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ABIDJAN (Capital Markets in Africa) – Heineken NV’s latest quest to seize a greater share of emerging markets has the brewer on a collision course with Groupe Castel in one of Africa’s fastest-growing economies.
Officially opened on Wednesday, the Brassivoire brewery is the product of a joint venture with CFAO SA and costs 150 million euros ($160 million) to build. Located 24 kilometers (15 miles) north of the commercial capital, Abidjan, the facility is already producing Ivoire Lager, a brand the world’s second-largest brewer is using to compete with market leader Castel’s Flag and Solibra Bock.
“Ivory Coast is a burgeoning country,” Chief Executive Officer Jean-François van Boxmeer said in an interview at the plant. “It’s one of the fastest-growing economies in the world. Government policies are sound. They’re favoring investment.”
The move is part of Heineken’s broader strategy to target developing markets to help offset slowing growth in Europe and the U.S. Both Heineken and Castel are said to be among companies bidding for a majority stake in Coca-Cola Beverages Africa, according to people familiar with the matter.
After emerging from a decade of conflict and instability a year earlier, Ivory Coast has averaged economic growth of 9 percent a year since 2012 and has attracted international companies such as supermarket chainCarrefour SA and Burger King Corp. Ivorians drank an average of 11.8 liters of beer per person last year, compared with 36 liters in Cameroon and 68 liters in the Netherlands, Brassivoire said in an emailed statement.
“Ivory Coast has a per-capita consumption that’s still relatively low and, until now, little competition,” Van Boxmeer said. “We are very confident.”
The addition of a new West African market could help lessen the impact of Heineken’s struggles in Nigeria, where its Nigerian Breweries Plc unit is battling an economic downturn, rising costs and a shortage of foreign exchange that’s hampered imports of raw materials. Profit at the Lagos-based company slumped 26 percent in 2016, while the shares are down 15 percent in the year to date.
Other recent Heineken investments in Africa include the addition of 300 sales staff in South Africa and the acquisition of Stellenbrau, a craft brewer based a short drive from Cape Town.
In Ivory Coast, the new brewery has a capacity of 160 million liters a year and Heineken could add more brands as it strengthens its market position, Van Boxmeer said.
“Ivory Coast is a key market in Francophone West Africa,” the CEO said. “It’s a long-term investment. Once we start, we’re not going away. We’re starting small but Ivory Coast will grow and we will grow along with it and there are many things to do.”
Source: Bloomberg News