Home' Trinidad and Tobago Guardian : June 8th 2014 Contents JUNE 8 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG19
On a Friday evening in Onitsha,
Nigeria, as the beer market
is closing, a man carefully
straps six cases of Hero lager
and two cases of Pepsi to the
back of his mo-ped. Another
rolls away his purchases by wheelbarrow. Buses
parked nearby soon will be filled with day-
trippers and their cases of booze.
Each day a vast quantity of beer is sold from
this closely packed warren of stores. It is part
of a sprawl of specialist markets in the city, a
commercial hub on the Niger river, which draws
in traders from across southern Nigeria.
It was the bustle of Onitsha that persuaded
SAB Miller, the world s second-largest beer
company, to set up a brewery here. The market
takes a slice of SAB s local production and sells
it on to small traders who otherwise are hard
The company had been late in coming to
Nigeria. First it acquired a rundown brewery
in Port Harcourt in 2009 and then another in
Ilesha, before it built a brand-new plant in
Onitsha in 2012. Already its capacity is being
increased to slake locals ever-growing thirst.
Nigeria is Africa s largest economy and its
largest beer market after the country where
SAB (South African Breweries) was founded in
1895. The firm moved its main stock-market
listing to London in 1999, and a few years later
acquired Miller, a big American brewer, in a
deal that gave the renamed SAB Miller global
scale and reach. It now operates in 75 countries,
but in recent years has found that its fastest-
growing and most promising market is the con-
tinent of its birth.
SAB has operations in 15 African countries
and a stake in 21 others through its alliance,
bolstered by cross-shareholdings, with Castel,
a French liquor company. Its beer has been
brewed in Zimbabwe for more than a century,
and it has had operations in Angola and
Botswana since the 1970s.
Its presence on the continent was only really
felt in the mid-1990s, however, when it snapped
up newly privatized breweries in Ghana,
Mozambique, Tanzania, Uganda and Zambia.
This was not a grand strategic gamble on African
growth, because the continent s economies
were then in a funk.
"At this stage it was about fixing the com-
panies," says Mark Bowman, boss of SAB s
With repairs and sounder management, the
thinking went, they ought to turn a decent
profit. In fact the investments turned out to
be shrewder than anyone could have expected.
Within a few years Africa s economies began
to expand quickly, in part because of Chinese
demand for the continent s abundant raw mate-
rials. GDP grew at an average annual rate of
more than 5 percent in the decade after 1997.
Rising incomes meant that more consumers
could afford to switch from home brews to fac-
tory-made beer. SAB found that it could not
keep up with the burgeoning demand. It ditched
its make-do-and-mend business model and
began to invest in building modern breweries.
SAB also began looking for fresh territories
to conquer. This was a riskier gambit than buy-
ing rundown breweries on the cheap.
In Africa one company tends to dominate
in each national market. In the nine largest
markets, a single firm accounts for three-quar-
ters of beer sales on average, according to a
report by Rey Wium and Anthea Alexander of
Renaissance Capital, an investment bank. Scale
is needed to defray the distribution costs: A
brewer has to be able to deliver a low-value
but bulky product twice a week to remote tav-
erns. Most deliver soft drinks too; SAB is the
leading bottler of Coca-Cola in Africa. There
are high fixed costs to building a new brewery
in Africa. Water treatment and power add to
the price tag. An entrant has to sell a great deal
of beer even to break even.
SAB first looked at setting up in Francophone
West Africa, but opted instead for an alliance
with Castel, which was established there. In
1998 SAB entered Kenya, building a brand-
new brewery, only to retreat a few years later
after being out-muscled by East African Brew-
eries, a local outfit in which Diageo, a big British
liquor company, has a majority share.
The company invested in South Sudan even
before its formal independence from Sudan in
2011. The goal was to establish its brand there
before anyone else could enter. At first things
went well, but the government soon split into
factions. Lager sales fell by a quarter last year
amid political violence.
