Middle East and Africa: Dynamic Beer Consumption Growth Continues
Emerging markets with strong beer volume growth have become a major focus for beer companies in recent years. Key players have been expanding their presence in Asia and Latin America, particularly in the largest Chinese and Brazilian markets, to capitalise on their dynamic volume growth, but rising beer consumption in the Middle East and Africa has also been offering growth opportunities for brewers.
In 2011, according to Euromonitor International estimates, beer volumes in the Middle East and Africa are expected to grow by 6%, significantly outperforming the global beer market which is anticipated a 2% increase. Although this strong growth comes from a relatively small base – the region accounts for only 7% of global beer volumes and per capita beer consumption currently stands at only 10 litres compared to 52 litres in Latin America and 75 litres in Eastern Europe – strong population growth and economic development are expected to continue to fuel consumption growth, thus the region offers long term opportunities.
In the six months to September 2011, SABMiller, the region’s leading brewer, reported 6% growth in its beer volumes in Africa (excluding South Africa), while second-ranked Heineken registered 8% organic growth for its Middle East and Africa region for the first nine months. Dynamic volume growth is expected to continue. According to Euromonitor International forecasts, beer in the Middle East and Africa is set to post a 5% volume CAGR over
2011-2016, making this the world’s fastest growing region. Volume growth will be driven by the region’s largest South African and Nigerian markets, although other smaller markets are also expected to register dyna mic growth. Leading players have been working to expand their presence in the Middle East and Africa so as to take advantage of this strong growth. SABMiller already has a well-established presence in the region’s largest South African beer market, and is enjoying strong growth elsewhere on the continent through its equity stake in Castel Group. In 2011, the company has started building a new brewery in Nigeria, challenging Heineken in its main market, while it has also announced that it will invest US$260 million in further capacity expansion in Uganda, Ghana, Zambia and Tanzania. Other major brewers have also been working on strengthening their presence in the region in 2011. Heineken acquired five breweries from the Sona Group in January to strengthen its dominant position in Nigeria and also purchased the Bedele and Harar breweries from the Ethiopian government in August. Diageo is also planning to invest heavily in additional capacity to meet growing demand, and the two companies have opened a jointly-owned brewery (Sedibeng) in SABMiller’s main South African market.
A-B InBev has not yet established a major footprint in the Middle East and Africa but should look to enter the region if it is to retain or improve its leading position globally. Due to significant acquisition activity from other players, this market has become highly consolidated, with the four largest brewers accounting for an estimated 81% of total beer volumes in 2011, and with one or two players dominating in most countries. As most of the lar gest acquisition targets have been taken, it will be difficult for other players to enter. Nevertheless, as the market offers strong volume growth, and with economic development driving stronger value growth, brewers should look for opportunities to grasp a share in the region.