Heineken submits highest offer for Bedele Brewery
Have they all gone mad? Or did global brewers suffer from a last minute panic attack in the scramble for Africa? According to Ethiopian media, Heineken, SABMiller, Castel and Carlsberg have submitted offers for the 290,000 hl state-owned Bedele Brewery, which many think blatantly over-valued. Heineken’s bid of USD 85.2 million exceeded those of Carlsberg Brewery (USD 68 million), Castel Ethiopia (USD 64 million) and SABMiller (USD 70 million). In January 2011 Ethiopia’s privatisation agency PPESA invited bids for Bedele Brewery. These are currently being reviewed.
Obviously, Ethiopia is the last unconsolidated beer market in Africa. With 85 million inhabitants it ranks third among Africa’s most populated countries – behind Nigeria (150 million people) and Egypt (100 million people), while its beer consumption stands at only 4 litres per capita.
But does this really justify offers to the order of almost 20 times profits (EBIT)? These days you can build a new 290,000 hl brewery for probably half the price Heineken is allegedly offering.
BRAUWELT International sources reckon that Bedele Brewery had an EBIT of USD 4.3 million in its past financial year.
Bedele Brewery, located 500 km west of the capital Addis Ababa, in Oromia Regional State, was first opened in 1993 as part of the socialist government’s policy to provide a poor part of the country with jobs.
However, it will be a costly undertaking for any buyer to turn Bedele Brewery into a really profitable enterprise which in turn will justify the astronomically high purchasing price. For one, transport costs will be huge. First you have to get brewing materials to the brewery and then you need to shunt the finished beer back to the capital, where most beer is consumed.
For another, buying Bedele Brewery will not buy you market leadership. The major brewer is BGI Ethiopia, owned by the French investor Pierre Castel and producer of the popular Giorgis brand, with two breweries and a market share of around 50 percent. BGI’s market share in Addis Ababa is said to be even higher.
Bedele Brewery was not the only brewery put up for sale. The other one is Harar Brewery, located in Harar 526 km east of Addis Ababa. Though smaller in output than Bedele Brewery, Heineken is said to have offered USD 78.1 million for it.
The PPESA initially planned to sell three state owned breweries, including Meta Abo Brewery, in the next three years, according to the agency’s five-year plan.
Due to the high demand from the private sector, the agency pushed the sale of Bedele and Harar forward.
The results for the Abo Brewery tender are yet to be announced.
Market observers think that Heineken will not get Meta Abo Brewery, whose beer is also quite popular in Addis Ababa, so they must have decided that buying Bedele will at least get them a foot in the door.
