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Vasari’s fundraising highlights potential of Ethiopia’s drinks market

By David Whitehouse
Posted on Monday, 1 July 2019 14:57

A customer drinks beer at the St. George brewery's public pub in Addis Ababa, Ethiopia. REUTERS/Tiksa Neger

Economic reform and one of Africa’s youngest demographic profiles are spurring increased investor interest in Ethiopia.

Consumer-focused investment group Vasari Beverages  completed fundraising of $100m in June and plans to expand its beverage operations in Ethiopia, as well as seeking new acquisitions in Africa and Asia.

Ethiopia’s alcoholic drinks market has “very strong growth prospects”, argues Vasari CEO Vivian Imerman.

  • Per-head consumption of beer has doubled since 2012 to 10l currently but remains well behind South Africa, at more than 60l, Imerman says.
  • Spirits consumption, he says, is also well below the regional average.

The International Monetary Fund expects Ethiopia to be Africa’s fastest-growing economy in 2019. With a population of about 105 million, Ethiopia is Africa’s second-most populous country after Nigeria. The median age of 17 gives Ethiopia one of Africa’s youngest demographic profiles. The major players in the Ethiopian drinks market are Heineken, Diageo, Dashen, BGI Ethiopia and Habesha.

Vasari has investments in Dashen Brewery, one of the country’s largest breweries, and the Rorank distiller, which produces spirits under the Super Eagle and Crystal brands.

  • Some of the recently raised capital will be used to double Dashen’s production capacity to 5m hectolitres per year, while capacity at Rorank will be tripled.
  • The firm takes a “highly activist stance” to growing each business, Imerman says.

Risks in the market

Competition is growing, and investment in Ethiopia’s drinks sector has been accelerating.

  • In March, local firm Kangaroo invested $52m to set up a new brewery.
  • South Africa-based wine and spirits producer Distell is considering entering the country.
  • In May, United Beverages, a joint venture between Kangaroo and United Africa Beverages, launched ‘Anbessa Beer’ in Ethiopia.
  • In soft drinks, Coca-Cola plans to invest $300m in Ethiopia over the next five years.

Ethiopia’s economic progress is unlikely to be linear. The World Bank in April pointed to the risk that political disruption and social unrest could negatively affect growth through lower investment, tourism and exports.

  • Limited competitiveness also constrains the development of manufacturing, job creation and exports, the World Bank said.

Ethiopia has recently tightened up on alcohol advertising.

  • A ban on broadcast adverts for alcoholic drinks between 6:00 am and 9:00 pm came into effect at the end of May.

Despite those risks, the Economist Intelligence Unit (EIU) argues that Ethiopia will continue to post robust growth and that Prime Minister Abiy Ahmed’s government will push ahead with reforms and privatise state-owned enterprises (SOEs).

  • Business confidence will increase and foreign investment will climb following a spate of sales of government stakes in SOEs, the EIU says.
  • The economy is forecast to grow at between 7% and 8% every year to 2023 inclusive – and even that figure would be higher were it not for growing international trade protectionism.

Bottom Line:

If Ethiopia can maintain political stability, then its demographic profile could make it one of Africa’s leading investment destinations.

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