Ethiopia: Dashen Beer Factory undertakes expansion

The Dashen Beer Factory in Gondar town, which has provided opportunities and growth for the community, has recently undertaken a major expansion, All Africa reported May 8.

When the Ethiopian People's Revolutionary Democratic Front (EPRDF) fought against the armies of the Derg regime and took control over Gondar town 16 years ago, Banchiamalck Sead was a member of one of many military families whose life was turned upside down.

Once the fighting had subsided, the wife of a member of the Derg armies, Banchiamalck, found her husband unemployed, and the kindergarten where she taught, owned by her Kebelle, shut down, so she too was out of work. Her life, at the time, seemed to be taking a turn for the worst; she had no income, two children and a husband that was out of work.

Beginning in 1991, Banchiamalck began selling small inexpensive meals to the residents of Azzezo town. She tried this manner of living until 1998, but found that it could not support her family and the growing needs of her children. So, slowly, she began to sell off her possessions, jewellery, household items, even keepsakes, just so they could stay alive.

After living in squalid conditions for seven years, Banchiamalck finally got a job at a guesthouse, cleaning the space for Danish citizens that had come to Gondar to establish a beer factory. For the first time in a long while, she was making steady money, earning 400 Br a month for her services.

"I have never been so happy in my life," she said. "Getting that job was like a miracle for me."

But the times when Banchiamalck thought that she would not make it through another day were long gone. She worked as a cleaning lady for one year, before being promoted to cook and earning an additional 100 Br a month bringing her salary to 500 Br.

"Then I got promoted again to the supervisor of the guest house," she told Fortune. "Everything started falling into place after that, I bought back the things that I had sold to survive; now my home is full."

The main cause for the major changes that Banchiamalck has undergone in her life is the establishment of the largest beer factory in the area, Dashen Brewery.

The endowment company was established by the Rehabilitation and Development of Amhara (Endeavour), an organisation created by the Amhara National Democratic Movement (ANDM). The Movement, in turn, is one of the four member fronts of the incumbent EPRDF, who claims that it used funds collected during the 17 year struggle with the previous regime to conduct development works.

Endeavour was a 60pc shareholder in Dashen with its two subsidiary companies, Tikur Abay Transport SC and Ambassel Trading SC; the remainder was owned by the BGI subsidiary company, BHI. Dashen Brewery was erected with a 350 million Br investment.

With an original production capacity of 300 hectolitres, the company offered job opportunities to 320 residents of Gondar town when it began production seven years ago.

At inception, the company faced demand problems and worked in the red for three years. Dashen was not able to service the over 200 million Br in loans that it had taken from the Commercial Bank of Ethiopia (CBE) and the Development Bank of Ethiopia (DBE). After many ups and downs, Dashen was not able to meet the growing demands for its products in 2004 and inaugurated its 98.7 million Br expansion project last Saturday, April 28, 2007. With the completion of the work, the production capacity of the brewery has now increased by 400 hectolitres. It has also increased the number of its employees to 412.

But undertaking the expansion was a feat that was not as smooth as the management and owners of the company had hoped it would be.

"When we first proposed the expansion, the 40pc shareholder (about 29 million Br), BHI, was not willing to undertake the project," said Bereket Simone, chairman of the Brewery's Board of Directors and special advisor to the Prime Minister on Public Relations with a ministerial portfolio. "This was the first problem that the expansion encountered."

So, the Board suggested that BHI take the 29 million Br in cash and leave the company.

"This idea they did accept," said Bereket. BHI was not accessible to confirm this information.

Although DBE had promised that it would cover 70pc of the expenses of the expansion in the form of a loan, when the time came for approval after the expansion had already begun, the Bank refused.

"The factory has been unable to service the loans that it was given when it was established, and recorded consecutive losses," said a member of senior DBE management. "Although the expansion proposal was a good one, the company did not have the history or profile of a good borrower, so the Bank refused to give them the money that they asked for."

