Habesha Brewery Kicks off Construction of its 500 Thousand Hectoliter Beer-Producing Factory


Photo: Ethiopian Beer

By Birhanu Fikade
January 21, 2013

Project to cost some USD 43 million

Bavaria N.V., 300-year-old Dutch brewer, is a major shareholder of Habesha Brewery with 39 percent stake

Based on a turnkey contract agreement reached last Thursday by Habesha Breweries Share Company and a Chinese contactor, Lehui (Group), the construction of the 500 thousand hectoliter beer-producing factory is expected to be finalized in the coming fifteen months. Bavaria N.V. – the 300-year-old Dutch brewer who is a major shareholder with 39 percent shares at Habesha – was the major negotiating body with the contractor, reaffirming that in the coming fifteen months the first bottle of Bavarian and Ethiopian mixed taste will hit both the local and the international market. Bavaria N.V joined Habesha in July of 2012.

According to officials of the share company, the upcoming factory will be erected in Debre Berhan town, some 120km north of Addis Ababa. The total cost of construction is estimated at more than 700 million birr. Zewdu Negate, general manager of the factory for Habesha S.C, said that out of the 700 million birr, some 30 million cash is expected to be provided to Lehui in dollars. He noted that the financing would involve loans from undisclosed sources. He did not want to give names of the loan providers. However, the speculated sources are some Chinese financial companies. Some initial payments have already been made to Lehui (Group).

Zewdu said that the official turnkey project period started on December 17, last month. Some minor changes in the design of the project were also involved to meet the requirements of European standards. Yonas Alemu, business development manager, said that counting down with the time frame, the first bottle of beer will appear in the market after April 2014, and is expected to reach both local and international markets. Stijn Swinkels, board member of Habesha, representing Bavaria N.V., expressed their expectations that one of the targeted markets is the US.

“After several visits to China, we confirmed that Lehui has the potential to build a state-of-the-art factory by European standards and the technology of the factory is expected to be similar to Bavaria N.V. in the Netherlands,” Yonas said.

They said that Bavaria N.V. will increase the shareholdings to 49 percent in the future. Currently, there are some 7,867 shareholders at Habesha, including the only foreign company Bavaria N.V.

The basic design and the civil works are said to commence in a month’s time, while, according to the project agreement, Lehui will import more than 90 percent of the required equipment and the remaining critical components will be supplied by other providers. After completion of the project, Habesha Brewery vows to take 10 to 20 percent of the local market share.

Habesha S.C. was incorporated with a paid-up capital of 250 million birr.

For more information, visit: http://www.habeshabreweries.com/

Background

By EDEN SAHLE
FORTUNE STAFF WRITER

Habesha Brewery to Request a Loan of 358 Million Birr from Development Bank of Ethiopia

After signing an agreement with a Chinese company, Lehui, Habesha expects to enter market in 15 months

Habesha Brewery is going to ask for financing of 70pc of the total estimated cost the constructing its plant from the Development Bank of Ethiopia (DBE) after signing a turnkey project of 510.7 million Br contract with Lehui Food Machineries, a Chinese company, on Friday, September 30, 2011. Habesha expects to submit the request for the 357.5 million Br in the next ten days.

Lehui won the 510.7 million Br contract for the designing, manufacturing, erecting and commissioning of Habesha’s Brewery on a 7.5ht plot located in Debre Berhan, 130km north of the capital, in June, 2011. It had offered the lowest price out of four shortlisted companies. Those in contention for the deal were Ziemann Ludigsburg from Germany, Techno Expo International Businesses Co from Czech Republic and Prj Industry from India.


Photo: Yonas Alemu (left), CEO of Habesha Brwery, shows William Huang, CEO of Lehui Food Machineries where to sign the contract for the of 510.7 million Br turnkey project for Habesha’s plant with Crystal Huang, Key account manager of Lehui, while Wu Jiang Zhong (right), sales manager of Lehui looks on.

