Government plans privatisation of breweries

It was a shrewd move by SABMiller to buy Ethiopia’s water business Ambo from the Ethiopian government in 2008. Although SABMiller insisted on and got the majority stake (68%) in Ambo, the brewer also showed to its partner – the government – that it was not unwilling to share the ownership.

SABMiller reportedly paid USD 21 million for Ambo and has invested USD 21 million since. Ambo bottles 35 million litres of a strong-tasting, naturally sparkling water from a valley of the same name about 130 kilometres west of the capital, Addis Ababa.

In a roundabout way, SABMiller’s success with Ambo may have encouraged the government to finally sell it the three state-owned breweries.

Ethiopia’s Meta Abo, Bedele and Harar breweries hold a combined 37 percent market share.

Plato Logic, a research company, says that Ethiopians on average drank 3.8 litres of beer. However, if we take beer production to have been 2.7 million hl in 2009 (Barth Report), Ethiopia’s population is 70 million people, whereas the World Bank puts the figure at 82 million people.

Let’s agree that Ethiopians drink very little beer.

The government is now offering auction documents for a joint-venture partner to run Meta Abo, the biggest of the three. The sale of Harar and Bedele breweries will take place before the fiscal year ends in July 2011, the state privatisation agency said in early October 2010.

Ethiopian media reported that Meta Abo may fetch as much as USD 55 million, Harar may be worth up to USD 30 million and Bedele around USD 20 million.

That adds up to over USD 100 million for a total of 730,000 hl beer.

That’s a lot of money, especially as any buyer will have to face a formidable opponent: Groupe Castel. With its two breweries Dashen and Kombolcha, Castel enjoys a market share of 62 percent.

According to the Barth Report, Ethiopia’s beer output has hardly grown from 2008 to 2009 although the country registered GDP growth of 6.8 percent (CIA estimate).

All said this does not make Ethiopia an easy market in which to operate.