Beer is big business in Africa. According to data from Statista, the beer market is estimated to generate revenues of about US$29.41 billion in 2023. What’s even more lucrative is its yet-to-be-tapped potential.
According to Statista, although Africa is home to 16% of the world’s population, it only accounted for a paltry eight percent of the global beer consumption market in 2019. In value terms, Africa’s estimated beer revenue in 2023 is four times smaller than that of the world’s largest market China (US$125.60), although the Asian country only has 200 million more people.
This represents a low per capita consumption rate which is only expected to go higher as a majority of the continent’s young population (the average median age in Africa is 19 years) matures and gains employment.
As most of the world’s future population growth is expected to come from Africa, the continent’s contribution to the beer market is only expected to go higher. In the medium term, Statista estimates the market to grow annually by 6.16% (CAGR 2023-2027) with expected volume growth of 3.9% in 2024.
Big beer fights for share of the cake
According to Asoko Insight, Africa represents the fastest-growing beer market, rising at 5% annually, compared to 3% for Asia and 1% for Europe.
Competing for the market are four multinational beer giants: the French Groupe Castel, the Dutch Heineken, the Belgian-Brazilian AB InBev, and the British Diageo. Collectively, these multinationals share 93% of African beer demand.
Turf wars between multinational alcohol corporations have increased in intensity across the African region as the market becomes even more lucrative. Competition is fierce in South Africa where AB InBev, through its local subsidiary South African Breweries (SAB) is locked horns with Heineken in a bitter fight for a bigger share of the continent’s most lucrative beer market. Revenue in South Africa’s beer market amounts to US$6.80bn in 2023, according to Statista.
Currently, AB InBev dominates the South African market, with a market share estimated at 20% to 25%. This might however not last for long as Heineken’s recent acquisition of Distell gives it access to a robust infrastructure that would provide a way to increase sales of their brands and products in South Africa.
Heineken further plans to make further investments including a €250m new brewery and maltery in the next five years. Analysts opine that this could allow the brewer to take over 33% of the market in a few years.
To counter Heineken, SAB has committed R5.8-billion (US$320m) investment this year to expand its production capacity and enhance its market presence. This year’s investment is in addition to the R11.7 billion (US$666 million) invested in the preceding two years to upgrade its Prospecton and Ibhayi Breweries.
Heineken and AB InBev are also aggressively competing in other African countries. In March 2019, Heineken opened a US$100m brewery in Mozambique, where AB InBev controls 99% of the beer market through the Cervejas De Moçambique unit.
This combined with the acquisition of Namibia Breweries in 2023 is expected to boost Heineken’s profile in Southern Africa. Heineken will also potentially overcome its struggles in countries like Botswana and Zambia, all the way to Tanzania and Kenya by combining their operations with Distell, which has for a long time now driven higher sales in these countries.
In East Africa, the script remains the same, albeit with different players. Here, Diageo, through its local subsidiary East African Breweries (EABL) competes directly with AB InBev in Tanzania and Uganda where the former owns Tanzania Breweries Limited and Nile Breweries respectively.
To gain an edge over its competitor, Diageo has been progressively modernizing its breweries in Tanzania and Uganda and intensifying its marketing which led to revenue growths of 15 and 18 percent respectively in 2022. AB InBev in response recently invested US$40 million in its Kilimanjaro plant, a move which is expected to increase malting capacity to 16,000 MT once the project is fully completed in 2025.
Unlike its neighbors, Kenya remains firmly under the control of EABL which dominates over 90% of the market share, according to Statista. To consolidate its grip on the highly lucrative market accounting for 75% of its revenues in the region, Diageo in March increased its stake in EABL by 14.97% to reach 65%. Things are different in Ethiopia where Diageo chose to exit the beer market by selling its Meta Abo Brewery to BGI Ethiopia (a local subsidiary of Castel) in 2022.
