The Malt Effect: How the Growing Beer Industry Creates Opportunities for Barley Farmers

Farmers in the highlands of Wogera, Dabat and Debarq Woredas in North Gondar Zone of the Amhara Regional State, produce barley and sell the spares from consumption in the local market. This year’s price was not more than ETB 800 per quintal. They also incur transportation costs and other expenses to avail their produce for sale. But the worst part is, they may not find market, particularly in the harvest seasons from November to January when every local farmer produces barley in surplus and takes it out to the market. 

Now the newly established Gondar Malt Factory, owned by Tiret, the Amhara Nation Democratic Movement (ANDM) endowment, at a cost of 670 million birr, is buying the barley produced by these farmers adding 15 pct on the prices of the local markets. The local market prices are studied with a committee formed from all stakeholders including the Woreda and Zonal Agriculture offices, cooperatives and unions, farmers’ representatives and the representative of the factory. These farmers now sell their barley for a price of ETB 920 per quintal at their farm gates. Moreover farmers can produce as much as they can as long as they maintain the quality and standard of barley the factory uses to produce malt for breweries.

Barley is the fifth most important cereal crop in the nation, after maize, wheat, teff and sorghum. Last year alone about 18 million quintals of barely has been produced on more than one million hectares of land in Ethiopia, according to the Central Statistics Agency (CSA).

According to a study by Access Capital in 2010, following the startling economic growth Ethiopia has registered recently, the beer market in the country has shown a noticeable augmentation. The total production of beer in the country has reached about 3.6 million hectoliters per year. But being Africa’s second most populous country with more than 90 million people, Ethiopia’s per capita beer consumption at four liters is only a third of the consumption of its neighbor Kenya’s 12 liters and a much lower volume than that of South Africa’s 59 liters. And there is a gap of 3.6 million hectoliters between demand and supply.

This means, beer production and consumption in Ethiopia will grow at least in to the foreseeable future. In fact, it has been growing approximately by 20pct over the past five years and will continue to grow at least by 15pct, according to the same study.

The Ethiopian beer production and market now more or less operated by the private sector has shown a tremendous transformation in the past few years. This booming of the beer market and increase in production can lend a hand to other sectors’ development through backward and forward economic linkages.

With this expected growing of production of beer, the demand for malt, one of the most important ingredients which have been scarce in the country for so long, will also grow in parallel. And this will create opportunities for farmers who produce barley in the highlands of Ethiopia.

Assela Malt Factory, the government owned malt factory found in Assela, in the Oromia Regional State, which has been supplying malt single-handedly to breweries in the country, has expanded its capacity in the past few years to satisfy the ever increasing demand for malt. Its production capacity has now reached about 36,000 tons of malt annually after investing ETB 300 million on its facilities recently. However, it could not be able to supply more than 50pct of the total malt demanded by the breweries in the country. Last year alone, for example, three of the breweries BGI Ethiopia, Heineken and Diageo demanded more than 75,000 quintals of malt. Dashen imported all of the malt it needed.

In fact, other breweries too, import the malt they needed which couldn’t be satisfied by the lonely supplier.  The growth of importing malt is also growing. According to a data from Ethiopian Revenue and Customs Authority (ERCA) in 2003 only 5,425 tons of malt was imported with a cost of USD 2.8 million. Whereas this number has grown about five folds in 2012 that 26,711 tons of malt was imported with a cost of more than USD 26 million.

Dashen Brewery will no longer import the malt it uses, rather it will use  the malt from the newly established malt factory of its sister company, according to Adane Teka public relation head of the Company. Gondar Malt Factory targets to supply the increasing demand of malt to all other breweries in the country and plans to export to other countries like South Sudan to earn foreign currency.

Assela Malt factory in collaboration with other stakeholders gives technical and other supports such as supply of inputs and improved varieties to farmers. Mekonnen Abera, malt barley supply head of the factory told EBR that the factory has been supporting farmers in rendering extension services, trainings and awareness creation workshops to farmers. It is now undertaking a five year research project in collaboration with Ethiopian Agricultural Research Center and three of the brewery companies.

