Big Beer Goes African

Africa is the second largest continent on the planet, and is also the second most populous, coming in second behind Asia. However, it’s also the least developed and the least invaded by mega-corporations. There are still many African tribes that live the same way their ancestors did for thousands of years before, including the way they brew their beer. That might be changing if big beer has anything to say about it though.

Increasingly, big breweries are turning their eyes to Africa for quite a few different reasons. Those include cheaper brewing ingredients, access to markets that aren’t glutted with other options, cheap labor and even for humanitarian reasons. What’s happening in the industry?

Alternative Ingredients

The cost of barley and wheat has skyrocketed around the world, spurred on by things like the Canadian wheat failure and increasing demand from small brewers. In an effort to save some money, big brewers like SABMiller and Heineken are eyeing alternative ingredients for their brew – locally sourced ingredients grown and used in Africa are much more affordable than buying up global barley or wheat supplies. What ingredients are they looking at?

Sorghum: Sorghum is a grass, much like wheat or barley. However, it’s far more frequently used in making fodder for animals than in anything else Westerners are familiar with. It is used in many foods and particularly manufactured for those with gluten sensitivity. Outside of the US and Europe, it is a heavily used food crop and most certainly plays an important role in Africa.

With rising prices for barley and wheat, companies like SABMiller see sorghum as a potential alternative grain. Not only is it ideal for gluten-free brewing (which is catching on in the US), but it’s cheap, widely available throughout Africa and is already grown by local farmers. SABMiller plans to source sorghum from local farmers and help create new jobs throughout the continent. The resulting beer will also be sold in African nations, providing Africans with one of the lowest cost beers ever.

Cassava: Cassava root is heavily used all around the world and ranks just under the potato in terms of popularity. It’s a starchy root that can be used for numerous things, including brewing beer. It is also a known problem because cassava root that is not prepared properly can have very high levels of cyanide – causing goiters and cyanide intoxication as well as paralysis. 

However, cassava is heavily grown throughout Africa, with Niger being the leading global producer of the foodstuff. SABMiller also has plans to turn cassava into an ingredient for locally brewed beer. Because the root spoils very quickly, it’s not a good option for export, but the big brewer has plans to buy from local growers and process the root immediately for fermentation. The resulting brew would be resold to the local population, helping to create new jobs and boost revenues for the world’s second largest brewer.

Using local ingredients like sorghum and cassava doesn’t only benefit the local farmers though. SABMiller and Heineken can also look forward to significantly reduced supply chain costs. It allows them to bypass the volatility in the wheat and barley market, avoid high costs for shipping ingredient to Africa (and the cost of shipping already brewed beer to the continent). Even with the lower price for locally produced beer (20% less than regular bottled beer), brewers stand to make a significant profit. Much of that is due to the unexploited African markets.

Access to New Markets

Beer is nothing new to Africa. Quite a few breweries exist throughout the continent, though South Africa certainly has the highest concentration. In addition, local brewing has long been established, though these are not the same as the microbreweries you’ll find in the US and in Europe. Local peoples use a range of different things for fermentation, including bananas and more. However, there is more than ample room here for big breweries to enjoy a significant presence.

By the end of 2011, SABMiller plans to be active within close to 20 African nations and has a building presence in a lot more. However, the real problem is that in most African markets, the people simply don’t have the money to pony up for the company’s premium products. The answer here is the same as in the above section – locally sourced ingredients and locally brewed beer. That more than halves the cost of brew for Africans and puts the beverage within reach of the average family.

Complimentary Production and Infrastructure Development

SABMiller and other big beer companies getting involved in the African market understand that it takes more than just local ingredients and local brewing facilities. They need bottling and canning facilities, packaging companies and more to ensure that they are able to get their products out to consumers. The answer to this is to foster growth in other areas.

For example, SABMiller has spurred growth in the Angolan bottling industry by promising to buy every bottle produced from at least one manufacturer. They are also helping to set up packaging companies throughout the continent in order to support their efforts. The upshot of this is that in addition to jobs in farming and brewing, big beer is fostering growth in a number of other areas.

There’s plenty of good reason for that – operational costs in Africa are a fraction of those for other nations, even Mexico and South America. That means that SABMiller and Heineken are able to cut costs for their customers without cutting their own profits significantly.

Of course, it remains to be seen whether or not big beer’s plan for the African people works out. It also remains to be seen just how well received their products will be or whether the jobs created will last. It’s to be hoped that big brewers do find success there, though, as that will further spur economic prosperity and possibly even pave the way for African craft beers to begin operating in many nations.

Posted on December 5, 2011 and filed under The Business of Beer.