With Meta Abo, BGI has taken over market leadership from Heineken. The Dutch brewer had invested over US$310m to acquire two breweries in 2011 and build the country’s largest brewery in 2015. Castel plans to consolidate its new market status through an additional investment of ETB500 million (US$9.3 million) to remodel and expand the brewery as well as increase capacity and improve the brewery’s Meta Beer branding.
Nigeria, Africa’s second largest beer market by volume, is arguably one of the most competitive market of them all. Here, Heineken through its local subsidiary Nigerian Breweries, is locked in relentless competition with two other multinational alcohol corporations Diageo (Guinness Nigeria) and AB InBev (International Breweries). Nigerian Beweries is the market leader accounting for 54% of all beer sales followed by Guinness Nigeria (24%) and International Breweries (22.2%).
To consolidate its grip on the market, Heineken acquired more shares in Nigerian Breweries 2020 and in 2021 raised its ownership in another local brewer Champion Breweries to 86.4%. still in West Africa, Heineken is also engaged in another fights over market dominance in Ivory Coast where its local subsidiary Brassivoire is in direct competition with Castel-owned Solibra.
In some instances, the brewing majors abandon intensive competition in favor of collaboration which is mostly in form of licensing deals. A good example is in Cameroon where Diageo recently completed the sale of its Guinness Cameroon brewery to France’s Castel Group for 389 million pounds ($459.8 million).
With the sale complete in May 2023, Castel has now taken over the production and nationwide distribution of Guinness in Cameroon under a license and royalty agreement. Earlier in 2015, Heineken had entered a similar deal with Diageo. The Dutch brewer agreed to sell its 20% stake in Guinness Ghana Breweries Limited to Diageo and further granted Diageo exclusive producer and distributorship rights of Heineken’s portfolio in Ghana.
Craft brewing on the rise
Joining the beer party is a small but budding group of craft brewers that is slowly spreading its tentacles across major cities in the continent. For many decades, craft beer was concentrated in South Africa with the country boasting over 215 craft breweries as of 2020. Now the action is spreading into the interior as more entrepreneurs introduce locals to the unique flavour and taste propositions of these niche beer category.
Close Neighbors Namibia and Botswana have warmed up towards craft beer with Namibia’s Swakopmund Brewing and Roof of Africa scooping awards at the Africa Beer Cup 2023. Zimbabwe and Zambia are other craft beer hot spots in the Southern Africa region with each boasting more than three established craft brewers as of 2022.
In Kenya, the craft beer market is slowly growing with more than five craft brewers already having established presence in the country’s capital Nairobi. The Big Five which was among the pioneers of the craft beer in the country is now joined by Bila Shaka, Sierra, and 254 breweries. Other smaller microbreweries including Crafty Chameleon and The Kraft have also joined the bandwagon offering customers increased access to new beer styles and flavors.
Neighboring Tanzania only has two known craft brewers: Twiga Brewery in Arusha and Crafty Dees in Dar es Salaam. Uganda has Banange Brewing Company whose distribution in Kampala is quite impressive while Rwanda has Kweza, its first and only microbrewery. Ethiopia has a young yet rising beer market with two breweries that stand out: The Beer Garden Inn (2006) and the most recent, Bole Microbrewery (2020).
In the west, Nigeria’s Bature Brewery is perhaps the most visible. Located in Lagos, the brewery plans to raise its capacity to 500,000 liters before the end of 2023. In neighboring Ghana, Speciality Beers opened its doors in 2022 and is already making waves in the African beer market, scooping 3 awards at the 2023 Africa Beer Cup held in South Africa.
The mushrooming of craft breweries across the continent is proof of a craft revolution that is slowly but steadily taking the African beer market by storm. According to Data Market Forecast, the Size of the Middle East and Africa (MEA) Craft Beer Market which was estimated to be US$8.75 million in 2022 is estimated to reach a valuation of US$39.45 million by the end of 2028, expanding at an annual growth rate of around 29% during the forecast period.