Holeta, Sinana, Kulumsa research centers in Oromia Region and Debre Birhan research center in Amhara Region have been working in improving and introducing new productive varieties to farmers not only in Arsi and Bale zones, but also to farmers in North and west Shoa, barley producers around Addis Ababa and in the Southern Region, according to Mekonnen. While the breweries contributed 30 Pct of the total ETB13 million project cost, the rest is covered by the malt factory. About 65,000 farmers have benefited from these schemes according to him.

Gondar Malt Factory plans to start production of malt at the beginning of the coming Ethiopian New Year. It plans to process and make ready about 16,200 tons of malt to breweries annually. To this effect it plans to collect more than 22,000 tons of malt barley from local farmers.

“The factory will create market opportunities for farmers who produce barley in the highlands of the Amhara region, primarily in Gondar, Gojjam and Wollo but will expand to other areas in the future.” Tadesse Kassahun, general manager of the factory told EBR. “The factory will also have a plant in Debre Birhan to utilize the potential barley production in the area,” Tadesse added.

North Gondar Zone Agriculture Bureau inputs supply and distributions head Tesfaye Alemu confirmed that farmers in Wogera, Dabat and Debarq Woredas are beneficiaries from this project. “Before the introduction of the brewery and malt factory in the region, farmers who produce barley used to sell their products for local merchants for prices which are usually decided by the traders. But now in collaboration with the farmers cooperatives and union the malt factory buys their products by adding a 15Pct increase from the price of the local market after a market research is done.” he added.

Farmers are also supplied with the necessary inputs and technical supports like trainings and awareness developments by the Agricultural offices in collaboration with Dashen Brewery and Gondar Malt Factory. “The contribution of these companies is sometimes more than collaboration” Tesfaye says. For example last year, there has been a shortage of inputs particularly improved seeds of malt barley and the malt factory has supplied the barley it has collected for the production of malt to the farmers to use them as seeds and payback in kind from their products, he told EBR.

Gondar Malt Factory, in collaboration with the Amhara Regional State Agricultural Bureau provides a special extension support. It also facilitates the supply of necessary inputs and technologies in collaboration with suppliers. Assela Malt Factory has been giving such supports to barley farmers in the Southeast Ethiopian highlands particularly to farmers in the Bale and Arsi Zones in collaboration with all stakeholders. 

Woreta Derebe, a farmer in Debarq Woreda, Adsige Miligebsa Kebele, in Amhara region, appreciates the supports given to him. “The introduction of Brewery and Malt Factory has contributed a lot from improving productivity and quality of products to market access,” he told EBR.

In collaboration with the regional agricultural offices, supports have been given to local farmers on producing quality malt barley. Woreta for example has received support such as improved seeds which he will payback in kind, and other technical supports such as how to use the fertilizers, weeding techniques and harvesting. “Because of this support and the introduction of new technology productivity has doubled, I am now able to produce more than 22 quintals of barley per hectare which was 10-12 quintals in the previous times.

It doesn’t mean, however, the farmers are satisfied with everything. They still want better prices. Eshetu Berehe, another farmer in Adsige Miligebsa Kebele of Debarq Woreda in the same region says, “Since we employ modern agricultural inputs including fertilizers, improved seeds and hence extra effort to produce quality products, we should be provided with even better prices. But this doesn’t mean that we are not happy with the introduction of the new schemes.

Woreta also makes a complaint that though the price is much better than the local markets price with an increase of 15Pct at the time of the harvest it could pay a better price if they could store it until the rainy season where prices are higher, due to low supply of products. “Local market price of barley during harvest time was about ETB 880 per quintal but it could go as high as ETB thousand if the price of the factory was calculated at the rainy season,” Woreta explains.

Tadesse doesn’t agree with the farmers complaints. “The committee sets the annual prices early in November when a lot of production has not reached the market. We also consider prices in addis Abeba and even the prices of Assela Malt Factory,” he says. “The factory values the support rendered to farmers as one of its objectives and nowhere in Ethiopia has malt barely been sold for a better price.”

Esayas Lema, senior agronomist at the Agricultural Extension Directorate, Ministry of Agriculture told EBR that companies with special interests like the breweries should give special supports to farmers to get what they want. “Producing malt barely is much costly and it is less productive than food barley. Therefore, the price should offset the opportunity cost farmers incur in producing it,” he asserts.

