Bottles of Perrier at a New York store. SAB Miller is in a race with EABL for the thriving Ugandan market. AFP
SABMiller is opening a second brewing plant in Uganda at a cost of $80 million (Sh6.6 billion), taking its ongoing beer war with Diageo affiliate East African Breweries Limited (EABL) to a new high.
SABMiller says the new plant will see its Ugandan subsidiary Nile Breweries (NBL) double capacity to 360 million litres by 2013.
EABL also doubled the capacity of its Ugandan subsidiary at a cost of Sh1.6 billion in its Port Bell plant and the SAB Miller move is set to intensify its ongoing battle for control of the regional beer market with its rival Diageo—which owns 50.03 per cent of EABL.
“The new brewery will be constructed in Mbarara in western Uganda, the fastest-growing regional beer market in the country, with the site chosen as the optimum location to meet the increasing local demand,” said Mark Bowman, the managing director of SABMiller Africa in a statement Thursday.
The investment comes when the beer giant has stepped up its activity in the Eastern Africa market. It has opened a new plant in South Sudan, made a re-entry into the Kenyan market via its local subsidiary Crown Beverages and is preparing to defend its Tanzanian market from a fresh onslaught from EABL – which bought rival Serengeti Breweries Limited in 2010.
East Africa is increasingly becoming a battlezone among multinationals SABMiller, Heineken and Diageo led EABL. The global brewing giants are seeking a stronger foothold in emerging countries where beers sales are still rising, compared to Europe and the US.
Data from Japanese investment bank Nomura show that beer consumption increased in Africa, Asia and Latin America by four per cent, 4.8 per cent 2.7 per cent respectively in 2010.
Already, a vicious battle for dominance is underway in Uganda between Uganda Breweries, owned 98.2 per cent by EABL, and Nile Breweries, which is 60 per cent owned by SABMiller and where it invested $29 million (2.4 billion) in 2009 to expand capacity.
Uganda accounts for 17 per cent of EABL’s sales and the brewer has been racing to reduce its reliance on Kenya – which generates over 75 per cent of its sales.
Unlike Kenya where beer sales have remained flat, Uganda recorded growth of 28 per cent in 2011, according to SABMiller, helped by its growing economy.
It also has a lower per capita beer consumption of about eight litres per year compared to an average of around 60 litres in South Africa—signalling opportunities for growth for beer makers. In Kenya, SAB Miller has focused on the premium market with brands like Miller Genuine Draft, Redds and Castle Lager—a segment that has also caught the eye of Heineken, which recently opened a regional office in Nairobi.
In Tanzania, Diageo through EABL ended a partnership with SABMiller over the running of Tanzania Breweries Limited and bought a majority stake in rival Serengeti Breweries.
This has set off a vicious market share war between the hitherto business partners. The number three global brewer, Heineken, has been a late entrant into Africa but wants to build its stake after clinching share purchase deals in Nigeria, Rwanda, South Africa and Ethiopia in recent months.