What is driving this growth is consumer desire for new flavor experiences. Thus far, consumers have been only exposed to lagers such as Tusker, Heineken, Castle with the only slight difference coming in Guinness, a Diageo-owned stout widely marketed across the continent. With little exploration outside lagers and stouts, a major gap in the market exists for beer consisting of more hops (ingredient providing bitterness) and malt variations as well as other flavour profiles.
This is where the craft beer market comes in, producing variations such as German wheat beer, Indian Pale Ale’s (IPAs), Belgian ales, in combination with flavoured (sour, fruity, etc.) beers. The 2023 African Beer Cup brought to the fore just how big this market is. According to a statement from the organizers, now in its fifth year, the competition attracted 232 beers from 20 different African countries.
Swimming Against the Tide
Although the African beer market holds great potential, it’s not without its challenges. An informal economy strongly rooted not only in the villages but also in the big cities, slow and insufficiently extensive distribution channels for goods, and low purchasing power on the part of the local populations are the three factors that continue to limit market growth.
Excessive taxation is also becoming another growth limiting factor. Kenya has been particularly consistent in updating their excise tax for beer. In July 2022, Kenya increased beer excise tax by 10%, only to further raise it by 6.3% in October. These increases came on the heels of an annual upward excise adjustment in 2021, leading to a compounded annual excise tax increase of 23% for beer. Consequently, beer volumes were down 13% in Kenya as consumers shifted to other affordable alternatives including illicit liquor.
Active lobbying can however help reverse the deleterious effects of high taxation. A good example is South Africa where the lobby group for beer makers BASA and leading brewer SAB were able to actively influence government decision on beer taxation.
After years of above inflation tax hikes, South Africa finally announced that excise duties on alcohol in financial year 2023/24 increased in line with expected inflation of 4.9%, a move that BASA welcomed. In response to the frequent tax updates, Africa Report reported that Diageo had opened tax dialogues with a number of governments in the region “to look at what constitutes a good tax revenue stream.”
Weighing in on the issue, alcohol industry executives say, competition, drought, economic growth that does not trickle down, political instability, regulatory headwinds and millennials-led dynamics are altering the alcohol industry in favour of spirits and low-end beer brands. Despite economic growth in East Africa averaging 6% in the years before the coronavirus pandemic, the ‘trickle-down’ effect has been minimal.
This has impacted disposable incomes and slowed down bottled beer consumption in favour of liquor. Therefore, alcohol producers such as East Africa Breweries Ltd (EABL) have gradually shifted to production of spirits in line with consumer preferences.
As beer production is highly dependent on agriculture and is also a water intensive process, to guarantee its sustainability in a continent plagued by drought, big beer producers like Diageo and AB InBev are making major investments in sustainable agricultural practices and responsible water use. Increased use of sorghum, a climate resilient crop, in local beers is also becoming a successive climate resilience strategy to keep the beer taps flowing.
As the market grows, we can only expect increased investment in many attractive regions in the continent. Craft Beer which is now being discovered by many African consumers will be a critical driver of this growth especially in countries with a large middle class capable of affording the premium price usually attached to these drinks.
Big beer will however continue dominating the main stream and in regions like South Africa, Nigeria, Ivory Coast, and Ethiopia where there exists more than one dominant market player, competition is expected to be intense as each producer battlers to have a bigger pie of the expanding market.
Those that placed their bets on the continent a long time ago are already seeing their efforts start to bear fruit. Groupe Castel was among the earlier believers in the African dream and today has a presence in fifteen African countries where it operates more than sixty breweries.
This effort spanning decades is paying off as the French brewer is estimated to generate over 70% of its continent from its African division, according to South World. Diageo which has 12 breweries and ten facilities for blending, malting and bottling in the continent, says that it generates 11% of its revenues from Africa.
There is money to be made in the African beer market. The market is already estimated to be worth over US$29 billion in 2023 and compounded annual growth is estimated at 6.1% annually for the next five years. Wise investment decisions combined with aggressive entrepreneurial maneuvers will however be key to striking this pot of gold.
This feature appeared in the September 2023 issue of FOOD BUSINESS AFRICA. You can read this and the entire magazine HERE
