9 February 2014

Ethiopia: New Tanks Illustrate Heineken's Lofty Brewing Ambitions

Heineken, the Dutch brewing giant,has received large fermentation tanks for the brewing plant it has been constructing in the Kilinto area, Akaki Kaliti District - on the outskirts of Addis Abeba -on Friday, February 7, 2014.

The six large fermentation tanks manufactured by Lehui -the famous Chinese company working in many African countries, with Asian and South American operations - are in the first shipment, Fortune learnt. There are two other shipments of tanks still remaining for the construction of the brewery, which, when completed, will be Ethiopia's biggest brewing plant. The other two shipments are on their way and they are all expected to arrive by the beginning of March.

Heineken entered the Ethiopian beer market in August 2011, after acquiring the 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 of beer a year.

The Bedele Brewery has three brands - Bedele, Bedele Special and Bedele Choice - with an annual production capacity of 300,000hl. Heineken's other acquisition, the Harar Brewery, has the capacity to produce 450,000hl a year, fewer than three brands - Harar, Hakim Stout and Harar Sofi (malt).

The ground at the Kilinto site, where the factory is being constructed, has already been cleared for installing the tankers.

"The tankers will be installed soon," Nebat Suker, Corporate Relations manager at Heineken, told Fortune.

When completed, by the end of this year, the brewery, which rests on a 25ha plot, is expected to cost 156 million dollars. The brewery, located one kilometre from the Kaliti Correctional Facility, will have the capacity to produce 1.5 million hecto-litres a year.

The journey of the six tanks took approximately six weeks via Djibouti. Their journey, however, was not all smooth sailing. A lorry carrying one of the tanks crashed with a bus around Gogecha - between Dukem and Gelan, on the Addis-Adama road - at around 12am on Wednesday, February 5, 2014.

The big tank crashed onto its side after the collision with the bus, with a large wire partially damaged. It arrived at Kilinto on Friday, after technicians had fixed it, Fortune learnt.

Police are investigating the cause of the accident, says Reta Belachew (Com.), head of the Dukem Town Traffic Police.

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

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

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 and Ghana.

Barley is produced on approximately one million hectares of land in Ethiopia, and is the fifth most important cereal crop in the nation, after maize, wheat, teff and sorghum.

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

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