Local Manufacturers

Struggle to Penetrate the Burgeoning Liquor Market

Liquor consumption is on the rise in Ethiopia. According to data obtained from the Central Statistical Agency (CSA), imports of hard liquors reached 4.2 million kilograms in 2014 – that figure is way up from 1.6 million kilograms in 2010. In an attempt to capitalise on this growth and seize the buying power of consumers, local liquor manufacturers are becoming common in the country. However, many manufacturers complain that they are facing difficulties in getting the attention of local consumers. Customers, meanwhile, argue that some local liquor brands are often more expensive than imported brands. EBR’s Fasika Tadesse explored the issue further and offers this report.

One night a few years ago, Henok Yitbarek and his cousin, who came from the United States, visited some nightclubs in Addis Ababa in order to enjoy each other’s company and relax. But that night was a special one for Henok because a new business idea emerged in his mind.
“In almost all of the night clubs we visited, many of the people were drinking liquor, especially vodka,” recalls Henok.
Since then, he began thinking about entering the liquor manufacturing industry. Finally he ended up doing so by establishing a company named Hen Sea Land Business PLC. Before establishing a liquor manufacturing factory, Henok had been occupied in a family business of importing and distributing stationary items and computer accessories.
Hen Sea Land, manufacturer and bottler of Abyssinia Vodka, which has an alcohol content of 40Pct, was established three years ago. Its manufacturing plant is located in Dukem, 37 kilometres southeast of Addis Ababa. The factory has a capacity to produce 2,000 bottles of alcohol a day. Even though it started manufacturing a couple of years ago, the company’s products have been on the market since September 2014.
“Recently there has been a shift in alcohol consumption, since many young consumers prefer to drink liquor,” he told EBR. “This can be also supported by observing many bars in the city that display a large amount of liquor on their shelves.”
Henok’s analysis of the increasing demand for liquor is supported by data from the CSA. According to the statistics, Ethiopia’s importation of liquor such as vodka, gin, rum, whiskey, and taffia from different countries like France, Russia, England and Italy has been increasing exponentially during the past five years.
During 2010, Ethiopia imported 1.6 million kilograms of liquor, but the amount increased to 1.97 million kilograms the following year. Furthermore, the country imported 2.6 million kilograms, 3.7 million kilograms and 4.2 million kilograms of liquor during 2012, 2013 and 2014, respectively, according to the CSA. The figure represents an annual growth rate of 23, 31, 14, and 13Pct in 201, 2012, 2013, and 2014 respectively.
Even if the amount of liquor imported to the country is increasing, the level of liquor consumption is still comparably lower when viewed vis-à-vis other types of alcoholic beverages. From the total alcohol consumption in the country, liquor has only an 8Pct share, while beer and wine have 50Pct and 1Pct shares, respectively, according to World Health Organisation (WHO) Global Alcohol and Health Status Report released in 2014. Other alcohols such as local liquors and traditional drinks account for the balance.
According to the report, 0.91 litre of pure alcohol was consumed in Ethiopia per capita each year by people aged 15 and above in 2004, which constitutes 56Pct of the total population. That figure has risen to 26.5 litters during 2014, which is a significant increase.
Compared with some African countries such as South Africa and Gambia, which have a per capita alcohol consumption level of 27.1 and 30.9, respectively, Ethiopia stands lower, at 26.5. Still, it is higher than that of Uganda, Nigeria and the Democratic Republic of Congo, which have a per capita alcohol consumption level of 23.7, 23.1 and 13.6, respectively.
The increased demand for liquor has created an opportunity for different local companies to engage in manufacturing liquors. According to data obtained from the Ministry of Trade (MoT), between 2012 and the first six months of 2015, a total of 61 business licenses were issued to manufacturers of liquors. Of the total 61 licenses, 30 of them were issued for liquor manufacturers using modern methods.
In 2012, a total of 25 business licenses were issued to manufacture liquors; however, that figure went down to 19 in 2013. In 2014 a total of 14 new licenses were issued for businesses to engage in liquor production. Furthermore, during the first six months of 2015, there were 3 business licenses issued by the Ministry.
But according to the Food, Beverage & Pharmaceuticals Industry Development Institute of the Ministry of Industry (MoI), there are only 24 operational companies that manufacture liquors. Of these, five are engaged in producing strong alcohols such as whiskey and vodka in addition to normal liquors such as gin.
