Uganda brewers toast to higher sales, thanks to low-end products
Increased beer consumption and an improved tax regime have led to new, major investments by Uganda beer makers.
This will boost the firms’ production capacity and market share as the region moves closer to integration.
Despite Uganda’s low per capita beer consumption, officials of Nile Breweries say they could improve their market share by finding the right product mix for different consumer categories.
At 6.0 litres per annum, the average per capita beer consumption in Uganda is much lower than Tanzania’s 8.4 litres, Kenya’s 12 litres, and South Africa’s 60 litres.
But there is a growing capacity in Uganda, with consumers segmenting themselves into brands such as premium, ordinary and lower-end. Nile Breweries first ventured into the lower-end beer market in 2002 when it introduced Eagle Lager.
The move was replicated immediately by East African Breweries.
Consumption of these products has risen from one million cases six years ago to four million cases today.
Recently, Nile Breweries launched a $29 million brewery and packaging line that will produce over 1.8 million hectoliters (180 million litres), effectively taking the Jinja-based company to double production capacity.
This capacity is part of the company’s strategy to introduce its own premium brand, Nile Gold, while increasing production of other brands in its product portfolio.
“We now have brands for all consumers. We don’t have to import premium brands any more. Our other brands are also doing well,” said Nick Jenkinson, the firm’s managing director.
He, however, conceded that the company’s answer to the competition’s premium brands was mainly imported brands from its sister breweries under the giant SABMiller plc family.
Nile Breweries has not been doing well in the premium brand segment, which is dominated by EABL’s Tusker Malt Lager.
In June this year, Finance Minister Syda Bbumba announced a 20 per cent reduction of exercise duty on beer made from barley grown and malted in Uganda — from 60 per cent.
This was to encourage import substitution, value addition and barley growing. The main raw materials of Nile Breweries’ Eagle Lager and Eagle Extra is epuripur sorghum and maize — both grown in Uganda.
The duty reduction is a boon to local farmers and will also impact on the price of beer.More people will be able to afford clean bottled beer, and hence the country’s per capita consumption will improve.
Currently, farmers in the high altitude areas of Kapchorwa, Kabale and Kabarole, and in Kitgum districts, are already growing barley to tap into the huge potential of the revamped industry.
Nile Breweries is currently asking its shareholders to approve a $16 million investment in a barley malting plant in Jinja.
A socio-economic impact study on Nile Breweries’ operations in Uganda by Professor Ethan Kapstein of INSEAD done last year revealed that the beer maker supports up to 44,000 people.
The company’s recent growth has been due to increased consumption of Eagle Lager and Eagle Extra.