Tapping Into Local Tradition: How AB InBev Hopes To Crack Africa’s Home-Brew Market

Tapping Into Local Tradition: How AB InBev Hopes To Crack Africa’s Home-Brew Market

Anheuser Busch InBev will drive Africa sales with cheaper beer to lure drinkers who make their own brew, its new Africa head said on Thursday, capitalizing on the continent’s demographics that helped drive its takeover of SABMiller.

The world’s largest brewer paid roughly $100 billion for rival SABMiller, giving it a big foothold in Africa and a crucial but tough task of cracking an untapped market of home brewed spirits that is believed to far exceed commercially produced alcohol.

From Reuters. Story by Tiisetso Motsoeneng.

“In many (African) countries people drink between 9 to 11 liters (2.3-to-2.9 gallons) of commercially produced beer) per person a year, so there’s lots of room for growth,” Ricardo Tadeu, AB InBev’s new Africa head, told Reuters.

“We need to develop our mainstream beer, make it affordable enough to tap into the informal beer market, not only informal beer but informal alcohol in general that you have in those markets.” The global average per capita beer consumption rate is 44 liters (11 gallons) per year, according to Global Risk Insights.

AB Inbev’s big rivals in Africa – Heineken and Diageo – have also launched lower-priced drinks, made with local ingredients, that are affordable for a wider swathe of the population.

Analysts have said the informal alcohol market is about four times the continent’s more than $11 billion commercial market because home brews have a strong tradition rooted in centuries-old African rituals such as the home coming of a young man from initiation schools.

Despite an economic slowdown in most countries including South Africa and Nigeria, Africa’s thirst for beer shows no signs of being sated. Analysts estimate the market will grow on average by 5 percent until 2020, faster than Asia’s projected 3 percent.

According to U.N. statistics, Africa will also account for one-fifth of the global population by 2025 and the continent also has the largest working age population in the world.

Tadeu said AB InBev, which had no presence in Africa until it bought SABMiller, was best placed to capture that growth because it could use its scale to negotiate better contracts with suppliers and free up money to invest in growth opportunities.

“We want to grow volumes but we want to grow efficiently,” he said.

AB InBev launched its global brands Stella Artois and Corona in South Africa in January and plan to launch Budweiser there later this year.

Diageo Africa President John O’Keeffe told analysts last month that consumers in many markets were trading down to cheaper drinks, but the trend was more pronounced in premium beer than in premium spirits.

SABMiller, which was started in South Africa in 1895, had already made affordable beer a key plank of its strategy. It sold Hero lager in Nigeria at a price well below Diageo’s Guinness, which has helped it gain market share.

It also has a sorghum beer called Chibuku, sold in several African markets, based on traditional home brews.

Tadeu, a company veteran who started his new role five months ago from being head of the Mexico division, also said South Africa showed scope for low and alcohol-free beer thanks to a growing number of health conscious consumers.

“We intend to launch non-alcohol beer this year and other products which are going to be aimed at more moderate consumers and calorie-oriented consumers,” he said at the company’s Johannesburg offices. “This wellness trend is something that’s picking up in South Africa.”

AB InBev has already forecast that lower and zero strength beer will grow from a small base to make up 20 percent of its sales by the end of 2025.

Read more at Reuters.