Foreign brewers fight for Ethiopia’s beer drinker

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Thursday, 2 April 2015

ADDIS ABABA: International brewers are helping transform Ethiopia’s business landscape as it slowly sells the assets of the former communist state and opens up to foreigners drawn to one of Africa’s fastest growing economies.

Heineken, Diageo and privately-owned Dutch brewer Bavaria, have snapped up state breweries or built new ones in the past four years, introducing new beverages and increasing competition for St George, Ethiopia’s oldest beer brand, that was itself bought by France’s Castel Group in 1998.

The east African nation that once could not feed itself now draws investors keen to profit from the increasing prosperity of its 96 million people.

“We recognise the huge potential in Ethiopia,” Diageo said in a statement e-mailed toReuters. It bought state-owned Meta Abo brewery for US$225mil in 2012 and has doubled brewing capacity and invested in new brands.

It launched Zemen Beer in December and non-alcoholic Malta Guiness in August 2013.

Heineken bought state-owned Bedele and Harar Breweries for a combined US$163mil in 2011, introducing the Walia beer, which bar staff in Addis Ababa say is catching up St George.

A few years ago, small bars struggled to get hold of crates of St George as they were bought up by hotels or bigger restaurants but Castel has increased brewing capacity, meaning they are now readily available.

Prices have dropped as a result of the extra competition and supply. A St George bottle sells for 15 birr (75 US cents) at Mery’s Pub, down from 18 birr in December.

“We have variety now for our customers – and more supply,” said Meron Girma, who runs the pub in a small shack with a corrugated iron roof next to the capital’s increasingly affluent Bole Medhane Alem district.

Per capita income is still below Sub-Saharan Africa’s average at just US$470 a year, according to World Bank figures for 2013 but annual economic growth rates are 8% to 9% and the political outlook is stable. The Ethiopian People’s Revolutionary Democratic Front, in power for a quarter of century, is expected to sweep a May election.

“Ethiopia has started to attract high quality foreign direct investment,” Abraham Tekeste, state minister for finance and development, told Reuters.

The International Monetary Fund estimates foreign direct investment will reach US$1.8bil in fiscal year 2014/15 and US$4.3bil in 2018/19.

Investors will have to wait for entry into many areas of the economy, which is still dominated by the state. It rapidly opened up the beverage sector, but has moved more cautiously in other industries. Telecoms remains in state hands while banks and retail businesses are off limits to foreigners.

The government says it needs the revenues from telecoms to pay for new railways, roads and dams. It says some businesses need protection until they can compete with foreigners.

Critics say the approach supports inefficiencies at state-owned companies, noting how the brewing industry has changed and prices fallen as international firms have come in.

They say better run companies would deliver bigger profits, pay more tax and generate jobs. – Reuters

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