Blog post

Opportunity in Africa – Why the major brewers are targeting the continent

  • Posted by Mike South,
  • on Tuesday September 15, 2015

 

One of the main opportunities that emerged from our Beer Industry survey was the potential of expansion into the African market.

44% of respondents thought the area that would see the most growth over the next 12 months was Africa

 

Why Africa?

Africa has become an increasingly attractive market for the beer sector, due to its large populations, increasing disposable incomes and the fact it remains largely untapped in comparison to the saturated European and US beer markets.

Regional governments are also trying to push consumers away from traditional home-brewed alcohol towards branded alternatives for safety and economic reasons. It was reported in 2013 that home-brewing accounted for 75% of the beer market.

Research by Canadean suggests Africa can expect a 5% average annual growth rate between 2013 and 2017, above all other expanding markets.

 

What are the major brewers already doing in the region?

SABMiller saw a 4% increase in net profit in the Africa region in 2014 and are targeting significant growth there in 2015.

Diageo also has a strong portfolio in Africa. This has been touted as one of the main reasons AB In Bev might be interested in the buying the business as the largest global brewer has little exposure in Africa. Find out more about their interest here.

 

Where are the largest areas for opportunity?

South Africa, Nigeria and Angola are the three largest markets in terms of volume.

South Africa is the clear leader – it expected a total volume of 30.9m hl in 2014 and accounts for around 30% of the overall African market.

Gaining market share from SAB might be difficult in South Africa, but the same can also be said in Nigeria.

Heineken controlled Nigerian Breweries dominated 2014 with 50% of beer sales in Nigeria with consumers drawn to their Star and Gulder brands. However, there is some hope for competitors in Nigeria as Orijin, a herb based African blend,became increasingly popular last year.

Alongside these countries, Kenya has seen growth with Diageo-owned East African Breweries increasing its market share and increasing its spirits penetration.

 

What are the challenges in Africa? And how can you be a success there?

Some of the challenges for the region are much the same across all industries in Africa – the power network and transport infrastructure increasing production costs and hampering distribution.

Perhaps in parallel with the beer sector across the globe, the African market craves product differentiation and it is clear that brand development is crucial for success.

SAB Miller’s brand explorer shows how they have created a beer for each region – ensuring they are created with locally sourced products and appeal to the local consumers. Take Impala as an example:

What's next?

The scene seems set for African growth over the next couple of years. With government support and an increasing appetite for alcohol the major brewers are looking to securing significant market share.

We think that brand differentiation and locally sourced ingredients and brand values are the way to securing consumers. We also think that in the regions where beer is already popular there will be an emergence of premium beers – where consumers pay a higher price for a better product.

Nonetheless it is an area of great excitement in the beer category.

 

Picture Source - SAB Miller

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