In recent years multinational fast-moving consumer goods (FMCG) companies have been turning their attention to the expanding consumer markets in Africa, with beverage companies often in the vanguard. This is certainly visible in Ghana, where research firm BMI forecasts that total household spending will reach $8bn in 2015, with a compound annual growth rate of 7.5% alone for carbonated soft drinks sales between 2013 and 2017. “Ghana has a very large market for FMCGs, with a mix of international and local producers,” Ben Akutteh, sales manager at a local branch of South Africa’s discount retailer Game, told OBG, though he added that currently most FMCGs are not yet produced by domestic players, estimating that the market is currently made up by 70% multinationals and 30% local brands.
International companies such as SABM iller, Coca-Cola, PepsiCo and Nestlé, have been operating in Ghana alongside local firms such as Blow-Chem for many years, but the dramatic improvement in macroeconomic indicators and purchasing power seen in recent years has resulted in a spate of new capital investments to expand or establish new production. “Medium term I think we will see more foreign FMCG producers setting up local facilities, but it’s a huge investment and they will be looking at the whole of the region, using Ghana, which is very stable, as a launching pad for countries like Nigeria,” Joe Ofori-Atta, director of South African department chain Woolworths’ operations in Ghana, told OBG.
The business environment for FMCG producers also poses some challenges. In March 2015, for example, Coca-Cola announced it was laying off 250 workers due to the energy situation and other rising costs.
Beer makers remain the most visible example of international companies delving into the local market, with SABM iller and Diageo both having strong market presence, the latter through its local subsidiary Guinness Ghana Breweries Limited (GGBL). SABM iller’s Club Premium Lager is the number-one selling beer brand in Ghana, while the company also has a majority stake in bottled water company Voltic Ghana, which it bought in 2009 and which, according to international auditor KPMG, has an 85% share of the country’s mineral water market. “The local breweries are doing very well – they are creating real opportunities in Ghana,” Akutteh told OBG.
SABM iller has been expanding its business in Ghana since 1997, when it acquired a 70% stake in local brewer Accra Brewery, which it later took full ownership of. In early 2015 the company completed a $100m upgrade at the brewery, doubling its production capacity in the region. “The long-term growth potential for the African beer market is enormous and the investments we are making today will ensure that we are prepared to capture the growth tomorrow,” Mark Bowman, managing director of SABM iller Africa, told local media at the time. The expansion included installation of new packaging lines, warehouse and storage facilities and two new power generators. A second phase of expansion is due for completion by late 2015.
With the government charging a 47.5% excise tax on beers made with less than 30% local content, companies such as SABM iller and GGBL are increasingly looking at sourcing locally to take advantage of tax breaks. The Local Raw Materials law states that the excise tax on beer with more than 30% local content drops to 10%. SABM iller hopes to buy the cassava for its Eagle Lager primarily from local farmers within the next year, for example, according to a recent report from KPMG. GGBL also makes a cassava beer, Ruut Extra, production of which involved roughly 3500 tonnes of locally grown cassava in 2013, according to the Ministry of Agriculture. The beers not only benefit from accessible domestic inputs, but also reach a wider swath of consumers as cassava beers generally retail for two-thirds less than conventional beers.