The technical and financial proposal, comprising 70pc and 30pc of the evaluation respectively, were done by AMS Beverage Engineering GMBH, a German consulting company hired at a cost of 11 million Br, along with Habesha Brewery. After Lehui had won, both parties negotiated for three months on the terms and conditions including the where the necessary machinery is to be bought, according to Yonas Alemu, CEO of Habesha Brewery.

Habesha had insisted that 40pc of the machinery be bought from Germany, including fermentation tanks, bottling machinery, carbon dioxide, waste and water treatment plants and generators, according to Tesfaye Bededa, a technology adviser and board member of Habesha.

“We demanded the supply from Germany because they have the best machines from our evaluations of their technical proposal during their offer to the tender,” he told Fortune. “The remaining will be bought from China.”

Representatives from Habesha, which has raised 170 million Br from 7,994 share holders, and AMS Beverage Engineering will go to China to check on machinery to be bought from there, Tesfaye added. Habesha is still offering shares to bring its capital to 250.2 million Br.

The signing of the deal will see Lehui paid 102.1 million Br as a down payment. The contract also requires that it finalize the project in 15 months.

The rest of the money after deduction of 10pc of the total amount will be paid once the company completes the project, according to Tesfaye.

“The money will be held by Habesha as a guarantee for a year to check whether the machinery installed work properly,” he told Fortune.

Once the brewery is completed, it will be the first entry by a local private share company to the beer industry that has close to a 1.3 million hl gap between demand and supply, according to a feasibility study Raya Brewery, which is also planning to join the industry with an annual production of 600,000 hl.

Although Habesha’s planned initial production is half of that of Raya’s, it plans to increase it to 500,000 hl. Habesha’s entry to the market will see it come into what is becoming a highly competitive industry where international companies are taking part. The industry is dominated by five breweries, two of which, Bedele and Harrar, were bought by Heineken NV at a cost of 78.1 million dollars and 85.2 million dollars, respectively. This gives Heineken 18pc of the market.

However, there is also another giant in the mix, Diageo, whose offer of 125 million dollars for the full acquisition of Meta Abo was approved on Friday, September 30, 2011. It will also enjoy 15pc of the market share as well.

But no one has a market share like BGI. With its treasured brand of St George which was acquired from the state back in the 1990s for 10 million dollars, it has 48pc of the market. But having failed in the acquisition running for Meta Abo and Bedele, BGI signed an agreement with Raya Brewery, a project still on the drawing board, for the acquisition of 25pc of its share. The fifth, Dahsen Brewery commands a share of 18.75pc.

Announcement by Lehui

Lehui signed turnkey contract for Habesha brewery

Mr. William Huang, CEO, mr. Jerry Wu, vice GM and miss Crystal Huang, key account manager attended the official contract signing ceremony in Hilton Hotel, Addis Ababa, Ethiopia on Friday, September 30, 2011. Hosted by Habesha Breweries, over 50 people from local government, local media, bank, board members and shareholders joined the ceremony, while local newspapers and national television reported this event widely.

Habesha breweries is a public stock company. The contract for the brewery, to be built on 75,000 sqm of land in Debre Berhan Town, 130km north of Addis Abeba, was awarded on a turnkey basis at a total cost of 30 million dollars.

A total of 16 companies initially showed interest in the turnkey project of which eight submitted technical proposals. Three were short listed. Eventually Lehui won the bid.

The brewery plans to produce about 300,000 hectoliters (hl) annually with plans for an additional expansion to 500,000hl. It is expected to start production in the first half of 2013.

Ethiopia’s annual beer consumption grows at an average of 24 %, according to research done by Access Capital in 2009. Even though the estimated consumption of four million hectoliters in the country roughly translates into five liters per person annually, it is well below the average consumption of neighboring Kenya (12 liters) and South Africa (59 liters).

Currently the economical situation in Ethiopia is steady, new constructions everywhere shows its booming economy which is very similar to China ten to twenty years ago.

Source: http://www.lehui.com/en/News/News/20111011/788.html