Beer making. The East Africa market is increasingly becoming a battle zone. Photo/FREDRICK ONYANGO
UK brewer Diageo, which owns a majority stake in East Africa Breweries Ltd (EABL), has made a direct bid for a state-owned brewer in Ethiopia, dashing the Kenyan-based firm’s hopes of entering the market.
Diageo, which owns 50.03 per cent of EABL, has taken part in a public auction of the Ethiopian brewer, Meta Abo, as it eyes rising incomes in Africa’s emerging markets and a larger stake in East Africa.
The transaction not only marks a shift in strategy for the multinational brewer, which has preferred to use EABL as its vehicle in the East Africa region, but also locks out the firm from getting a piece of the Ethiopian market.
EABL has in recent years expressed interest in buying Meta Abo.
Analysts say bidding by the parent company has quashed EABL’s ambitions of having representation across the seven eastern African nations.
On Tuesday, EABL refused to comment on its plans for the Ethiopian market.
“The response is no comment,” Ms Brenda Mbathi, the Corporate Relations director at the regional brewer said in response to the Business Daily’s inquiry.
It’s not clear why Diageo decided to go for the deal, but the UK multinational has been racing to get a larger stake in East Africa, expressing intention to buy additional shares in firms owned by EABL.
Ethiopia’s Privatisation and Public Enterprise Supervising Agency says Diageo is one of three multinational brewers, including its rivals Heineken and SABMiller, that have placed bids to acquire the brewer.
Top brewers
The world’s top three brewers’ interest in the firm is set to add impetus to the ongoing battle for control of the global beer market, with protagonists increasingly looking for new demand in emerging markets.
The East African market is increasingly becoming a battle zone between SABMiller and Diageo as both firm’s race to grow their regional footprint.
Already, a vicious battle for market dominance is under way in Uganda between Uganda Breweries, owned 98.2 per cent by EABL, and Nile Breweries, which SABMiller owns 60 per cent.
In Tanzania the two firms, which last year broke an eight year partnership that saw both run Tanzania Breweries Ltd (TBL), are in the cusp of a vicious battle for control of the market.
SABMiller holds 52.83 per cent in TBL, while EABL has bought a 51 per cent stake in Serengeti Breweries — setting off another market share war between the two.
The remaining 49 per cent stake in Serengeti will be bought by Diageo Plc between February 2014 and July 2014, signalling the UK brewer’s intention to gain a larger stake compared to that held by other EABL shareholders whose holding in the Tanzanian unit will shrink to 25 per cent.
In Sudan, EABL is planning to open a plant that will see it engage in a head-to-head battle with SAB Miller, which opened a Sh2.9 billion plant in southern Sudan in April.
The number three global brewer, Heineken, has been a late entrant into the African market but is racing to build its stake after clinching deals in Nigeria, Rwanda, and South Africa in recent months.
“With its large, growing population, political stability, improving economy and rapidly growing beer market, Ethiopia is a promising, long-term growth market for Heineken in Africa,” Heineken said in an interview with Reuters.
Low consumption
Ethiopia’s population of about 85 million people and its low consumption per capita compared to its regional counterparts is what has sparked a scramble among multinationals for a piece of the market.
The Ethiopian government is selling its stakes in three breweries including Meta Abo, Harar, and Bedele, which have a combined market share of 38 per cent.
French controlled BGI Ethiopia has a 42 per cent stake with the remaining 22 per cent controlled by Dashen.
But Diageo’s planned market entry is set to hurt EABL’s ambitions of tapping this market and reducing further its reliance on the Kenyan market that has been showing signs of maturity.
Last year, the Kenyan market generated 83 per cent of EABL’s profits and 70 per cent of its revenues
