Heineken to invest in a new brewery

It was to be expected that Heineken would not be content with owning two breweries in Africa’s second most populous country behind Nigeria. Early last year Heineken entered the Ethiopian beer market when the Dutch brewer acquired the Bedele and Harar breweries — both of which were publicly owned — for USD 78.1 million and USD 85.2 million, respectively.

Although both breweries have a stake in the country’s major market – the capital of Addis Ababa – they are hampered by high transportation costs. Harar brewery, located on the outskirts of Harar, is 526 km to the east of the capital.

At the end of April 2012 African media reported that Heineken is currently in the process of acquiring 25 hectares of land near the capital for the construction of a new brewery.

Not enough, Heineken is supposed to invest a total of around USD 40 million in modernising and upgrading Bedele and Harar breweries by the end of 2013.

Harar brewery, which holds a 10.5 percent share in the local beer market, largely dominated by BGI Ethiopia (a company owned by the French entrepreneur Pierre Castel) with over 40 percent, plans to increase its annual production to 420,000 hl, from its current 300,000 hl.

Heineken was the second foreign brewer after BGI to move into Ethiopia. It would have been in a more comfortable position to compete with market leader BGI had it also been able to buy state-owned Meta Abo brewery, which ultimately went to Diageo for USD 225 million. Meta Abo is located closer to Addis Ababa.

Ethiopia’s per capita annual consumption of beer is 5 litres, according to research by Access Capital in 2009. Compared to other African countries, like Kenya, where consumption is 12 litres, and South Africa, where consumption is 59 litres, the amount is very low, according to the research.