SABMiller Gives African Homebrew Market a Shake-Shake
Andrews Bortey takes a seat with his wife outside the Tsui Anaa pub in Accra, ready for refreshment after a day at work as a fisherman in Ghana’s capital.
He orders a Chibuku beer and gives the box of brew a vigorous shake before sipping the thick, milky-looking beverage.
Chibuku, sold in blue-and-white cardboard cartons, is called “Shake-Shake” by devotees because the ingredients tend to separate. SABMiller Plc (SAB), better-known for clear beers including Peroni and Grolsch, is counting on Bortey’s favorite brew to help tap the booming African beer market.
Growing African economies have attracted beverage companies including Diageo Plc (DGE) and Heineken NV (HEIA) looking to gain share among the emerging middle classes as beer consumption in western Europe and the U.S. slowly declines. With Chibuku, SABMiller is looking to win an additional segment of the market: lower-income Africans more used to “informal” beers, or home-brews.
“It gets a whole new income level of consumers into the category,” said Michael Steib, an analyst at Morgan Stanley in London. “With growing incomes, there’s ultimately scope to trade drinkers up.”
The world’s second-biggest brewer is spending $260 million across the continent this year, partly to expand Chibuku production in order to offer a commercial alternative to a drink that’s traditionally brewed and enjoyed at home.
“It has the original taste of our locally brewed Brukutu,” fisherman Bortey said. His wife, Patricia Kaa, who joins him in sipping Chibuku at the pub, said the drink is more affordable, and better-produced. “Unlike Brukutu, we know Shake-Shake’s prepared under very hygienic conditions.”
Ghana’s economy may expand 9.4 percent this year after a projected 13.6 percent gain in 2011, Finance Minister Kwabena Duffuor said in November. The country, which started exporting oil in 2010, is the world’s second-biggest cocoa producer and Africa’s No. 2 gold miner.
“We’re the only people doing this commercially,” said Wes Tiedt, the Zambia-based managing director of SABMiller’s National Breweries unit. “It’s a huge opportunity.” SABMiller plans to sell the drink in 12 countries within three years.
SABMiller boosted first-half revenue from African countries excluding South Africa 22 percent to $1.8 billion, the London- based brewer said Nov. 17. SABMiller splits out South African sales from the rest of the continent. The company has been selling beer in South Africa since 1895, over a century before South African Breweries Plc bought Miller Brewing Co. for $5.6 billion in 2002.
Chibuku costs as much as 40 percent less than mainstream beers, according to Tiedt. Bars sell a one-liter carton for 1 cedi (58 cents) to 1.3 cedis. The drink has a shelf life of about five days as it ferments, becoming more alcoholic and more sour. The beer started in Zimbabwe in the 1950s and is well- established in Malawi, Botswana and Zambia. The concoction has inspired a nightclub of the same name in Liverpool, England, after a traveler encountered the drink during a trip to Africa.
The informal-beer market is about four times the size of the clear-beer market in Africa, estimated Tiedt, who’s overseeing Chibuku’s expansion. SABMiller estimated in 2009 that the market for African home brew could be worth $3 billion.
Sharing With Friends
Chibuku is drunk in various ways -- from cutting off the top of the carton in Malawi and sharing with friends, to drinking from cups in Zambia. The flavor also varies by market, as SABMiller caters to local tastes. That means the company can get ingredients such as corn and malted sorghum nearby, Tiedt said.
SABMiller raised its mid-term revenue and profit growth targets last year for the region, seeking 3 percent to 5 percent annual sales growth and higher margins over the next 3 years.
Rivals are expanding in Africa, too. Diageo, better-known for its Smirnoff vodka and Johnnie Walker Scotch whisky brands, bought a brewery in Ethiopia for $225 million in January. Heineken has purchased breweries in Nigeria and Ethiopia.
National Breweries, leading Chibuku’s expansion, has about 60 percent of the market for opaque beer in Africa and an annual capacity of 1.8 million hectoliters (48 million gallons).
“We’re still not up to full speed in terms of earnings growth” in existing operations, Tiedt said.
Delivering a beer with a five-day life span to customers is tough, especially in rural areas with unpaved roads, limiting the number of people SABMiller can sell to.
Mary Abotse, 52, started selling Chibuku at the Tsui Anaa pub in July last year. Even though people are warming to the drink, given its short shelf-life, she doesn’t stock that much, she said. “I buy one crate of 15 pieces,” she said. “My stock is finished within four days.”
SABMiller might have an answer to this: Chibuku Super. The product is being tested in Zambia, and it has two notable differences -- it’s sold in leak-proof plastic cartons and has a shelf life of 21 days.
“I think it’s a game-changer for us,” he said. “It’s not necessarily an on-premise drink any more.” Spar supermarkets has agreed to sell the product.
Africa is “SAB’s natural back yard,” Morgan Stanley’s Steib said. “It’s a continent that can almost grow irrespective of what’s happening in the rest of the world.”
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