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Global brewers hope to tap a new market: Africa

World Cup aside, Africa is attracting attention from global brewers seeking to slake the continent’s steadily growing thirst for beer.

Breweries and brands are sprouting from Johannesburg, South Africa, to Juba, Sudan, as multinational giants such as SABMiller, Diageo and Heineken seek to build out long-standing local presences into larger regional ones using products old and new alike. And with good reason: Although hundreds of millions of Africans are still trapped in dire poverty, economic development and political stability have pulled increasing numbers of the rest into higher levels of prosperity and given them the discretionary income that comes with it.

As of the end of 2008, the latest figures available, Africa accounted for about 5% of world beer production, up from 4.4% five years earlier, according to Beverage Marketing Corp., a research and consulting firm. Meanwhile, the share of production in North America and Europe declined.

And that does not even take into account the millions of gallons of home brew cooked up at the village level and then consumed, sold or bartered informally every year.

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“Even as its growth potential appeared somewhat circumscribed, Africa emerged as the new frontier for beer marketers in the mid to late 1990s,” according to Beverage Marketing’s Global Beer Market report.

Africans — at least the sub-Saharan, non-Islamic ones — have long been enthusiastic beer drinkers. But until recently (and with the exception of South Africa) many have been unable to afford a mass-produced packaged product. Even now, it is estimated that 500 million of them live on less than $1 a day, which doesn’t leave room in the family budget for beer.

“Beer is relatively unaffordable to a majority of Africans,” said Jonathan Oates, a spokesman for SABMiller, which from its base in South Africa is probably the continent’s dominant player. “Halving the cost of beer there is one of our business’ core focuses.”

To do it, and to wean potential customers from homemade hooch, SABMiller has started an ambitious program to use more locally sourced material, often substituting sorghum or other native grains for more expensive imported raw material such as barley. That also frees it from import duties while bringing business to local farmers, jobs to brewery workers and enhanced tax revenues.

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The brewer is encouraging a South African packaging company to set up shop in Angola by guaranteeing to buy every bottle it can make, saving often-exorbitant transportation charges in a country where the infrastructure is shaky to nonexistent.

SABMiller has operations in 15 African countries and does business in 18 others via a strategic alliance with the Castel Group, which operates largely in the French-speaking nations of Central and West Africa.

Although SABMiller has a jump on the competition — especially in South Africa, with a nearly 90% share in a market that generates more than 20% of its gross profit — its field is far from clear.

Spirits giant Diageo, which also makes Guinness, just opened a brewery in Johannesburg in a joint venture with Heineken and Namibia Breweries that will brew Amstel, Heineken and Windhoek Lager.

One big player not yet in the African beer fray is Anheuser-Busch InBev. That surprises some industry observers because of its vast operations in Latin America and Budweiser’s exclusive sponsorship of the World Cup soccer championship now going on in South Africa. The company does so little business there that it does not even break Africa out as one of its six operational zones that encompass vast swaths of every other inhabited continent.

Spain writes for MarketWatch.com/McClatchy.


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