The company turned to its sister companies under Tiret, where it was able to borrow the funds that it needed to complete its expansion. It also used its own income as part of the funding. Dashen spent 57.2 million Br on machinery purchases; 1.3 million Br for civil work; 2.5 million Br for purchasing transportation trucks; and 4.1 million Br for digging wells. Finally, DBE agreed to give Dashen a 33.6 million Br working capital loan.

During the expansion process, the company was forced to shut down its existing Brewery temporarily.

"The temporary shut down happened around the same time that opposition parties were attempting to make the public boycott products from companies affiliated with the ruling party, after the national elections; but the effects that they intended did not materialise," said Bereket. "During the shut down, many of our customers switched to other brands that were more readily available on the market at the time, so when we re-entered into production we had lost some of our market."

But there are conflicting views as to why Dashen's business went down, "the effects of the boycott were felt by the company later, when the number of consumers of Dashen Beer decreased," a sector expert told Fortune.

Dashen objects to this statement and holds the adamant stance that the Beer has a huge market, particularly in the northern areas of the country.

Fortune's extensive tours around Gondar the day after the inauguration of the Dashen expansion revealed the most popular brand in the town is St George Beer.

"I do not really enjoy Dashen, I have noticed that this holds true for my customers as well, because I sell a lot more St George than I do Dashen," said a local bartender.

BGI, producer of St George, is the largest brewery in the country, with a production capacity of 1.2 million hectolitres. The state owned Meta Abo produces 500 hectolitres; Harar 300 hectolitres, and Bedele 250 hectolitres.

"The production capacities of the local breweries have increased in the last two years, having undergone expansions, and with the increase in the demand of beer the market is expanding as well," said the sector expert. "The Dashen expansion has been completed at the perfect time, especially with the sector seeing such growth."

Menale Kassie, a small liquor shop owner in Azzezo town, told Fortune "My customers, predominatly farmers, used to drink tella, a traditional liquor of Ethiopians, and now they have moved to Dashen beer. I sell about two crates a day, more than I would have ever been able to imagine in the past."

When Endeavour established Dashen, the aim was not to make the society in the area part of its consumer base, but rather to make the residents of the area grow the malt needed for the production of beer.

"Part of the reason that the brewery was established here was to move the people into farming and land development," said Bereket during the inauguration event. "Endeavour, in collaboration with the Amhara Agricultural Research Institute has just completed preparations to supply the area with top grade malt seeds."

The company imports 119,000qt of malt a year at a price of 5.9 million euros (around 74 million Br).

Megabiaw Tassew, deputy mayor of Gondar, told Fortune that the residents of the Fogera, Southern Gondar, Gaint and Adet areas had already begun growing malt.

"The additional income earned by farmers in malt production and increased access to refrigeration and lighted venues for drinking as a result of massive electrification projects, have increased the number of beer drinkers in the area," said the expert. "If the current ability of local business to make cold beers available to its customers and the expansion of electrical coverage in rural towns and kebelles continues, the market for Dashen Beer will simply continue to grow."

Berhanu Admassu, general manager of Dashen, told Fortune that if the farmers' standard of living in northern Ethiopia continues to grow at the rates that they have been, the company will have a strong market for its product.

"If things keep up we will not even have to take our product to the central and southern parts of the country, we would have our hands full with just the north," said Berhanu.

Indeed, the upside has already been felt by the company, which made a 19 million Br net profit last year and awarded a two month salary bonus to its employees amounting to 566,966 Br. In addition, the company also increased the pay of its employees by four per cent.

One of the beneficiaries of the pay raise and the bonus is Banchiamalck, who is now working in the bottle quality control department of the factory. She now earns 897 Br a month sending one of her daughters to private school for a monthly price of 100 Br.

"I have back everything that I lost now," she told Fortune.

But Banchiamalck is not the only one to benefit from Dashen Brewery. There are more than 50 employees that are part of military families that lost everything with the downfall of the Derg, and they too are reaping the benefits of the factory.

"Banchiamalck or even the others are some of the lucky people that EPRDF has managed to lift out of poverty," said Menale, a 55 year old resident of Azzezo.

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