African roots create market for SABMiller
Business Day - Nov 2nd 2011, 15:35
Brewer launches low cost cassava-based beer for Mozambican market to capture previously untapped low income earners
With the introduction of the first commercially produced cassava-based beer in Mozambique, SABMiller aims to increase its footprint in the relatively untapped home-brew beer market in Africa, which could be four times the size of the traditional market.
Almost half the alcohol made on the continent outside SA was made at a "subsistence" level, CEO Graham Mackay said yesterday at a Johannesburg press conference launching the product. It was a market that paid no tax and had no quality control, he said. "We always looking for new markets and opportunities."
The price of mainstream beer offered by brewers on the continent such as SABMiller and the UK’s Diageo means it is largely inaccessible to a large segment of alcohol consumers and is seen as a luxury purchase.
According to the United Nations, at the end of the 20th century, there were 315-million Africans living on less than $1 a day, which could increase to 404-million in the next four years.
Mainstream beer on the continent costs about $1, while homebrews can cost 85% less.
The informal market had "enormous untapped potential", Simon Hales, analyst at London-based Barclays Capital, said yesterday. "Your usual lager beer in the usual form is still too expensive," he said.
SABMiller will brew its Impala beer in Mozambique with local subsidiary Cervejas de Mocambique. "We hope the Impala brand gets about 10% of the market share eventually," MD of the brewer’s Africa unit Mark Bowman said. "An attractive price is important."
The beer will sell for 75c for a 550ml bottle, compared with the average price in Africa of $1 for an equivalent unit.
The brewer first invested in its Mozambique partner in 1995. Average per capita consumption of beer in the country is around 8l a year, against 60l in SA.
Impala is brewed using 70% cassava — a root vegetable that grows widely on the continent.
SABMiller will make use of the locally grown starch, which will be much cheaper to use than importing alternatives such as maize, Mr Hales said.
"It also enables them (SABMiller) to partner with local farmers and that wins favour with local authorities."
The brewer aims to increase local raw material sourcing in Africa to 50% over the next two years. SABMiller now imports about 80% of its raw materials.
Initially, the Impala brand will be restricted to rural areas — basically where cassava is grown, Mr Bowman said. "We’ll check the commercial success and in five to six months of running this then decide where to expand."
SA, which does grow some cassava, is not one of the markets primed for the product, according to Mr Mackay.
"There’s no discount category beer market in SA."
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