Breweries discuss BGI’s possibly buying shares in Raya, partial management
BGI Ethiopia, Ethiopia’s largest brewer by volume, has been holding talks with Raya Brewery over a possible purchase of stakes in the latter and partial management of the soon to be established Raya Brewery, Fortune has learnt.
The two breweries have confirmed to Fortune that they have been in discussions over a possible partnership. Both parties declined to disclose details on the talks or whether an agreement has been reached.
“The talks have been positive,” Esayas Hadera, marketing manager for BGI, told Fortune. “We are encouraged by the growth the beverage sector has been showing over the past few years and we see continuing growth in the sector in the foreseeable future. We see a possible partnership with Raya Brewery as a move in the right direction towards enhancing the beverage sector in Ethiopia.”
A joint venture (JV) would give Raya and BGI an estimated market share of over half of Ethiopia’s market.
BGI Ethiopia’s market share currently stands at around 50pc. On June 7, 2011, it inaugurated a brewery in Hawassa, located 273km south of Addis Abeba. The brewery, BGI’s third after its breweries in Addis Abeba and Kombolcha, boasts an annual production capacity of 400,000hl (hectolitres), increasing the company’s total annual production capacity to 1.9 million hectolitres.
A broader share of the Ethiopian beer market would fend off possible challenges from Heineken, the world’s third largest brewer. Heineken is set to enter the domestic industry following its acquisition of Harar Brewery and Bedele Brewery for 78.1 million dollars and 163.4 million dollars, respectively, on May 2, 2011.
“We see a possible partnership with BGI as a move in the right direction,” Tsadkan G. Tensae (Gen), chairman of Raya Brewery, told Fortune. “A partnership will leverage Raya’s brand as well as enhance its marketing and distribution. We see a partnership as beneficial for both parties where we can pool our resources towards the growth of the beverage sector.”
The former army chief hinted that a deal could see BGI acquiring shares in Raya Brewery as well as possible management.
Beer consumption in Ethiopia has shown surprising growth, roughly double the average annual growth rate in real GDP, research conducted by Access Capital in May 2010 indicated.
The demand for beer has increased from only one million hectolitres in 2003/04 to nearly 3.1 million hectolitres by 2008/09, amounting to an estimated average growth rate of around 24pc annually, the research found.
Ethiopia’s beer industry consists of five major breweries: Meta Abo Brewery, Harar Brewery, Bedele Brewery, Dashen Brewery, and BGI. Combined, they have an annual production capacity of close to four million hectolitres.
Along with Raya, Habesha Breweries is currently under formation.