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Global brands eye local beers to quench African palates

BUSINESS NEWS
By Reuters | July 18th 2016

International brewers in Africa are expanding their production of beers based on local ingredients, snapping up craft brewers and introducing more brands as low-cost beers gain popularity on the fast-growing but still poor continent.

Diageo acquired a South African rival specialising in local beer last year, while SABMiller is opening new production lines in markets such as Zimbabwe where cheap competitors and illicit brews often out-sell more globally recognised competitors.

Kenya-based East African Breweries Ltd, a Diageo unit, has already doubled the proportion of materials sourced locally to 80 per cent from 40 per cent in the past three years, partly driven by demand for its sorghum-based Senator Keg beer.

Senator Keg, sold by the mug rather than in more expensive bottles, costs the equivalent of 40 Kenyan shillings ($0.4) for 500 ml, whereas EABL’s well-known Tusker brand sells for Sh180 for a 500 ml bottle.

That is good news for consumers like Gilbert Amoko, a 35-year-old driver in Kampala, who says he can now afford to drink regularly.

Diageo unit Uganda Breweries Ltd (UBL) has pinned hopes on Ngule, or “Crown” in the Luganda language that started production this year based on cassava, a tuber that is a staple food in the nation at the heart of Africa’s Great Lakes region.

Local Tastes

Ngule has captured 7 per cent of the formal beer market in just five months after launch, UBL says, winning customers in dusty drinking holes in poor districts of Kampala like Hope Naturinda’s bar, where it sells for 2,200 shillings ($0.65) per 500 millilitres, less than half the price of Diageo’s renowned Guinness brand.

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“More than half of my customers take Ngule now,” said Naturinda. “It’s affordable and very strong.”

“I used to drink occasionally because I could not afford it. With Ngule I can afford to drink at least three times a week,” explained Amoko.

It also highlights a challenge multinationals have faced across Africa. While the continent still boasts some of the world’s fastest growing economies, even with a commodities price slide, global consumer brands are still waiting for a new middle class to emerge wanting to pay for their best-known products.

Some have responded by scaling back plans for the continent, with foods giant Nestle saying last year it was cutting 15 per cent of its workforce in Africa because it had overestimated the rise of the middle class.

But in the beer business, brewers from Nigeria to Kenya and Uganda to Mozambique are turning instead to maltose extract from cassava or malted sorghum grain to replace pricier barley, helping reduce input costs and creating new products.

“Traditional African beers present a significant opportunity within these markets,” said SABMiller spokesman George Hudson.

“To play seriously within the affordable segment in Africa,it is important to produce beverages that are attuned to local tastes, at prices that are fair and reasonable,” he said.

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