Study: Growth in African Beer Market set to Outpace Asia in Next Five Years

14 May 2014 ---With waning beer consumption and economic challenges in mature western markets, the major brewers are setting their sited on opportunities in Africa. Rising wages and a growing population is helping to fuel the beer market in Africa, while glow growth in the BRIC and Asia countries looks set to continue, according to research.

Canadean’s latest Global Beverage Forecast report predicts a five year growth rate (CAGR) of 5% for Africa beer compared to 4% for Asia, 2% for Latin America and 3% for the BRIC countries. Only the Middle East and North Africa market (MENA) is predicted to grow faster, but from a very low base.

“Recent years have seen beer in Africa beginning a transformation from being a commodity to becoming a premium product,” said Canadean’s director of beer services, Kevin Baker. The Africa beer market is heavily consolidated with four groups (SABMiller, Diageo, Castel and Heineken) accounting for 90% of the region’s beer consumption, but Baker said Africa offers huge potential for new brewers. “Although the market is already dominated by four brewing groups, and it may appear difficult for other brewers to gain a foothold in the region, the growth potential could offer opportunities for new players to enter the market.”

The transformation of the African region from a continent affected by localised instability, to a potential economic powerhouse is dramatic. A recent report by the African Development Bank finds that Africa is growing faster than any other region and average inflation in the region has fallen considerably since the 1990s. Africa’s burgeoning population is now perceived as an asset with the working age population forecast to outstrip that of China and India. Africa is expected to see a significant increase in the legal drinking age bracket over the next five years; a factor which offers clear potential for targeted product development by the major brewers.

Operating within Africa is not without challenges. In some countries restrictions on alcohol for religious reasons are in play, while in others, the alcoholic drinks sector is dominated by unregulated ‘homebrews’. These products include ‘beers’ brewed from sorghum, bananas and tree bark. Estimates suggest that the size of the unregulated segment could be as high as 90% of alcohol consumption in some African countries. The major international brewers are working to develop low cost products that can compete with the unregulated market. According to Kevin Baker, “the market for illicit ‘homebrews’ is a major public health issue in Africa, and the development of affordable alternatives, made from local raw materials, is both socially responsible and commercially sound.”

Diageo’s subsidiary Kenya Breweries was the first to specifically target the segment with sorghum-based Senator. SABMiller’s Eagle brand is also brewed from sorghum, but in Ghana the brand uses cassava root. Another of SABMiller’s products, Impala, in Mozambique is also cassava-based, while Diageo has developed Ruut Extra in Ghana, brewed from cassava root.

As the brewers target the informal sector with innovative products, it is expected that consumers will continue to trade up to premium beer. Currently premium beer volumes in Africa are rising faster than the overall market driven by both international brands and new product development. The region can be expected to be a hive of activity over the forecast period, with the incremental volume increase predicted to account for 15% of global beer consumption.