Nigeria, in contrast, is one of SAB s fastest-
growing ventures. Stung by its experience in
Kenya, the firm initially had been wary of enter-
ing a market where it faced not one but two
big incumbents: Guinness, owned by Diageo,
and Nigerian Breweries, owned by Heineken,
the Dutch giant which also has ambitions to
refresh all parts of Africa.
This time the company was careful to avoid
a head-on clash with its rivals. It kept out
of Lagos, the country s commercial capital,
where costs also are higher.
"We are a regional player," insists Simon
Harvey, head of SAB s Nigerian businesses.
It treats its three breweries there as separate
entities, each with its own brands. A new beer
was developed specifically for Onitsha. Nigerians
like larger-than-life names, and the country s
leading brand is called Star. SAB named its beer
Hero. Its label features the rising sun, an icon
of the local Igbo people.
SAB uses such symbolism in other African
markets to give its beers a local identity.
"People badge themselves with beer," says
Alan Clark, the company s overall boss. "It has
an emotional content."
The firm s brand in Zambia is Mosi, the local
name for Victoria Falls, and the label depicts
the frothing waterfall. In Tanzania its best-
selling beer is Kilimanjaro. Each ale has a distinct
taste. Hero is brewed with fewer hops than a
European lager. This gives it a less bitter, more
refreshing taste that is suitable for a hot climate.
It also makes the beer more "sessionable"; peo-
ple can drink more of it.
A push to make factory-made beer more
affordable is an important part of SAB s strategy
on the continent. An average consumer works
for two to six hours to earn enough to buy half
a liter, compared with 17 minutes in America.
Hero is priced competitively, with a 650-milliliter
bottle costing US$1, around 25 per cent cheaper
than a bottle of Star.
The bulk of the African market is further
down the income scale, however. Two-thirds
or more of all the alcohol consumed in Africa
is supplied not by big breweries or distillers
but by home brewers and bootleggers. Their
output varies from the merely drinkable to the
toxic: A dud batch of home-brewed spirits
recently claimed around 100 lives in Kenya.
The market is nevertheless vast, and SAB
worked on a way to tap it, in a modest corner
of its empire at Kitwe, in Zambia s copper belt.
Zambia is the home of chibuku beer. It was
developed in the 1950s by Max Heinrich, a
German, who had the idea of making the indige-
nous home brew on a commercial scale. His
business passed through many hands before
SAB acquired it in 1999.
The brewing process at Kitwe has not
changed much in half a century. Maize is ground
and mixed by hand with cold water in a giant
tub. The mix is then sucked into two pressure-
cooker towers that look like spaceships from
a 1950s sci-fi movie. The steam quickly turns
starch into sugar. The mix is strained and cooled,
and yeast is added to turn the sugar to alco-
hol.Within a few hours the brew is poured into
one-liter cartons. It continues to ferment in
them, and must be sold and drunk within a
few days, before it goes sour. The beer has the
consistency and color of a watery porridge. The
SAB brand is called Shake Shake, because the
carton has to be shaken before each sip to dis-
perse the sediment.
Until recently SAB had seen chibuku as a
sunset business, because of the competition
from informal brewers who pay no tax. Shake
Shake is now sold in 11 countries, however, and
is the main weapon in the firm s battle to capture
the bottom end of the market. A liter sells for
half the price of the main local brands, such
as Hero or Mosi. Faster sales of chibuku have
helped to cushion the blow of a big fall in lager
sales in Zimbabwe, where money is tight.
What might other consumer firms looking
to Africa learn from SAB? It is not an easy place
to do business, and the results are not uniform.
Lager sales are booming in Ghana and Nigeria,
but shrinking in South Sudan and Zimbabwe.
There also are few reliable sources of business
information. Firms have to learn as they go
South African businessfolk have a phrase for
it: paying your school fees. The first year in a
new African market almost never goes to plan,
"You ve got to persist through the school-
fees stage and not lose your nerve," he says.
@2014 The Economist Newspaper Ltd.
Distributed by the New York Times Syndi-
Riding the beer frontier
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