3 March 2013

Ethiopia: Heineken to Set Up Country's Largest Brewery

MoU Signed to Fill Supply Gap in Barley Production as Ethiopia's Beer Market Continues to Grow

After laying the cornerstone for Heineken's third and largest brewery plant, Johan Doyer, general manager of Heineken Ethiopia , Lilianne Ploumen, Netherland's minister for Foreign Trade & Development Corporation (centre) and Khalid Bomba, chief executive officer of ATA, relaxed with a Heineken beer on Thursday, February 28, 2013.

Ambitious in the Ethiopian beer market, the Dutch brewing giant, Heineken, is building Ethiopia's biggest brewing plant, with the capacity for 1.5 million hecto-litres a year, in Akaki Kaliti District, one kilometre from the Kaliti Correctional Facility.

The project, that rests on a 25ha plot, is expected to cost 156 million dollars, according to Johan Doyer, general manager of HeinekenEthiopia.

Heineken entered the Ethiopian beer market in August 2011, after acquiring Bedele and Harar breweries from the Privatisation & Public Enterprise Supervising Agency (PPESA). The breweries, which were purchased for a total of 163.4 million dollars, have the capacity to produce 750,000hl a year.

Bedele Brewery has three brands; Bedele, Bedele Special and Bedele Choice, with an annual production capacity of 300,000hl. Heineken's other acquisition, Harar Brewery, has a capacity of 450,000hl a year, under three brands; Harar, Hakim Stout and Harar Sofi (malt).

"This clearly shows the level of ambition and outlook Heineken has for the Ethiopian beer market," said Lilianne Ploumen, Netherland's minister for Foreign Trade & Development Corporation, when she laid the cornerstone for the project.

The new plant will produce Bedele, Harar and Heineken brands.

Heineken is present in over 70 countries, where it operates more than 165 breweries, with a total output of 221 million hecto-litres. The company isEurope's largest brewer and the world's third largest, in terms of volume.

"Heineken is also committed to engaging in agricultural activities," said Doyer, when signing a Memorandum of Understanding (MoU) for a four year malt barley program with the Agricultural Transformation Agency (ATA) and the Ethiopian Institute of Agricultural Research (EIAR), on Thursday, February 28, 2013.

The brewer is also involved in the production of maize inRwandaand sorghum inSierra Leone.

Heineken sources 60pc of raw materials from local markets, and it has similar practices in seven other African countries, including;Nigeria, the Democratic Republic of Congo andGhana.

Barley is produced on about one million hectares inEthiopia, and is the fifth most important cereal crop in the nation, after; maize, wheat, teff and sorghum.

Assela Malting Plant, the only barley processing plant in the country, currently meets only 52pc of the annual malt barley demanded by the existing breweries. Production only amounts to 36,000tn to 40,000tn a year, and thus, there is still a significant market to capture.

"The Ethiopian beer market has doubled over the last five years and the per capita consumption is still relatively low compared to other East African markets," said Doyer.

"Ethiopia's annual beer consumption is four litres a person, lower thanKenya's 12 litres," he added.

The construction of the new brewery is expected to be completed within 18 months. Rama Construction was awarded the first phase of the construction for 107 million Br, which is already underway.

Heineken was the second foreign company to enter the local beer market, following BGI, which acquired St. George beer, in 1998, for 10 million dollars.

With plants in Addis Abeba, Kombolcha and Hawassa, the French owned BGI Ethiopia currently remains as the country's largest brewer. After adding a new plant in Hawassa in 2011, with the capacity to produce 400,000hl, its annual beer production has now reached 1.9 million hecto-litres.

Heineken and Dashen Brewery rank second and third, with an 18.75pc and 18pc share of the beer market, respectively. Diageo Plc, a company based in theUnited Kingdomand owner of Meta Abo, has the lowest market share, at just 15pc.

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