Addis Fortune (Addis Ababa)

23 December 2012

Ethiopia: Premiumisation Gains New Momentum

opinion

The traditional picture, which is often painted of Africa-poverty, political turmoil and dire infrastructure- is beginning to look outdated. Real signs are emerging of a continent, which offers extraordinary growth potential and rapidly changing consumer dynamics.

Infrastructure is improving by the day, large investments are being made in education and the population is growing, becoming more urban and increasingly brand-conscious. For a brewer such as Heineken, active on the continent since the beginning of the last century, growth is very much linked to demographic and economic development, as well as increasing political stability.

Therefore, the change which Africa is currently undergoing offers an enormous opportunity for our businesses, and, of course, other consumer companies.

We have seen time and time again in Africa, and other emerging regions, that beer market growth is related to gross domestic growth (GDP) growth. Africa has the world's second largest population and it is estimated it will have over two billion inhabitants, by 2050.

The African beer market is forecast to grow by almost 50pc over the next 10 years and by 2020, is expected to represent seven percent of the global beer market. Beer is the alcoholic beverage of choice throughout Africa.

The vast majority of African consumers, however, are still buying unbranded, home-brew beers. Only one in five litres of alcoholic beverages drunk in Africa today comes from professional companies.

With the improvement in income, Africans are now moving towards branded beers, whether they are local, regional or international. Furthermore, the rise of the aspirational middle-classes is leading to a rapidly increasing appetite for premium beers, which is why this segment of the beer market is the fastest growing in Africa.

One of the main reasons why the premiumisation trend is emerging in beer is because Africa now has 52 cities with populations of more than one million people; this is as many major urban areas as there are inEurope. It is estimated that 50pc of all Africans will be living in cities by 2030.

So how is that changing the African consumer?

Generally speaking, city-dwellers earn more money and have more discretionary income to spend. This shift, together with the growth of the middle classes, has created a significant rise in the number of brand-conscious African consumers.

This is further amplified by improved lines of communications and technology that connectAfricato the developed world and its popular culture. The new African consumer is aspirational and is drawn to branded products. All of these developments are driving the trend we are currently seeing, where consumers are "trading-up" from home-brewed beers to local and regional power brands, as well as international premium brands, such as Heineken.

The International Premium Segment (IPS), in which the Heineken brand is the biggest player globally, has seen impressive growth in Africa in recent years. Since 2005, growth of the Heineken brand in Africa has far outstripped that of the beer industry as a whole, at a compound annual growth rate of 21pc versus an industry average of four to eight percent.

While we are admittedly starting from a relatively low base, the opportunity in Africa for brands such as Heineken is big and exciting. It is estimated that the African IPS will represent 20 million hector-litres of beer in 2020, almost double what it is today.

As Africa continues to develop, and economic and political stability increases, branded consumer goods companies have a fantastic opportunity to participate in the continent's growth. As the emerging middle classes support and grow our brands in Africa, however, we have a responsibility to support local communities to help ensure that Africa's development is consistent.

Various economic impact studies that we have executed in markets acrossAfricashow the positive impact that Heineken has on society. For instance, it has created many thousands of direct and indirect jobs and too generated tax income. Heineken's commitment to improving local communities is clear; there are 26 health clinics across the region; the Heineken Africa Foundation supports numerous local initiatives; currently 48pc of raw materials in Africa are sourced locally, and the aim is to increase that to 60 percent in the coming years; and over 2.2 billion dollars have been invested in Africa since 2005.

This is an investment that we believe will enable us to develop a strong, sustainable business in Africa. Equally importantly, it will also benefit the development of this exciting continent.

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