SPECIAL REPORT: Beer trends in South Africa

Concoction beers, or opaque beers, are growing in popularity as the tipple of choice for many low-income sub-Saharan African consumers. These products are relatively affordable, partly due to the use of low-cost and locally grown fermentable starches such as sorghum, cassava and millet. These concoctions, however, are increasingly becoming a modern business, involving major global brewers such as SABMiller and Diageo. Such companies are using factory lines, thus replacing homemade traditional wooden drums with Tetra Pak-type packaging and focusing on rural-centric distribution networks.

Although, according to Euromonitor International, volume growth of sorghum beers in South Africa began to slow towards 2% in 2013, there remains potential for further growth beyond this market in the rest of Africa. As the illegal or untaxed trade of alcohol remains prominent in many African markets, companies like SABMiller are seeking to commercialise concoctions and expand affordability to low-income consumers.

Diageo’s attempt has worked well thanks to the use of transactional packaging to reduce costs; such an example can be seen in Kenya where the Senator Keg brand is sold in large returnable containers suitable only for communal consumption. SABMiller has commercialised opaque beer variant Chibuku Shake-Shake to undercut unbranded concoctions. Yet, regardless of such innovative attempts to bring illicit trade to the fore by investing in commercialising traditional concoctions, there still remain limitations to their future success.

An opaque outlook for concoctions

First of all, one of the main problems associated with the commercialisation of concoction beers is how to make prices more affordable. Sorghum or cassava beers are typically associated with low-income consumers so they have to be marketed and priced at a level that is in line with a typical labourer’s wage. However, various brewers are taking a gamble as Africa's fast growing middle-class will hamper demand for commercialised concoctions as these consumers will want to trade up and away from such low-value products.

Secondly, sorghum homebrews can have variable manufacturing output, resulting in lumpy parts that have distinctively sour tastes when compared to clear beers. This is mostly due to the low-cost manufacturing process that is used to keep prices low enough for low-income consumers. Variable quality output and flavour acceptance will be the key issues to consider when developing more commercial versions of these branded concoctions.

Thirdly, one of the most inconvenient aspects of commercialising sorghum concoctions is their short shelf life (Chibuku Shake-Shake has a shelf life of just 3-5 days), which depends on the seasonal temperature. Concoctions continue to ferment even after the completion of the process, and it is the need for a stabilising process that is likely to push up costs and prices.

SABMiller is trying to target consumers of these concoctions by countering the short shelf life problem via innovation whilst also keeping costs down. In 2012, the company released the slightly more expensive brand Chibuku Super in Zambia, with a fixed ABV of 3.5% and a 21-day shelf life. Furthermore, in an effort to keep prices as low as possible, manufacturers are utilising low-cost PET or Tetra Pak-style packaging to reduce distribution and storage costs.

It would be wrong to assume that African consumers would snub branded concoctions. On the contrary, for many low-income consumers these would represent a step up from the lumpier and unhygienic concoctions that they recognise. Moreover, the low-value offering of this drink will deter low-income consumers from illicit trade concoctions which can endanger health.

Is the investment justifiable?

Competition from clear beers is limiting the expansion of branded concoctions but they still may have potential as long as prices can be kept significantly lower than those of mainstream beers. Eagle, a Ghanaian cassava-based beer, competes with mainstream beers via lower excise duties. Eagle is part of the race between SABMiller and Diageo to target lower-income African drinkers. Concoction beers tend to retail at only 70% of the price of clear beers, and companies are targeting people who make as little as US$2-3 a day. However, in many African countries the incomes of these people are rising rapidly, and they are being pursued by multinational companies as population and income growth stagnate in more developed countries outside Africa.

Despite the aforementioned limitations, there is scope for these beers to capture volume sales at the low end of the market. And it would be beneficial for companies to achieve this before further competition leads to saturation in the fast growing African market.

27 May 2014 - Amin Alkhatib Euromonitor International, Alcoholic Drinks Analyst