AB InBev to invest US$100 million in a new brewery in Tanzania

TANZANIA – Beer giant AB InBev plans to invest US$100 million in a new beer plant in the administrative capital of Tanzania, Dodoma, as the brewer says it is likely to face potential pressure on capacity in the near future after its beer volumes jumped 20% last year, reports Reuters.

Construction of the brewery, the fifth beer plant in the country, is set to start next year while production is expected to commence in the second half of 2020.

The new facility will have an initial capacity of 1 million hectolitres, putting AB InBev at a better competitive edge with other players such as East African Breweries Limited, a Kenya-based holding company, which is its main competitor in the Tanzanian beer market.

AB InBev owns a majority stake in the country’s biggest local brewer, Tanzania Breweries Ltd (TBL), which operates four other breweries in the country.

The brewer opened its fourth factory in the southern town of Mbeya in 2008, adding to its other brewing plants located in the capital city Dar es Salaam, Arusha in the north and Mwanza, which is located on the shores of Lake Victoria.

TBL has a commanding lead in the country with brands such as Castle Lite, Safari Lager, Kilimanjaro Lager, Balimi Extra Lager and Eagle Lager.

The moderate growth in per capita GDP and a growing, young population set to hit 60 million by 2020, is driving the growth potential of the local alcohol beverage industry in Tanzania and region.

Business Monitor Research (BMI) forecasts that the Tanzanian beer market growth will outperform that of neighbouring Kenya and Uganda from 2015 to 2020.

BMI also says that the Tanzania beer market had the highest trailing operating profit margin in Africa in 2015, and the second highest return on equity, from the figures reported from SABMiller that year.

The announcement was made after a meeting between Tanzania’s president and major foreign and local investors, Bloomberg reported.

The company said it was working with the government to find the site for the project, expected to be assigned in the coming months ahead of drawing up initial plans.

“At the current growth rate in Tanzania, we expect to reach the maximum capacity of our current breweries by 2020,” said Roberto Jarrin, AB-InBev president of the East Africa business.

Anheuser-Busch InBev completed the acquisition of its then rival, SABMiller for US$103bn in 2016, giving it control over a number of brewing assets on the continent, including Tanzania Breweries.

AB InBev has been increasing its focus on the African consumer beer market, where the company says it has seen ‘healthy growth rates in the middle teens.’

In 2017, the company announced a new US$250 million new brewery in Nigeria, as it looked forward to become the biggest player in the market, dominated by Heineken-owned Nigerian Breweries.

The new Sagima brewery is planned to start production by mid this year.

The company also last year embarked on a US$234 million capital expenditure programme in South Africa, which entails the expansion of brewing capacity through the installation of new packaging lines.

AB InBev in its 2017-year report announced that its acquisition of SABMiller, the former South African brewing giant that had grown exponentially into Africa, and which it acquired in 2016, had been the ‘most successful business integration ever’, as it reported a 5.1% increase in revenues, most of it driven by newly integrated SABMiller businesses.

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