To help boost local production, the government has announced that it plans to privatize Assela Malt Factory,Â the countryâs largest supplier, and has also encouraged outgrower schemes with companies such as DiageoâsÂ Meta Abo Brewery and Heineken to bolster domestic supply.Â
The countryâs only other operational malt supplier is Gondar Malt Factory, also state-owned, which hasÂ a capacity of 16,000 tons. The remaining demand is covered by imports from primarily Germany and theÂ Netherlands and racked up an import bill of $38 million in 2016.
Low sugarcane production has subdued growth for local distilleries.
A shortage of sugar-derived molasses has had a particular impact on the distillery sub-sector, primarily due toÂ low sugarcane production and challenges with obtaining the appropriate processing machinery. The knock-onÂ impact has influenced product choices, for instance, Balezaf Liquor Factory has stopped production of oneÂ of its popular liquors âEnatna Lijâ. This may have an impact on negotiations for the planned privatization of theÂ countryâs largest state-owned distillery National Alcohol and Liquor Factory.
Foreign ownership is on the rise as international brands acquire their way into the market.
St. George – Ethiopiaâs oldest beer – was bought by BGI Ethiopia (owned by Franceâs Castel Group) in 1998.Â Since then, foreign acquisitions have accelerated. Over the last six years Heineken, Diageo, and Bavaria have allÂ acquired former state-owned breweries and scaled up production capacity. As a result, the top three breweriesÂ in Ethiopia are wholly owned by foreign multinationals while two of the next four largest breweries haveÂ multinationals as major shareholders.
Ethiopiaâs alcoholic beverage sector can be broadly broken down into three sub-sectors: breweries, wineries, and distillers. The brewery sub-sector is the largest, accounting for approximately 90% of overall revenues. Collectively, the industry employs an estimated 10,000 employees.
Value of Ethiopian Alcoholic Beverage Industry Broken Down
Heineken Beer, BGI Ethiopia, and Diageo-Meta Abo Brewery are the dominant players in the industry by both production capacity and revenue. Multinationals Heineken and Diageo both entered the market on the back of local acquisitions, with Diageo taking over Meta Abo Brewery for $250 million in 2012, and Heineken
taking control of both Bdele and Harar breweries in 2011, a deal that totaled $163.4 million. Smaller players are also joining the market: Zebidar Brewery was commissioned in January 2017 on the back of a $53.2 million investment. It is a joint-venture between Belgiumâs Unibra and local partner Jemar Hulugeb Industry. Kegna Beverage Share Company, an Ethiopian entity, has broken ground on a $300 million factory following the companyâs launch in March 2017.
Expansion of existing companies is also underway. Both Habesha Brewery and Raya Brewery have invested in production this year. Habesha is in the process of doubling capacity to 1.5 million hectolitres through a $43.3 million program, while Rayaâs $3.2 million investment will bump production by 25% to a total 750,000 hectolitres. Investments such as these are in step with moves made by competing companies over the last four years.
Taken alone, the brewery sub-sector has an overall turnover of $620 million from an estimated annual productionÂ capacity of 11 million hectolitres.
Beer consumption in Ethiopia has seen strong growth over the last seven years, growing by 15% over theÂ period and currently stands at 7.2 million hectoliters. The trend is set to continue with Asoko sources predictingÂ annual growth of 12% over the next five year, placing the market firmly ahead of the African average of around
5% since 2012. Despite the significant rise in local consumption, the competitive nature of the space, in whichÂ brand loyalty is perceived as being extremely strong, has led to mixed success for participants.
Habesha Beer, for instance, registered a net profit of $1.5 million for 2016 given that it is in peak demand atÂ groceries, bars, and restaurants according to local sources while Raya Beer registered a second consecutive lossÂ of $4.6 million for the same period. The latter is currently in discussion with BGI over a majority share transfer.Â Dashen Brewery SC has also faced difficulty gaining market share and is trying to strive by introducing newÂ brand beers like Jano Beer and Balageru Beer. Brand loyalty has made it difficult to break into the market andÂ win customers for newer brands despite the presence of few other players.
A bulk of the demand for beer comes from so-called âOn Tradeâ clients such as hotels, restaurant chains, bars, andÂ grocery stores.
Also in this segment are Ethiopiaâs recreational centers, non-governmental consumer associations managed byÂ locally elected board members. Funds are raised by selling shares to town residents with government involvementÂ limited to subsidies of rent and utilities for the centers. In Addis Ababa alone, Asoko estimates a weekly consumptionÂ of 590,000 liters of beer across 120 recreational centers, of which 60% is consumed as draught beer.
The remaining âOff Tradeâ market segment is primarily made up of kiosks and informal resellers and makes up aÂ fraction of the overall market.
Breweries typically manage their main channels of distribution, maintaining their own networks to serve âOnÂ Tradeâ client groups, without engaging third-party distributors. However, external distribution partners are contractedÂ to reach areas away from core distribution channels. This essentially consists of the Off Trade segment.
View the fullÂ PDF report here