Food & beverage

The Company

Established in Côte d’Ivoire approximately 60 years ago, Société de Limonaderies et Brasseries d’Afrique (Solibra) produces and markets beers, soft drinks and mineral water. Solibra, which is part of Castel Group, has four production sites – two plants in Yopougon, one in Bouaflé and one in Treichville – with an installed capacity of 5.5m hl, including 2.4m hl for the beer segment. Solibra has 16 brands and almost 92 products.

The competition in the sector has been led by local traders focused on imported beer such as Codis, Bavaria and Heineken. 2013 was the most challenging year for Solibra, as it faced significant competition in the beer and soft drinks segments. The entrance of LBI (beer) and NBCI (soft drinks) affected the monopolistic situation Solibra has enjoyed and boosted competition in the segments. The company lost 10% of its market share in the beer segment to Les Brasseries Ivoiriennes (LBI) and 10% to NBCI in the soft drinks segment. To efficiently battle the competition, Solibra invested CFA81.97bn (€123m) in enhancing its production capacity between 2013 and 2015.

Despite the good momentum it enjoyed from 2013 to the middle of 2015, LBI was acquired by Solibra’s owner Castel in 2015. This major event lead to a significant improvement in Solibra’s results in 2015. Turnover grew by 10.48% in 2015 (-6.21% in 2014) to stand at CFA156.84bn (€235.3m), mainly due to the drop in competition in an environment with a growing demand. Additionally, 2015 was an electoral year, which led to an increase in consumption.

Earnings before interest, tax, depreciation and amortisation were up by 51.25% year-on-year to CFA49.26bn (€73.9m), compared to CFA32.57bn (€48.9m). This strong growth compared to turnover (+10.48%) is due to the drop in overhead costs, with savings accrued in many accounts such as transport and advertising, after the decrease in competition in the beer segment. As a result, profit after tax almost doubled to CFA22.62bn (€33.9m) compared to CFA11.49bn (€17.2m). Solibra issued a total dividend of CFA7.5bn (€11.3m), compared to CFA5bn (€7.5m) the previous year, representing a dividend per share of CFA4557 (€6.84).

Outlook

 Following the same trend, the level of activity should continue to increase. This growth should be driven by the country’s economic growth and the opening of new distribution locations such as Carrefour in Abidjan Mall.

However, in 2017 these results could be negatively affected by the arrival of a major new competitor Heineken through its local subsidiary, Brassivoire.

Brassivoire is a partnership between French trading company CFAO and Heineken. Its plant is scheduled to start operations in November 2016. The installed capacity will be 1.6m hl per year. The new competitor intends to market brands such as Heineken and Desperados, but also local brands. When first imported, these two major brands were priced at a price point a little higher than Solibra’s products. Both products are much appreciated in Côte d’Ivoire. The local production of these two beers will reduce the price on the market and should drive strong competition.

Development Strategy

Brassivoire is appearing as a major competitor on the beer market. Solibra’s strategy now is to reposition its products. The company is rethinking its marketing strategy through the rebranding of its products. In fact, since the end of 2015 Solibra has launched a marketing campaign for most of its products, which is helping the company asses its influence in the market. In addition, Solibra has also improved its product range in other segments with the production of fruit juices such as Rani, Sumol and Compal. This strategy should help the company diversify its turnover by increasing soft drinks’ contribution to its revenue.

 

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The Report: Côte d'Ivoire 2017

Capital Markets chapter from The Report: Côte d'Ivoire 2017