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Anheuser-Busch InBev NV
Andrews Bortey takes a seat with his wife outside the Tsui Anaa (translation: Patience Pays) pub in Accra, ready for a refreshment after a long day working as a fisherman in Ghana’s capital. He orders a Chibuku and gives the beer a vigorous shake before sipping the thick, milky-looking beverage. Chibuku, sold in blue-and-white cardboard cartons, is called “Shake-Shake” by devotees because the ingredients tend to separate and leave a yogurt-like paste at the bottom. The residue might be a turnoff to some Western drinkers. Yet SABMiller (SAB), known for clear beers including Peroni, Grolsch, Miller Lite, and South Africa’s Castle Lager, is counting on Bortey’s favorite brew to help tap the fast-growing beer market across the continent.
As beer consumption in western Europe and the U.S. slows, global beverage companies such as SABMiller, Diageo (DEO), and Heineken (HEIA) hope to gain market share among Africa’s expanding middle class. SABMiller’s first-half revenue from African countries excluding South Africa increased by 22 percent, to $1.8 billion. (An earlier incarnation of the company had been selling beer in South Africa since 1895.) With Chibuku, SABMiller is looking to win over lower-income Africans more used to “informal” beers, or home-brews. “It gets a whole new income level of consumers into the category,” says Morgan Stanley (MS) analyst Michael Steib. “With growing incomes, there’s ultimately scope to trade drinkers up.”
Photograph by Jason Alden/Oneredeye
SABMiller, the world’s No. 2 brewer after Anheuser-Busch InBev (BUD), is spending $260 million across Africa this year, partly to expand production of Chibuku as a commercial alternative to a corn-and-sorghum-based drink called Brukutu that’s traditionally brewed and enjoyed at home. “It has the original taste of our locally brewed Brukutu,” Bortey says. His wife, Patricia Kaa, adds that the SABMiller drink is not only more affordable but better produced. “Unlike Brukutu,” she says, “we know Shake-Shake’s prepared under very hygienic conditions.”
Chibuku costs as much as 40 percent less than mainstream beers, according to Wes Tiedt, managing director of SABMiller’s National Breweries unit. Bars in Ghana sell a one-liter carton for 1 cedi (58¢) to 1.3 cedis. The drink has a shelf life of about five days as it continues to ferment in the carton, becoming more alcoholic—it can be as low as 3 percent, and can reach 5 percent—and more sour. The style of thick beer was formalized in Zambia in the 1950s when brewer Max Heinrich wrote down the formula and locals called it chibuku, which means “by the book.” It’s now well-established in Malawi, Botswana, and Zambia. SABMiller plans to sell the drink in 12 African countries within three years.
SABMiller isn’t the only beverage maker eyeing African expansion. Diageo, better known for its Smirnoff vodka and Johnnie Walker Scotch whisky brands, bought a brewery in Ethiopia for $225 million in January. And Dutch brewer Heineken purchased five breweries in Nigeria and two in Ethiopia last year. But they’re mainly sticking to Western-style brews.
The sales potential for the thicker African quaffs isn’t small beer. SABMiller forecasted in 2009 that the market for African home-brew could be worth $3 billion annually. Tiedt estimates that the informal-beer market is about four times that for clear beer in Africa. National Breweries has about a 60 percent share of opaque beer sales in Africa and an annual capacity of 1.8 million hectoliters (48 million gallons). “We’re the only people doing this commercially,” says Tiedt. “It’s a huge opportunity.”
How consumers enjoy Chibuku differs from country to country. In Malawi, the top of the carton is cut off and the brew is passed among friends. In Zambia, the beer is sipped from cups. The flavor also varies by market, as SABMiller caters to local tastes and uses ingredients such as corn and malted sorghum produced near individual plants, Tiedt says.
Delivering a beer with a five-day life span is tough, especially in rural areas with unpaved roads, limiting SABMiller’s market. Mary Abotse started selling Chibuku at her Tsui Anaa pub in Accra last July. She says that even though customers are warming to the drink, she doesn’t stock much because of its short shelf life. “I buy one crate of 15 pieces,” she says. “My stock is finished within four days.”
SABMiller thinks it may have a solution: Chibuku Super. The product, now being test-marketed in Zambia, is sold in leak-proof plastic cartons and has a shelf life of 21 days. “I think it’s a game-changer for us,” Tiedt says. “It’s not necessarily an on-premise drink anymore.”
The bottom line: SABMiller is expanding distribution of its cloudy Chibuku beer in Africa. It hopes the 58¢-a-liter drink will compete with home-brews.