By Lynda Kiernan
The International Finance Corporation will invest up to €50 million (US$56 million) in Ethiopia’s Habesha Breweries. The capital is being co-funded by Dutch development bank FMO, and Dutch banks Coöperatieve Rabobank U.A. (Rabobank) and ING Bank N.V. (ING Bank).
This project will not only support the company in expanding its operations in the country, but will have a wider, ripple effect of increasing the sourcing of barley from smallholders, doubling farm yields and raising incomes for 15,000 of Ethiopia’s barley farmers, and creating 500 jobs.
“Programs that support local sourcing are critical to linking smallholder farmers to large supply chains, thus creating more economic opportunity and jobs for vital parts of the country’s agriculture sector,” said Jumoke Jagun-Dokunmu, regional director for Eastern Africa, IFC.
Ethiopia continues to be a key market for the IFC. Over the past five years, IFC has committed to new investments totaling $452 million in the country’s agribusiness, financial, and manufacturing sectors, while also providing advisory services that have been driving the improvement of Ethiopia’s investment environment.
And within this key market, beer is a key category.
Cheers
Originally, U.S. fund managers gained entrance to the African beer market through investing in infrastructure. However, after noticing the continent’s age demographics – how large portions of the population are at the prime beer drinking age, and how local production is creating an opportunity for profits – U.S. mutual fund managers are turning their attention away from Milwaukee and are investing in the new brewery centers of Africa.
Ethiopia’s beer industry has seen significant growth over the years, growing at a CAGR of 16 percent per year to reach a value of US$620 million. The number of breweries in the country has nearly doubled, and production has topped 7 million hectoliters as of 2018.
Taking a step back, and taking a wider view, Africa is forecast to be the fastest growing alcoholic beverage market in the world by 2023, with a market valued at US$13 billion, and beer volume growth of 4.5 percent for 2017 – far outpacing the global average of 1.4 percent.
And the demographics of the continent only point to even greater growth. Urbanization, demographic shifts, and rising disposable incomes across growing middle classes in emerging markets are expected to drive significant growth for the segment, which is expected to see a CAGR of 6 percent between 2017 and 2022 to reach a value of US$750 million within the next five years. This growth is expected to be seen at its greatest in Africa, which is expected to grow faster than any other region on the back of economic and population growth.
By 2050, Nigeria is expected to be the world’s third most populous country, with a larger working-age population than China or India, according to data from the UN, while 45 percent of the population in Tanzania will be between 15 and 45 years of age, according to Technavio. Factors such as this, combined with increased globalization and urbanization, will drive Africa to see a CAGR of 5 percent in beer consumption between 2015 and 2020, according to Canadean.
Habesha
Entering into this growth market is Habesha, which launched its first beer only two years ago, but already has targets in place to increase production almost eight-fold to 4.5 million hectoliters, or 119 gallons of beer within five years.
This projected increase in output would call for 63,000 tons of barley per year, and an increase in sourcing from 2,800 smallholder farmers to 15,000.
“Increasing farmer access to improved agricultural inputs such as seeds and fertilizers and building the agronomic and technical capacity of local, smallholder barley producers in Ethiopia will create more jobs and higher efficiency,” said Linda Broekhuizen, FMO’s chief investment officer.
“By being part of this financing, ING is pleased to support the farmer community in Ethiopia and at the same time reinforce the strategy of our appreciated client Royal Swinkels Family Brewers, which invested in Habesha Breweries in 2012,” said Kiran Sanchit, ING’s head of Food & Agri EMEA.
“We are really trying to keep up with the big boys,” said Jort Crevels, finance director, Habesha. “With IFC’s support, we have no reason not [to] play in that league.”
– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.