Can SABMiller’s Cassava Beer Make a Change?
When SABMiller, the South African brewing giant, announced its entry into the Nigerian market with a cheap beer in 2009, beer drinkers on the lower rung of the economic ladder almost raised glasses in congratulations. However, long after SABMiller acquired major shares in Pabod Breweries in Port Harcourt, Rivers State, it appears no impact has been made so far. Ralph Tathagata examines the marketing situation.
Reports have it that Nigeria is Africa’s second largest beer market, after South Africa, and is currently dominated by players like Star lager, Harp lager and Gulder from the stables of Guinness Nigeria and Nigerian Breweries Plc.
The international brewing giant SABMiller last year acquired 70 percent of Pabod Breweries, Port Harcourt, Rivers State. Pabod Breweries started in 1982 but closed due to management problems. In 2007, Brewtech revived the brewery with the help of the Rivers State government. The company also acquired 100 percent of La Voltic, a bottled water manufacturing company based in Lagos State.
Since its Pabod acquisition, SABMiller has reintroduced brands such as Grand Lager and Grand Malt into the Nigerian market.
Johan de Kok, Managing Director of SABMiller’s Nigerian unit was quoted in a press statement as saying that the Pabod plant produced 30, 000 hectolitres and that the company’s target was to produce 250, 000 hectolitres by February 2010.
Branding/Marketing Strategy
SABMiller’s announcement in July 2009 that it plans an eight-fold increase in output at its Pabod Breweries by 2010, while seeking other potential acquisitions underlines the strategic importance that Nigeria holds in terms of boosting global beer volumes. However, SABMiller went further by shifting its focus to the economy and promised to domestically produce beer based on local sourcing. The company promised to produce more affordable brews using locally sourced ingredients such as cassava, a root vegetable that yields rich starch, in place of more expensive imported ingredients like sorghum.
Exploring the Lower End of the Market
Nigeria, with its high number of legal drinking age consumers and geographically strategic positioning within the African continent has become one of the testing grounds for the manufacturer’s push into the sub-Saharan region.
According to Euromonitor International’s preliminary findings, beer sales in Nigeria amounted to 1.6 billion litres in 2009, registering 9 percent volume growth, marginally down from 10 percent in 2008. A similar report has it that while the country is set to retain the leading position in stout in the global rankings, with 315 million litres in 2009, equating to 10 percent volume growth on the previous year, high single digit growth rates will also be witnessed in all other beer segments, considering the remarkable buoyancy of the sector.
Target Market
Until recently, SABMiller was reportedly targeting the overlooked economy segment of a market that had been traditionally dominated by standard and premium offerings from leading rivals Guinness Nigeria and Nigerian Breweries Plc.
In a press statement, Van den Houten, Director of supply chain and enterprise development, SABMiller in Africa, was quoted as saying that, “With cassava beer, we are trying to aim at consumers who aren’t drinking beer at all but who are drinking a whole lot of other stuff.”
Research has shown that small bars or ‘beer parlours’ are extremely popular in Nigeria and lead on-trade beer sales. According to industry sources, there are an estimated 500,000 such outlets throughout the country as beer consumption is very much a social activity and as a result, on-trade outlets dominate beer with about 80% share of sales. The pronounced social element of Nigeria’s drinking culture has thus also boosted the importance of aspirational credentials.
Although aspirational consumption and westernisation trends have been the primary drivers of the overall beer sector, lower-income consumers are rapidly taking centre stage. SABMiller, through the acquisition of Pabod, reportedly decided to increase its efforts to provide affordable alternatives to popular Premium and standard lager like Star, Gulder and Harp lager beers.
However, six months after the buzz for cheap cassava beer, Nigerian consumers are yet to see the beer making impact in the beer market.
Several phone calls made to contact the marketing department of Pabod Breweries in Port Harcourt, Rivers State were not picked as at press time.
Can Cassava Beer Emerge as One of Nigeria’s Beer Drivers?
The root of this plan lies in the fact that SABMiller announced that it would be using cassava, a tuber, to brew beer, commercializing a technique that has been used across Africa for generations.
As a hangover from colonial times, commercially produced beer in Africa has typically been brewed using barley and maize imported from Europe or the US.
In another press statement, Gerry van den Houten, was also quoted as saying, “The overall strategy is to reduce the cost of beer.”
The company’s first move into cassava-based beer was made at its brewery in Luanda, on the coast of Angola, where it is brewing a local brand known as N’Gola beer using the crop.
Nigeria’s comparatively upbeat economic prospects and projected 8% beer volume CAGR over 2009-2014, according to Euromonitor International’s provisional findings, underline the country’s strategic importance for the beer industry. However prospects of ruling the beer market with cheap cassava lager remains bleak at the moment as other alternatives like 33, Champion, Goldenberg and other cheap lager that are playing at the fringes of the market are very active.
Whether targeting the upwardly mobile middle-class or the mass lower end of the market, SABMiller has not come out with a clear cut marketing strategy to fly its cassava beer. Neither has the cassava beer made any noticeable market presence like the other players.