Last February, a tripartite Memorandum of Understanding (MoU) has been signed between the Netherlands Minister for Foreign Trade and Development Cooperation, Heineken and two Ethiopian Government Institutes to launch a four year program to improve the quality and supply quantity of malt barley in Ethiopia. The Dutch government and Heineken made the agreement with Agricultural Transformation Agency (ATA) and Ethiopian Institute of Agricultural Research (EIAR), government institutions that work for the improvement of agricultural productivity and outputs in the country. When the project goes fully operational, in 2016, about 100,000 smallholder local farmers will participate so as they will be able to supply 20,000 metric tons of high quality malt barley annually.

Heineken, one of the most popular breweries in the world has bought two government owned breweries: Bedele and Harar, to enter the Ethiopian beer market in August 2011, after acquiring them from the Privatization & Public Enterprise Supervising Agency (PPESA) for a total of USD 163.4 million. 

It has started building a new brewery in Kilinto at the outskirts of Addis Ababa with a total investment capital of USD156 million which will produce 1.5 million hectoliters of beer per annum including the international brand Heineken. Its total production with the present capacities of the two breweries will reach up to 2.5 million hectoliter.

“Heineken is exploring ways to increase the malting capacity in Ethiopia to secure future local supplies sustainability,” said an official from the company.

BGI Ethiopia has been producing St. George, Castel and Bati beer at its Addis Ababa and Kombolcha breweries since it acquired St. George beer for USD ten million in 1998. It has added a new brewery at Hawassa and its total production has already reached about 2.2 million hectoliters per year.

Dashen Brewery has been making expansion projects and its annual production capacity has now reached 920,000 hectoliters. It will reach one million hectoliter per annum soon, according to Adane. It is also building another brewery in Debre Birhan which will start production in January 2014. The brewery has a capacity of producing 2.5 million hectoliters when operating at full capacity, thus making the total annual production capacity of Dashen 3.5 million hectoliters.

Diageo, a renowned British Company which produces alcohol and beverages including the classic Johnnie Walker, has bought Meta Brewery and is expanding it. Currently it produces 700,000 hectoliters of beer per year.

Newly established Breweries Habesha Brewery with USD 43 million will produce 300,000 hectoliters of beer annually when it starts operation and will grow its capacity to 500,000 within two years time.  Whereas, Raya Brewery which is under construction in the northern part of the country near Maychew, will have the capacity to produce 600,000 hectoliters of beer when operate at its full capacity.

This all will dramatically change the overall beer production capacity of the country leading to the high demand of raw materials for the increased production, particularly malt which will in turn create additional opportunities for barley farmers.

Berihun Mekonnen

EBR Staff Writter

40 comments

  • Aubrey

    On your own website we employ a quick contact page form on every page because we realize
    not everybody would like to submit the entire blown version or our web
    site design form. They work steadily without anyone's knowledge to help keep modern industries safe and efficient.
    Technology has had about many alterations in the queue management world.

    Aubrey Tuesday, 12 January 2016 22:26 Comment Link
  • Christal

    You have to have too obserrve the simple methods described benbeath to get Subway Surfers limitless coins cheat.

    Christal Tuesday, 12 January 2016 21:52 Comment Link
  • Phillis

    Twitter is effective on cellular devices, so you could have the
    ability to fit it into the routine at convenient things — like if
    you are looking forward to a train or using a coffee break.

    Phillis Monday, 11 January 2016 18:21 Comment Link
  • mortgage companies in Maryland

    I believe what you wrote was very reasonable. However, what about this?
    what if you added a little content? I mean, I don't want to tell you how to run your website,
    however suppose you added something to maybe grab folk's attention? I mean The Malt
    Effect: How the Growing Beer Industry Creates Opportunities for Barley Farmers is kinda boring.
    You ought to peek at Yahoo's home page and note how they create post titles to grab people
    to open the links. You might add a related video or a related pic or two to grab people interested about
    everything've got to say. In my opinion, it might make your posts a little bit more interesting.

    mortgage companies in Maryland Saturday, 03 October 2015 23:01 Comment Link
  • how to create my own logo for my own business

    This post gives clear idea designed for the new people of blogging, that truly how to do blogging and site-building.

    how to create my own logo for my own business Thursday, 11 June 2015 14:40 Comment Link
  • who is the antichrist

    Howdy! This is kind of off topic but I need some advice from an established blog.
    Is it difficult to set up your own blog? I'm not very techincal but I can figure things out
    pretty quick. I'm thinking about making my own but I'm not sure where to start.
    Do you have any tips or suggestions? Many thanks

    who is the antichrist Thursday, 21 May 2015 07:13 Comment Link
  • bolas chinas

    Hi, everything is going well here and ofcourse every
    one is sharing data, that's in fact excellent, keep up writing.

    bolas chinas Thursday, 14 May 2015 17:01 Comment Link
  • rahapelejä netissä

    magnificent publish, very informative. I wonder why
    the opposite specialists of this sector do not realize this.

