Heineken overlooks Kenya in Sh10bn Ethiopia plant plan

Dutch brewing company Heineken has opened a Sh10 billion factory in Ethiopia, indicating a preference for the country in its regional investment plans.

The brewer said it would continue importing its flagship brand from Netherlands to Kenya, despite the set up of the new factory in Ethiopia.

Heineken’s financial communications manager Christine van Waverenn said in an interview that the factory, which is only one of few in Africa producing the flagship brand, would only serve the Ethiopian market.

“We are not anticipating a change in the distribution model for Heineken beer in Kenya,” said Ms Waverenn in an e-mail response. “Heineken sold in Kenya will continue to be imported from our Zoeterwoude brewery in the Netherlands.”

Heineken, which set up a Kenya office in 2011, distributes across the country through Maxam Limited, which has held the franchise since 2007.

The beer maker has three breweries in Ethiopia (Kilinto, Bedele and Harar), two in Rwanda (Bralirwa) and two more in Burundi (Brarudi) which produce tens of brands except its flagship beer.

In Uganda, Tanzania and Kenya, where Heineken only has offices, but no breweries, the company has plans to begin importing Desparados— a tequila-flavoured beer, beginning last year.

The investment plans signal Heineken’s view of high growth potential in the region, underlining its attraction to Ethiopian—Africa’s second most populous country. The brewer, however, declined to disclose reasons for its preferred business model.

“Our priority is to establish the brewery in full operation for our local brands,” said van Waveren. “When we have done this, we will start brewing our flagship beer Heineken; we expect this to be during 2015.”

Heineken purchased the Bedele and Harar plants from the Ethiopia government in 2011, saying that the two facilities would help them “export beers to South Sudan and other neighbouring countries in the region.”

Analysts said the decision by Heineken to stick to importation from Europe is likely to be a factor of tax breaks that the company may have signed with the State, barring it from exporting to neighbouring countries.

“The Ethiopian government could have restricted Heineken to supplying its flagship brand locally and employing a certain number of locals in exchange for tax concessions,” said Johnson Nderi, the corporate finance manager at ABC Capital.

Eric Musau, an analyst at Standard Investment Bank, said poor linkage between the two neighbouring countries could also be a factor.

The highway linking Ethiopia and Kenya is incomplete, limiting importation options to Kenya since the two countries do not also have railway connection.