Africa: Three-way fight over control of Africas beer industry may be close to its endgame
A three-way fight over control of Africas beer industry may be approaching its endgame, Bloomberg reported on November 21.
The tussle between Heineken NV, Diageo Plc and units of Anheuser-Busch InBev SA for control of the worlds youngest continent has been going on for decades. Heinekens acquisition of South African winemaker Distell Group Holdings Ltd. and Namibia Breweries Ltd. to create a 4 billion euro business, announced last week, may be a final piece of the puzzle.
The attractions for brewers of a region overlooked by other global businesses should be obvious. Beer is all about demographics, and Africas are among the most promising. By 2050, its nations will have a larger combined population than either China or India, accounting for one in four humans. Thats an opportunity for companies far beyond the beverage sector. To date, fast-growing labor forces and abundant natural resources have failed to bring Africa the sort of economic growth that other emerging regions have enjoyed. This may be on the verge of changing.
As anyone who has thirsted for something cool, mildly alcoholic and heady after a hard day at work should know, beer and employment go hand-in-hand. One reason that Vietnam has been a hotly-contested market for global beverage companies in recent years is that the labor force will overtake Japans by 2030.
Developing nations are in a particularly sweet spot for brewers. While affluent populations tend to gradually lose their thirst for beer in favor of wine, spirits, or abstention a trend thats well under way in developed countries, and advancing now in China, too people tend to pick beer in the earlier stages of income growth. Where Heineken, Guinness and Budweiser go, other businesses in need of an able workforce ought to follow.
All of that makes Africa an attractive market. Beer consumption rose by 33% between 2010 and 2019, according to a study by Kirin Holdings Co., making it a rare growth region in a world whose thirst for lager and ale is largely slaked. Nigeria long ago overtook Ireland to be the second-biggest market after the U.K. for Diageos Guinness stout. Sales in the continent grew by nearly a third during 2021, the companys beer president, John OKeeffe, told an investor conference this month.
Brewers involvement in the emerging world isnt an act of charity. Indeed, as Dutch journalist Olivier van Beemens recent book Heineken in Africa demonstrates, its frequently a grubby, immoral business that shareholders back home would rather not know about. Scrambles for Africa by powerful European players have rarely turned out well for the people of the continent.
Still, theres a lesson in brewers interest in Africa to a corporate sector that by and large still neglects the regions opportunities (foreign direct investment into the entire continent south of the Sahara is no greater than flows into Italy during a typical year.) The booming population and labor pools that will emerge over coming decades are far more than just the consumers seen by AB InBev, Diageo and Heineken: Theyre the productive engine for the next leg of the worlds economic growth, once China and India reach their own plateaus.
Such a role is long overdue. After a long and miserable history of extractive exploitation under colonial control, a brief interlude of protectionist industrialization in the early independence era ended in business failure, debt and default. Mining and petroleum helped lift exports in recent decades, but the benefits have fueled inequality and graft more than broad-based wealth.
The problem hitherto has been a lack of decent jobs for the expanding urban workforce. Around 90% of work in central, eastern and western Africa south of the Sahara is in the informal economy, according to the International Labour Organization, meaning people live week-to-week with little security of employment or income.
Africas population is more urbanized than Indias now or Chinas in 2003, one reason that international beverage companies see such potential in distributing there. Unless jobs can be found, though, Africas demographic boom risks turning from an asset into a liability.
This may now finally be happening. We could be seeing the early signs of a manufacturing renaissance in the continent, according to a study for the United Nations Industrial Development Organization. Outside of the biggest economies of Egypt, Nigeria and South Africa, regional trade may be more active and dynamic than previously suspected, a separate study for the Brookings Institution argued. That suggests the continent-wide free trade area that came into force in January may help kick-start a virtuous circle of trade and development.
The challenges for sub-Saharan Africa remain profound, especially as critical shortages of Covid-19 vaccines leave it with yet another disease burden. The opportunity in the coming decades, however, is quite as substantial. Thats a prospect worth drinking to.
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