Heady days, heady prices
Readers, hold on to your seats. Diageo is said to have offered USD 200 million for Ethiopia’s state-owned Meta Abo brewery which in its last financial year made a profit of USD 2.6 million on beer sales of perhaps 600,000 hl. That’s a multiple of … sheer madness.
Ethiopian media reported on 10 May 2011 that Diageo outbid four rivals in the government auction. Heineken is said to have offered close to USD 100 million, while BGI (Castel) and SABMiller offered USD 90 million and USD 70 million respectively.
Diageo reportedly will pay the sum in two instalments of USD 95 million and USD 105 million.
On 5 May 2011 Heineken announced that it had won the bidding for the Harar and Bedele breweries for a total of USD 163 million.
The two breweries have a combined market share of 18 percent in a market dominated by Mr Castel’s BGI group (over 40 percent market share).
What are the world’s leading brewers banking on to offer such astronomically high prices? Future growth, it seems.
The scramble for Africa, the world’s last beer frontier, is in its final stage. The privatisation of Ethiopia’s three state-owned breweries was the last chance to tap into a market with great potential.
Hopefully for Heineken and Diageo their wild dreams will turn into profitable reality.
True, Ethiopia is Africa’s second most populated country with 85 million people. Its beer market (3 million hectolitres in 2010, according to Plato Logic) grew approximately 20 percent annually over the past five years, compared to a GDP growth of 8 percent.
Beer and non-alcoholic malt consumption in Ethiopia was 4 litres per capita in 2010, which is well below the global average of 27 litres and below beer consumption in neighbouring countries, such as Tanzania (7 litres), Uganda (9 litres) and Kenya (10 litres).
It is equally true that Ethiopia has a fast growing population and a certain degree of political stability.
But – and here come the reservations – digging deep into their pockets did not award Diageo or Heineken with market leadership, which you’d need in Africa to reap decent profits. There will be three players – BGI, Heineken and Diageo – desperately fighting over market shares and prices.
In any case, the offers received by Ethiopia’s privatisation agency may not be the final sales price. BRAUWELT International’s sources say that the authority has requested the successful bidders to present themselves for financial negotiation.
What could this possibly mean?