    You must continue your writing. I am confident, you've a huge readers' base already!

    rahapelejä netissä Sunday, 12 April 2015 01:56 Comment Link
  • additional reading

    This paragraph presents clear idea in support of the new viewers of blogging, that truly
    how to do blogging.

    additional reading Wednesday, 25 February 2015 03:16 Comment Link
  • http://www.betterloversbettersex.com/questions/conversation-relating-to-others-analytical-issue-solving-dedication-adaptability/

    This particular style plus tone associated with writing is not something that any kind of writer can be able to obtain. It may be in the
    form of guarantees, insurance, free of charge
    online customer care, rebates, repayments or discounts.
    A purely carnivorous mammal includes a small abdomen, which can not break down cellulose.

    http://www.betterloversbettersex.com/questions/conversation-relating-to-others-analytical-issue-solving-dedication-adaptability/ Friday, 23 January 2015 18:00 Comment Link

Leave a comment

Make sure you enter the (*) required information where indicated.Basic HTML code is allowed.

Latest News

Ethiopia to Host the 4th International Coffee Conference

Ethiopia to Host the 4th International Coffee Conference

Ethiopia is set to host the 4th International Coffee Conference from March 6 – 8, 2016 in Addis Ababa at the United Nations Conference Center. Previous conferences were held  in England in 2001, Brazil in 2005 and Guatemala in 2010. Read more

Tweets


ሰበር ዜና ብሄራዊ ባንክ ከነገ ጀምሮ የብር ምንዛሪ ተመንን በ15% እንዲገሽብ ውሳኔ አስተላለፈ፡፡ በተጨማሪም የገንዘብ ማስቀመጫ ወለድን ከ5% ወደ 7% ከፍ እንዲል ውሳኔ... https://t.co/fab8ZVRMVa

Breaking News National Bank of Ethiopia will depreciate the exchange rate of birr against a basket of foreign... https://t.co/1JPgVHEv1E
Follow EBR News on Twitter

Most Popular

  • 1
  • 2
Prev Next

The White-Box of Ethiopian Agriculture

The agricultural sector remains our Achilles heel, nonetheless, we remain convinced that agricultural-based development remains the only source of hope ...

Read more

For Whoever Has, to Him Shall be Given …

As the Ethiopian government seeks to transform the economy into one that’s rooted in manufacturing, the simplicity for local investors to access finance...

Read more

Commentary

  • 1
  • 2
  • 3
Prev Next

Shooting in the Dark: The Anomalies of Headhunting

The war for ‘heads’ – also known as talent – has been raging for many years and the manner headhunters ‘poach’ people is getting tougher ...

Read more

Understanding Chinese Investment in Ethiopia A Critical Evaluation of the World Bank’s “Chinese FDI in Ethiopia” Survey

The World Bank country office in Ethiopia, apparently in response to the request by the government of Ethiopia, has conducted a survey of...

Read more

Mitigating Growing Income Inequality: What Needs to Be Done

Rising income and wealth inequality in many countries around the world has been a long-term trend for three decades or more. But the atte...

Read more

View Point

  • 1
  • 2
  • 3
Prev Next

Delivering Life Insurance: The Untapped Market in Ethiopia

Modern insurance transaction in Ethiopia was started by an Egyptian Bank in 1905. According to Ethiopian Chamber of Commerce there were 19, 33 and 40 insuran...

Read more

Headache When a Key Personnel leaves a Company in the Financial Sector

The financial sector in Ethiopia has undergone considerable changes in recent decades. The dramatic rise of new market players into the sector has vividly al...

Read more

Women and the World Economy

In many countries, public debate about gender equality focuses mainly on women’s access to top positions and high-powered career opportunities. But the “glas...

Read more