Among the operational companies are Hen Sea Land, Captus S.C, manufacturers of Black Lion branded sprits; Ponu Monu Supplies PLC, manufacturer of Merry’s brand of whiskey, vodka, gin, ouzo and rum; Marathon Liquor, which produces whiskey and vodka. In addition to these places, Habesha Walker and Super Eagle are among the local brands occupying the shelves of liquor stores, bars and supermarkets in Addis Ababa.
Betemariyam G. Yohannes, who works at Ageza Bar, located around Olympia in Addis Ababa, says the surge of locally produced liquors at the bars is driven by the demand from customers. “Two years ago, our shelf was fully packed by imported liquors, but recently we have a variety of locally produced liquors,” He told EBR.
Local manufacturers feel as though they are uniquely positioned to seize opportunities in Ethiopia’s market. “We are pushed to enter to the market, as there is no player in the main stream market,” said Mehret Tesfaye Brand Manager of Captus.
Launched in December 2014, CAPTUS S.C was established jointly by Southwest Development PLC, an Ethiopian investment company, and its partner, SABMiller, a London-based brewery. The company was established with a total investment capital of ETB70 million and built the plant on the outskirts of Ambo, in Oromia regional state.
The company has a production capacity of 25 million bottles of liquor per annum. It produces gin, vodka, whisky, ouzo, mint, and amaretto cream liqueur. It bottles its products in two sizes: 250ml and 750ml. The 250ml bottles range in price between ETB50 to ETB135 at the company’s outlet. The 750ml liquor bottles have a price range between ETB120 to ETB220. But at different outlets, the price of Black Lion spirits ranges between ETB180 to ETB1,500.
“As the disposable income of Ethiopian consumers’ increases, they look for quality and affordable liquors and our brand is an obvious choice,” Mehret told EBR.
While the increased availability of locally produced liquors in the market is a good sign, their prices are a source of dissatisfaction for some customers, such as Asmare Abreha, an Ethiopian who came from the US.
In early July 2015, Asmare was at Fantu Supermarket’s Bole branch, which is located on Africa Avenue, to buy vodka as a gift for his relatives whom he planned to visit. He had two choices: the 700ml imported Stolichnaya Vodka and locally produced Abyssinia Vodka, which has a volume of 750ml.
“I will choose the imported one because its price is much lower than the local one. The former is ETB430, while the latter one is ETB744,” said Asmare. “You can clearly analyse the price difference,” he claims by pointing to the price tags of the liquors on the shelf of the supermarket.
Producers of Abyssinia Vodka acknowledge that they receive criticism on the higher price of their vodka. “We receive several complaints saying our price is expensive, but it is because we import the bottles from Europe, where many global liquor manufacturers purchase [their bottles]. In addition, our product has a quality that can compete with international branded liquors,” Henok argues.
At the company’s outlet, the price of Abyssinia Vodka is ETB620, but in the market it is sold between ETB700 and ETB1,500. Beyond their high prices, local spirit producers are also criticised for being fewer in number and for having less product variety.
“The number of factories that produce locally manufactured liquors and even the existing companies’ product variety is very small,” said Mesfin Mehari, supervisor at Fantu Supermarket, which added locally produced alcohol to their product lists at the beginning of 2015. “In our display locally produced liquors have a share of less than 10Pct,” he added.
Recognising the significance of local companies that produce liquor in terms of saving foreign currency, the Food, Beverage and Pharmaceuticals Industry Development Institute is assisting local companies engaged in the sector, according to Moges Amtataw, expert at the Food and Beverage Department of the Institute.
According to Moges, the Institute is providing technical assistance, including consultancy service and trainings, to companies with the aim of increasing their production capacity and widening their product variety. In addition, the Institute provides assistance to new companies that are planning to join the sector by helping them in reviewing their business plans.
Despite their efforts to improve, existing local companies complain that they are facing challenges in the market. “Many consumers have the perception that locally manufactured liquors have less quality,” complains Henok. Additionally, he says that strong promotion by international companies hinders the visibility of locally produced sprits, as the international companies have huge budgets for advertisements.
With the increasing demand from consumers for their products, companies are considering different options to be competitive in the market. Henok, asserts his company has a plan of opening bars, which exclusively sells their products. This will cut the price, which is added by middlemen before reaching customers, making them more competitive. EBR