Diageo has a tiger by the tail
So Diageo has made a bid for the Meta Abo brewery on its own. It’s another madcap offer – rumoured to run to USD 150 million, which is way over the top like Heineken’s USD 85 million bid for Bedele Brewery. But the interesting question is not why the world’s number one drinks group and brewer of Guinness beer is prepared to spend so much on a medium-sized brewery in a market where all the global big wigs will be stepping on each others’ toes. The more pertinent issue is: why isn’t Diageo going for Meta Abo in tandem with its Kenyan partner, East-African Breweries (EABL)?
In April 2011 it was reported that UK company Diageo had made a direct bid for the state-owned Meta Abo brewery, dashing EABL’s hopes of entering the market.
Diageo, which owns 50.03 percent of EABL, has taken part in a public auction of the Ethiopian brewer, Meta Abo, as it eyes rising incomes in Africa’s emerging markets and a larger stake in East Africa.
The transaction not only marks a shift in strategy for the multinational drinks company, which has preferred to use EABL as its vehicle in the East Africa region, but also locks out EABL from getting a piece of the Ethiopian market. In recent years EABL has repeatedly expressed an interest in buying Meta Abo.
Ethiopian media have cited the country’s Privatisation and Public Enterprise Supervising Agency as stating that Diageo, Heineken and SABMiller have all submitted bids for Meta Abo.
The size of the offers has not been disclosed, but given the recent bids for Bedele Brewery, Meta Abo could fetch even more considering that it uses soft spring water from a source the Ethiopian Privatisation Agency says is locally thought of as holy.
From what we hear at BRAUWELT International, EABL is cross and sulking for having been excluded by Diageo.
It’s not clear why Diageo decided to go for the deal alone, but the UK multinational has been racing to get a larger stake in East Africa.
The East African market is increasingly becoming a battle zone between SABMiller and EABL/Diageo as both firms try to expand their regional footprint.
Already, a vicious battle for market dominance is under way in Uganda between Uganda Breweries, owned 98.2 percent by EABL, and Nile Breweries, in which SABMiller owns 60 percent.
In Tanzania the two firms are involved in a vicious battle for control of the market.
SABMiller holds 52.83 percent in TBL, while EABL has bought a 51 percent stake in Serengeti Breweries – setting off another market share war between the two.
In Sudan, EABL is planning to open a plant that will see it engage in a head-to-head battle with SAB Miller, which opened a brewery in Juba two years ago.
Perhaps after years of trying to cooperate with the EABL leadership Diageo have come to realise that they have a tiger by the tail with EABL, a tiger, to stretch the metaphor further, that has nevertheless become too complacent and staid for its own good.
That would explain Diageo’s solo offer for Meta Abo.
