By John Oyuke
The regional beer market appears to be looking up despite with analysts reporting positive forecast in next four years.
Analysts at Renaissance Capital, an investment bank, say the region presents significant potential for growth in beer consumption, despite muted beer per capita consumption ( PCC) growth levels in the past.
“We believe this potential stems from competitive pricing of beer and improvement in the coverage of brewers’ distribution networks, supported by robust economic and population growth and urbanisation trends,” said Julie Kariuki, Renaissance Capital Research analyst.
Kariuki said it is expected consumption in east Africa to increase by 4.8 per cent between last year and 2016.
Luxury status
She said the firm believes Gross Domestic Product ( GDP) is the most important driver of beer consumption in east Africa, given the luxury status of commercial beer in the region.
“As a result, we expect our robust nominal GDP growth forecast to translate into improved income levels, thereby driving beer consumption in the three countries,” Kariuki said in the report dated May 3, 2012.
Economic growth in EA has been relatively steady over the past six years, interrupted only by Kenya’s post-election violence in late 2007/2008 and the global financial crisis in 2008/2009.
The report painted positive outlook for volume growth for regional brewer, East African Breweries Limited (EABL), saying it expects volume growth of 19 per cent this year, on the back of a strong first half year performance in Tanzania, particularly following the consolidation of Serengeti Breweries Limited (SBL) with EABL and export markets, including South Sudan.
Higher sales
Boosted by sales in spirits business, analysts at the firm also forecast higher beer sales.
“With the exception of Uganda, beer consumption growth between 2006 and last year was below real GDP growth, indicating potential headroom for future consumption growth to match or even exceed economic growth,” said Anthea Alexander, also a Renaissance Capital research analyst.
Of the three East Africa countries, Uganda experienced the highest beer market growth between 2006 and last year, at 15.7 per cent.
Kenya is the largest beer market in the region, with 4.9 million hectolitres of beer consumed last year against 4.1 million hectolitres and 3.4 million in Tanzania and Uganda, respectively, the report says. Beer consumption in Kenya has increased over a five-year period to 11.9 litres per capita last year.
The analysts expect Kenya’s beer market to show the least growth during the 2011-2016 period and projects beer PCC to increase to 14.2 litres.
“Despite this muted growth, we expect consumption to be boosted by stronger economic growth, thereby increasing its beer PCC to around 11.3 litres by 2016,” Kariuki and Alexander add.
stiff competition
Kenya’s premium beer market has attracted interest, with players such as SABMiller and Heineken angling for a slice of the pie.
EABL has attempted to ward off competition by introducing premium products, such as Snapp and Tusker Lite, and relaunching Pilsner Ice.
Other players in the market include Keroche Industries, Ozbecco Ltd, brewers of Sierra beers, and Viva Product Line Ltd, distributors of Corona.
In Tanzania, SABMiller, through its subsidiary Tanzania Breweries Limited produces Ndovu Special Malt and Castle Lite, in Uganda it manufactures Nile Gold Crystal Malt Lager.
