The expansion is a part of the company's strategy to be one of the biggest brewers in the next five years
Habesha Breweries S.C. has started an effort to double up its annual production capacity to 1.5 million hectolitres. The project is likely to cost a billion Br, according to sources.
The company, whose market share is around 13pc, is undertaking the expansion project in its 7.5ha plant located in Debre Berhan, 130km north of Addis Abeba, near to Dashen Brewery's factory. The expansion is expected to be completed in the first half of the coming year; they are planning to borrow from commercial banks. But, the representative of the company refused to say which bank they are going to apply for the loan from.
The current expansion is the second time that the Company undertakes an expansion project since it became operational in July 2015. During the first half of the current fiscal year, with the aim of increasing its market share, the company almost doubled its annual production capacity to 700,000 hectolitres helping the company raise its sales five fold to one billion Br.
When Habesha became operational with a 700 million Br investment, its market destination was limited only to Debre Brehan, Addis Abeba and Adama.
The current expansion is said to be a part of the company's strategy to be one of the biggest brewers in the next five years, according to the management of the company. Upon completion, in the coming years, the company is targeted to raise its annual sales and revenue by 28pc.
"The surge in demand for Habesha beer in various parts of the country necessitated for the expansion of the company," reads the report which was presented to its shareholders three weeks ago.
The expansion also involves introducing a new brown beer into the market. In 2020, the company also aims to complete further expansion which produces the brown beer and start selling the new product in the respective year.
The expansion comes a year after Habesha has registered a net profit of 32 million Br during the past fiscal year. The company's shareholders, in a general meeting held at Intercontinental Hotel, voted to reinvest its profit in a bid to increase its capital. They also agreed to double the paid-up capital of the company to 2.2 billion Br.
The latest performance of Habesha is contrary to the trend observed in the brewery market. Last year, its peer, Raya Brewery S.C., registered a loss of 104 million Br, which is 32 million Br higher than the previous year. Currently, Habesha has a little over 8,800 shareholders, with 70pc of the company owned by Bavaria, a Dutch-owned company founded three centuries ago and globally known for the production of beer and soft drinks.
This year, it is not only Habesha that is undertaking an expansion project. Raya Brewery, which was established the same year as Habesha, has also begun an expansion project to raise its capacity to 1.3 million hectolitres in the next 18 months. The company has already started the construction of the first phase of the expansion, which will increase its capacity by 25pc to 750,000 hectolitres.
Also, Heineken, the largest brewery in the country, completed a 2.4 billion Br expansion project doubling its capacity to four million hectolitres. Since then, Heineken overtook BGI as the biggest brewer in the country.
Ever since the first beer was produced ninety years ago, the local beer market has been controlled by few brewers for the majority of its history. However, over the past seven years, a stiff competition among brewers and an ever growing demand, which has brought a change in the local beer market landscape throughout major markets, raised the annual production of beers from less than five million hectolitres in 2011 to over 13 million hectolitres presently.
The number of breweries in Ethiopia has doubled in the last six years, from three to seven, mirroring a nationwide trend that has brought newcomers into the field. At this time there are about 23 brands of beer in the country.
Despite the surge in beer production in the country, industry insiders believe that the market is not saturated yet. Alazar Ahmed, a private marketing expert and consultant in the brewery industry, is among those who believe there is a mass market in the industry.
"The market is still untapped, yet to see new players in the field," he said. "The expansion of brewers is inevitable considering that beer consumption in the country is too low."
The per capita consumption of beer in Ethiopia stands at 10 litres, which is low compared with Kenya, whose population is two times lower than Ethiopia and has a per capita beer consumption of 12 litres.
Some believe although per capita beer consumption in Ethiopia is small by regional standards, the degree of urbanisation and soaring disposable income will hike up the demand in the coming years.
"Recent investment seen in the brewery market indicates that there is a growing demand in the market," says Tewolde Asfaw, CEO of Raya Brewery. "The growth in population and income helps the industry to revive."
Two years ago, BMI, a Fitch group company and think tank, had projected the Ethiopian beer market would exhibit a significant investment in the next two years, with growth driven by a large consumer base and surging disposable income. Over the past five years, the per capita income of the country has doubled to 794 dollars.
"Market differentiation with the introduction of new brands to the country will further help the industry to boom in the coming years," said Alazar, who consulted different brewers in the country.