In SAB Miller’s March Across Africa, Nigeria Is No. 2 Beer Market

In SAB Miller’s March Across Africa, Nigeria Is No. 2 Beer Market

When long-established African beer maker SABMiller went global, it soon found that its fastest-growing markets were on its own doorstep, TheEconomist reports.

The world’s second-largest beer company, SABMiller was founded in South Africa in 1895 as South African Breweries.

Nigeria is now its second-largest beer market after South Africa. In its quest for global expansion, SAB moved its main stock market listing to London in 1999 and bought Miller, a big American brewer, a few years later in a deal that gave the renamed SABMiller global reach. SABMiller now operates in 75 countries, but in recent years its fastest-growing and most promising markets are in Africa.

SAB operates in 15 African countries and has a stake in 21 others through its alliance with Castel, a French drinks firm.

Its beer has been brewed in Zimbabwe for more than 100 years and it has had operations in Angola and Botswana since the 1970s. But its presence on the continent really took off in the mid-1990s when it bought newly privatized breweries in Mozambique, Ghana, Uganda, Zambia and Tanzania.

This was not a grand strategic gamble on African growth, TheEconomist reports. “At this stage it was about fixing the companies,” said Mark Bowman, an SAB Africa boss. With repairs and sounder management, the logic went, they ought to turn a profit.

It turned out better than anyone expected. Within a few years Africa’s economies began to expand. Rising incomes meant more consumers could afford to switch from home brews to factory-made beer. SAB couldn’t keep up with the demand. It abandoned its make-do-and-mend business model and began investing in building modern breweries.

Nigeria is one of SAB’s fastest-growing markets. The company was initially wary of entering a market with two formidable incumbents — Guinness, owned by Diageo, and Nigerian Breweries, owned by Heineken, a Dutch company keen to reach all of Africa. It has three breweries in Nigeria — each treated as a separate entity. Each has its own brands. “We are a regional player,” said Simon Harvey, head of SAB’s Nigerian businesses.

Nigerians like larger-than-life names for their beer, TheEconomist reports. The country’s leading brand is Star. SAB named its beer Hero. Its label features the rising sun, an icon of the local Igbo people. SAB uses symbolism in other African markets to give its beers a local identity, TheEconomist reports. “People badge themselves with beer,” said Alan Clark, the company’s boss. “It has an emotional content.”

The firm’s brand in Zambia is Mosi, the local name for Victoria Falls; the label depicts the frothing waterfall. In Tanzania its best-selling beer is Kilimanjaro. Each ale has a distinct taste. Hero is brewed with fewer hops than European lager. This gives it a less bitter, more refreshing taste suitable for a hot climate. It also makes the beer more “sessionable”– people can drink more of it.

A push to make factory-made beer more affordable is an important part of SAB’s strategy on the continent. An average consumer works two-to-six hours to earn enough to buy half a liter, compared with 17 minutes in the U.S.. Hero is priced competitively. A 650-milliliter bottle costs 150 naira ($1), around 25-percent less than a bottle of Star.

But the bulk of the African market is lower down the income scale. Two thirds or more of all alcohol consumed in Africa is supplied home-brewers and bootleggers, not by big breweries or distillers. Their quality varies from drinkable to toxic: a bad batch of home-brewed spirit recently killed about 100 people in Kenya. The market is nonetheless huge and SAB found a way to tap it at Kitwe in Zambia’s copper belt.

Zambia is the home of chibuku beer. It was developed in the 1950s by Max Heinrich, a German, who had the idea of making the indigenous home-brew on a commercial scale. His business passed through many hands before SAB bought it in 1999.

The brewing process at Kitwe hasn’t changed much in 50 years. Corn is ground and mixed by hand with cold water in a giant tub. The mix is then sucked into two pressure-cooker towers that look like spaceships from a 1950s sci-fi movie. The steam turns starch into sugar. The mix is strained and cooled. Yeast is added to turn the sugar to alcohol. Within a few hours the brew is poured into one-liter cartons. It continues to ferment in them, and must be sold and drunk within a few days before it goes sour. The beer has the consistency and color of a watery porridge. The SAB brand is called Shake Shake because the carton has to be shaken before each sip to disperse the sediment.

SAB originally saw chibuku as a sunset business because of the competition from informal brewers who pay no tax. But Shake Shake is now sold in 11 countries and is the main weapon in the firm’s battle to capture the bottom end of the market.

A liter of Shake Shake sells for half of the main local brands such as Hero or Mosi. Faster sales of chibuku have helped cushion the blow of a big fall in lager sales in Zimbabwe, where money is tight. SAB developed an upscale version at Kitwe called Chibuku Super, which comes in a plastic bottle and has a shelf life of several weeks. The company also offers economy-brand lagers made from cassava or sorghum that enjoy a lower tax rate because governments want to support local farmers. SAB’s premium lagers such as Peroni and Castle Lite, complete the range.

What can other consumer firms looking to Africa learn from SAB? It is not an easy place to do business and the results are not uniform. Lager sales are booming in Nigeria and Ghana but shrinking in Zimbabwe and South Sudan. And there are few reliable sources of business information. Companies have to pay their dues.

South African business people call it “paying your school fees.”

The first year in a new African market almost never goes according to plan, said Bowman. “You’ve got to persist through the school-fees stage and not lose your nerve,” he said. It takes a while to work out how to how to deliver beer to remote taverns in Uganda; how to get truck licences for each state in Nigeria; or how to transport imported malt from Mombasa in Kenya to Juba in South Sudan. Local managers are trusted to do what best fits local conditions, Bowman said. There is no recipe for success but persistence clearly matters. “The model is that we stick it out.”

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