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March 07, 2009

Beer company to commercialise traditional cassava beer

by Jonathan Sibun

It might sound like something from an African crime novel but those were the events that shook Machakos, a slum 40 miles southeast of Nairobi in June 2005.

The men had been the victim of Kenya's latest homebrew poisoning. The criminal brewing gang had used battery acid and methanol to bulk up alcohol levels in the moonshine.

In a continent racked by poverty for many people beer is an unaffordable luxury. The result is that many people make their own homebrew using anything from watermelons and bananas to root vegetables. The results are usually intoxicating and sometimes deadly.

SABMiller, the continent's biggest brewer, has hatched a plan to combat the problem and to enrich its own coffers at the same time, in a perfect example of what chief executive Graham Mackay refers to as "enlightened self-interest."

The root of the plan lies in the ground. SAB intends to use cassava, a tuber, to help brew beer, commercialising a technique used across Africa for generations.

In a hangover from colonial times, commercially produced beer in Africa has typically been brewed using barley and maize imported from Europe or the US. On average 88pc of the input value of a bottle of beer is imported, of which 65pc is agricultural costs. The result is high prices, explains Mark Bowman, head of SAB's African operations.

"Beer is still very much an 'introduced' product in Africa and as such it comes with European input costs," says Bowman, pointing out that cassava is about 60pc of the price of maize. "The overall strategy is to reduce the cost of beer so that we can reduce the price of beer."

SAB plans to use cassava – a rich form of starch – to replace maize, allowing the company to brew pilsener style lager using 60pc barley and 40pc cassava.

The company's first move into cassava-based beer will be made from its brewery in Luanda, on the coast of Angola, where it plans to brew local brand N'Gola using the crop.

Maize will gradually be phased out of the brewery and replaced by cassava, explains Gerry van den Houten, supply chain and enterprise development director for SABMiller in Africa, who is running the project.

The brewery produces 500,000 hectolitres of beer annually and Van den Houten claims SAB will need 5,000 to 8,000 farmers locally to grow the crop, all of whom will be based within 30km of the brewery.

This is where SAB chief Mackay's "enlightened self-interest" comes in.

"Casava is already widely grown among the local people but principally through subsistence farming," says Van den Houten. "It will give farmers the chance to move from subsistence to cash-crop farming."

SABMiller believes opportunities to erode the role of the 'informal' beer market in Africa are huge. The company has conducted research into nine of the 14 African countries where it has operations and believes the informal market is responsible for about 40m hectolitres of hooch a year with a value north of $3bn. In volume terms that amounts to four times SAB's sales in Africa.

African languages are peppered with words for local homebrews. In Botswana, local words reflect the alcoholic content of distilled drinks. 'Tho-tho-tho' refers to the dizzy spell associated with drinks over 80pc proof, while 'a lala fa' translates as 'you sleep right there'.

Such words will remain in the local vernacular for centuries to come but the tradition is not the main reason for their durability, argues Bowman, who claims the "informal market is driven by tradition and price, but mostly by price".

SAB's plan is to sell cassava-based N'Gola at between 50pc and 60pc of the price of standard lager. That should prove competitive with the informal market where hooch is priced at between 20pc and 70pc of mainstream beer.

"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," says Van den Houten.

The use of different types of crops to make beer is far from a radical new idea. SABMiller and Diageo have been brewing beer in Africa using sorghum for some years. In Nigeria one third of all beer is brewed using the grain. SAB's sorghum-based Eagle brand sells for about 85pc of the price of standard lager in Uganda.

Meanwhile, Diageo has cornered the market for cheap commercially available beer in Kenya with its barley-based Senator Keg brand. The Guinness brewer secured ultra low tax duties on Senator by marketing it to the government as a solution to problem drinking following the deaths in Machakos and other areas.

While SAB hopes to benefit from excise breaks, the use of cassava could allow brands such as N'Gola to compete commercially on their own feet.

Consumption levels across Africa suggest the potential for growth is huge. Annual per capita consumption runs at about six litres, compared with 100 litres in Europe. If the rest of Africa were to move to South Africa's average consumption of 59 litres, the African beer market would grow from a size of about 60m to 530m hectolitres.

Despite the optimism, the cassava project does not come without its challenges, some of which will limit SAB's ambitions.

While cassava provides a cheap alternative form of starch, is grown all year round and can be left in the ground where it will keep until needed, it has its drawbacks.

The biggest is that once harvested the tuber perishes within three days. For an international brewer that presents huge logistical problems and will limit the crop's use to areas where SAB has local operations and can rely on large numbers of farmers to grow the crop.

And while the use of cassava will bring SAB's starch costs down the brewer will be forced to continue to import barley and maize to make up any shortfall in ingredients. The company has launched barley growing initiatives in Tanzania and Uganda but like the cassava project they remain at a formative stage. However, SAB hopes the projects will indirectly employ about 60,000 farmers when up and running, compared with the 13,000 farmers who grow its sorghum, barley and cassava today.

That will give farmers cash which they can in turn use to buy beer. A perfect example of SAB's virtuous circle of "enlightened self-interest" in action.


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