 when it acquired the state-owned Harar and Bedele breweries. Despite the variety in brands and companies behind them, all involved appear unified in their reluctance to disclose precise figures, especially when it comes to production volume and growth. But for once, that’s not down to old-fashioned wariness of nosy journalists.

“Competition is stiff and if others know our production volumes, that could give them an advantage,” says Blayne Tesfaye, communications manager for Meta Abo Brewery that produces Meta beer. “So many new investors are coming, breweries are expanding, their building capacities – it makes it tough.”

Diageo’s $225m purchase of formerly state-owned Meta Abo Brewery in 2012 came at the end of a five-year period in which Diageo invested more than $1.6bn in building its businesses in Africa – it is the majority shareholder in East Africa Breweries Limited, the region’s leading beverage alcohol company. It had already been present in the Ethiopian capital through its representative office for marketing its international premium spirits brands including Johnnie Walker Scotch whisky, Smirnoff vodka and Gordon’s gin.

But despite being the world’s biggest liquor maker, the competitive state of the Ethiopian beverage market means Diageo has a tough fight on its hands if it wants to come out as number one.

Shifting markets

Western companies are cognizant of major changes in the global structure of the alcohol industry. While alcohol markets in Western Europe, North America, Australasia and Eastern Europe approach stagnation, markets in Latin America, Asia-Pacific, the Middle East and Africa are expected to grow substantially.

Total volume sale of whiskies in emerging markets, for example, are set to outstrip those in traditional markets by 2018, and alcohol markets in Africa are expected to grow by 5.2% between 2011 and 2016. Hence developing countries like Ethiopia – and many others in Africa – are particularly alluring.

“Sub-Saharan Africa is not only a trillion dollar market, but the IMF forecasts it will have seven of the world’s 10 fastest-growing economies over the next five years,” the UK’s then Minister for Trade and Investment, Lord Green, remarked after Diageo’s purchase of Meta Ato Brewery in 2012. “Within this market, Ethiopia represents a great opportunity, and I hope that where Diageo leads, other UK firms will follow.”

A traditional market such as the UK’s still remains attractive, with per capita consumption at a thirsty 75 litres. But the flip side of such high consumption is that there aren’t many ways it can increase, especially with increasing health consciousness related to alcohol intake.

Ethiopia’s per capita alcohol consumption, although increasing, is still only about seven litres, up from four litres a few years ago. By way of comparison to other African countries, in Kenya per capita consumption is about 12 litres, and in South Africa it is about 59 litres.