SABMiller Uses Success With `Holy Water’ to Target Ethiopia’s Beer Market

Ambo Mineral Water from Ethiopia
Ambo Mineral Water from Ethiopia

By Nicky Smith and William Davison – Bloomberg

Addis Ababa, Ethiopia: SABMiller Plc, the world’s second- largest brewer by volume, is using its success with Ethiopian “holy water” to encourage the country’s government to sell it state-owned breweries

Naturally sparkling water from Ethiopia

SABMiller has invested $20 million since last year buying Ambo, which bottles a strong-tasting, naturally sparkling water from a valley of the same name about 130 kilometers (81 miles) west of the capital, Addis Ababa. The water, named after the town, is sold locally as Ambo Tabel, which means holy water in Amharic, and is touted as a historical cure for ailments from diabetes to obesity, according to London-based SABMiller.

“We thought it would be a great business and great opportunity to enter Ethiopia,” Mark Bowman, the managing director of SABMiller’s African operations, said. “This water brand is probably the most powerful brand in Ethiopia, it’s as close to buying a holy water as one can get.”

Ethiopia’s Meta Abo, Bedele and Harar breweries, which the government said today are up for sale, hold a combined 37 percent market share, according to London-based Plato Logic Ltd., which estimates that Ethiopians drink about 3.8 liters of beer (1 gallon) on average each year compared with 10 liters in the rest of the continent.

The Ethiopian  government is offering auction documents for a joint- venture partner to run Meta Abo while the sale of Harar and Bedele will take place before the fiscal year ends in July, Wondafrash Assefa, a spokesman for the government’s Privatization Agency, said from Addis Ababa today.

Other Bidders

Habesha Breweries Share Co., a newly formed company, plans to bid for Meta Abo, Eskinder Desta, a spokesman for Habesha, said. Meta Abo may fetch as much as $55 million, Harar may be worth up to $30 million and Bedele around $20 million, he said.

Ambo, of which SABMiller owns 68 percent, produces 35 million liters a year, accounting for 85 percent of Ethiopia’s mineral water market, SABMiller said. The brewer paid $21 million for the stake, the Addis Ababa-based Reporter said. SABMiller spokesman Jonathan Oates didn’t give details on the transaction in an e-mailed response to questions yesterday.

SABMiller has improved technology and marketing and cut workers to 300 from 700 since buying what was a “defunct” business, Bowman said in an interview in Johannesburg.

Can’t Be Ignored

This may improve chances for the 115-year-old brewer of Miller Genuine Draft and Castle Lager in bidding for state- brewing assets in a country that posted economic growth last year of 8.7 percent, he said.

“You can’t ignore 80 million people,” Bowman said. “We’ve had a look over time at beer interests in Ethiopia that haven’t been available to us and we came across Ambo.”

The town of Ambo, surrounded largely by bare hillsides, has about 50,000 residents. Emperor Haile Selassie used to bath in the hot springs that still fill an outdoor pool popular with tourists. About 63 percent of Ethiopians are Christians, more than two-thirds of which are Orthodox Christians and the balance from other denominations, according to government statistics. About a third of the country’s population are Muslim.

A plastic bottle production line is being commissioned for Ambo to grow volumes and cut packaging and transport costs, Bowman said. It is also introducing Ambo Light, a “more lightly sparkling version,” at the end of the month.

‘Double-Digit Growth’

The business may post “double-digit” growth over the next two to three years, he said.

SABMiller’s partner in 18 African countries, Castel Groupe, controls 62 percent of Ethiopia’s beer market with its Dashen and Kombolcha operations, Plato Logic said. A seventh brewery is planned by Habesha, it said. Beer drinking in Ethiopia will grow 15 percent in five years as disposable income increases, Addis Ababa-based Access Capital said in a May 28 note.

SABMiller bought three water businesses in Africa last year, including Voltic in Ghana and Nigeria, Rwenzori in Uganda, and Ambo. Africa’s water market is growing 18 percent a year and has accounts for 4 percent of the company’s African sales.

Volumes in SABMiller’s Africa region, which accounts for 10 percent of sales, grew 7 percent in the first quarter of the 2011 fiscal year, which Bowman said he expects to maintain for the rest of the year.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net; Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.

To contact the reporters on this story:

Nicky Smith in Johannesburg at nsmith38@bloomberg.net; William Davison in Addis Ababa, Ethiopia via Johannesburg at pmrichardson@bloomberg.net.