TIME TO REFRESH

Tanzania 2015 | INDUSTRY & MINING | INTERVIEW

TBY talks to Steve Gannon, Managing Director of Serengeti Breweries, on changes in local beer consumption and sourcing local inputs for production.

Steve Gannon
BIOGRAPHY
Steve Gannon is Managing Director of Serengeti Breweries and Chairman of the Coastal Chapter of the British Business Group. Serengeti has three breweries in Tanzania brewing both national Serengeti brands and international brands such as Guinness. It is 51% owned by Diageo through its subsidiary EABL, while 49% of the company remains with local shareholders. The British Business Group is a voluntary membership of some 200 companies, which are either UK listed or led by UK citizens. Its purpose is to inform and assist both existing companies and those wishing to invest in Tanzania.

What is the importance of the Tanzanian market for Serengeti Breweries?

We are a substantial investor in Tanzania, which is the fifth largest beer market in Africa. GDP growth has been running at between 6% and 7% over the past seven years, in excess of 50% of the population is under 30, and we are likely to see significant growth of the middle class. All of these elements lead to a highly attractive market and we have strong brands at play. Currently, the market size is significant as, indeed, is the informal market. A number of opportunities present themselves as a result. We have invested strongly in our brands and in innovation. Clearly in the spirit market, we note that an emerging middle class will tend to gravitate toward spirit brands like Johnnie Walker, Baileys, and Smirnoff. We are well prepared and confident in our potential to deliver in this market.

How is Serengeti Breweries working to increase the level of local sourcing?

We are hugely pleased with the progress we have made with our agribusiness in Tanzania. We have a dedicated agribusiness team who work with farmers to improve yields through an improved variety of seeds and agronomy and are proud of the results we have achieved with the many farmers with whom we work. Currently, we are working in collaboration with the Ministry of Agriculture on a Memorandum of Understanding (MoU). Our objective is to halve the level of imported raw materials and double our local production. To do this, we need to encourage and develop more barley farming in the country, and considerable work with farmers has been done on this front. Currently, we have 52 farmers engaged as partners with us, and we expect to yield between 6,000 and 8,000 tons of barley in 2014. It is an exciting project as it benefits both the farmers and our company. It is important that the government continues to support this type of partnership, which supports local production. We have our own local beer brands, such as Senator, Kibo, Kick, and Pilsner, which are made of 100% local raw materials. It is possible to reach 100% local sourcing for all of our beer brands. The current limiting factor is the crop yield from the farms. Therefore, providing that barley farmers remain competitive, there is no reason why our business shouldn't look to achieve 95%–100% beer production utilizing locally sourced raw materials.

What is the extent of government support for this initiative?

We enjoy excellent relations with the Ministry of Agriculture and with the Tanzania Investment Center. We currently work with all relevant stakeholders and are developing a significant barley sector.


Is the domestic barley supply adequate?

We would ideally need to double the cultivated area, so there is still a long way to go before we reap the crop's full potential. The challenge with barley is that it has to be grown at a particular altitude, and there are only specific regions in this country, such as West Kilimanjaro, that are suitable for this crop.

How are farmers responding to this move toward cash crop production?

They have been receptive, despite the challenging transition from subsistence agriculture. We provide various services for selected farmers including seed and educational programs. This year alone, we have provided 300 tons of seed to farmers. We have one anchor agri-business manager supported by a team of advisors, but the main responsibility lies with the Ministry of Agriculture, which we partner with.

What are your short-term targets?

From a brewing perspective, we recently garnered three Monde Selection quality awards for our outstanding beers. We won a gold medal for Kibo Gold, a silver medal for Serengeti brewed at our Dar es Salaam plant, and two gold medals for Serengeti brewed at our Mwanza plant. This confirms our brands are of the highest quality and have been recognized internationally over the past two years. We have put a lot of investment into our business, and I am confident we now have a good base for future growth.

How much of what you produce is exported?

We are primarily interested in satisfying the increasing demand from our Tanzanian consumers. In addition, logistically speaking, exporting from Tanzania into neighboring markets is extremely challenging in terms of cross border movement. That being said, we do export beer to Kenya, and Serengeti can be found in select outlets in London.

What is your long-term outlook for the beer sector in Tanzania?

The branded beer and spirits sector in Tanzania is increasingly vibrant, and I believe that this is a good thing for our industry. We have a wide portfolio of brands that will continue to satisfy consumers in every segment of the population. We believe that Tanzania presents untapped opportunities that we are well placed to exploit. As the market develops, I think we will see people trading up from cloudy to clear beer. That has been the trend in most markets; as incomes rise, people trade up in qualitative terms. I also think that we will see a move into spirits, especially international brands, as people seek to drink better, but less. We are well placed to serve both of these trends. Moreover, we are invested in the long term. Therefore, we will build long-term relationships with suppliers, consumers, and the government.