In a beer market of tightening means, brew masters are shaping future competition by turning to food crops as a major raw material to cut costs and boost profits.
Cassava has become the third edible crop to make it to the brewers’ waiting-list of sources of beer, Business Power has established.
This follows the successful use of home grown sorghum and maize as cheap and reliable sources of beer compared to imported barley.
With more exotic brands taking up places in bars, the marketplace is turning into a steeple chase for brewing firms where survival is for the lean, most enduring and profitable. In Uganda, the chase is between two of the world’s leading beer makers South African Breweries (SAB) Millers and Diageo through their respective subsidiaries; Nile Breweries and East African Breweries.
Mr Nick Jenkinson, the managing director of Nile Breweries Ltd, says if studies on the use of cassava as a raw material to brew beer are successful in Angola and Ghana, cassava like sorghum, could be adopted as an input providing a cheaper technology for locally brewed beer.
“It is certainly a possibility for the future. If a commercially viable product can be brewed from cassava, then there’s a good chance that it will be rolled out in other countries,” Mr Jenkinson told Business Power in an interview at the Jinja-based brewery last week.
SAB Millers - the world’s second largest brewing company and the parent company of Nile Breweries Ltd - is conducting trials on the food crop.
Most African countries grow a lot of cassava, which makes it a readily available material like sorghum. However, Mr Jenkinson said the business motive behind utilising cassava like sorghum, maize and locally grown barley, is to reduce the price of beer, by lowering its cost of production.
“If you can brew a beer from a cheap local raw material it would reduce the price of beer and make it more accessible to more people who cannot afford to drink clear beer,” he said.
East African Breweries Uganda’s Managing Director Ivo Buratovich, agreed that their aim too is to reduce beer prices by using 99 per cent locally produced raw materials in the long term.
EABL is using sorghum to produce beer at its Luzira-based factory in Kampala.
If the trials, which are expected to end between the next six to 12 months are successful, SAB Millers is expected to come up with a good and workable business module that it will expand from Ghana and Angola to other African countries.
Using cassava, says Mr Jenkinson, is a way of further strengthening the company’s Eagle beer concept which encourages farmers to grow sorghum for better prices and at a larger scale, in Uganda.
Eagle, which is one of the low-end market brands of Nile Breweries, costs almost half the price of some premium brands like Tusker Malt, Club and Nile Special brands.
The locally produced high-end brands cost between Shs1,800 and Shs4,000 depending on the retailer while Eagle and EABL’s Senator Lager cost between Shs1,100 and Shs1,400.
According to the beer makers, premium beers are expensive because their raw materials like barley are imported from abroad.
According to Finance Minister Syda Bbumba’s 20009/10 budget speech, Uganda imports malted barley equivalent to 25,000 metric tonnes annually at a cost of about Shs103 billion or $50 million.
Cassava as a raw material is expected to lower the cost of some premium beer below their current prices; it is also likely to increase the cost of cassava – a benefit to farmers - as well as competition between individual consumers of cassava as food and the beer makers.
The beer makers are also turning to local raw material as navigation past the imported barley tax instead take advantage of government’s incentives to the beer industry including the reduction of tax.
At the reading of the 2009/10 financial year budget, Finance Minister Syda Bbumba proposed to reduce excise duty on beer produced, using locally grown materials from 60 per cent to 40 per cent.
The move was aimed at encouraging value addition and promoting the growth of sorghum and barley for beer production, in various part of Uganda.
Mr Buratovich, explained that besides reducing the cost of production through using cheaper materials, it is also more profitable for businesses. This is because of the 20 per cent tax breaks the government puts on locally produced products.
While making beer cheaper and more available could result into its abuse and consumption by teenagers the brewers think it’s one way of getting people off harmful alcohol.
Mr Jenkinson argued that producing cheaper clear beer, would convert people from indigenous alcohol like tonto, a local brew made out of bananas, as well as local gins like Kasese and waragi, which can be dangerous and unhealthy to people when abused.
The move to venture into cassava has already received a warm reception from one of Uganda’s farmers associations based on the impact of the use of sorghum in the East part of the country.
Mr Frank Tumwebaze, the president Uganda National Farmers Federation (UNFFE) –an organisation that advocates for friendly farmer policies, lauded the move towards more local food crops for manufacturing purposes.
“We welcome their initiatives because they create market opportunities for our farmers and guarantee market prices,” Mr Tumwebaze said in an interview on Tuesday.
Using the Epuripuri sorghum brand grown in eastern Uganda as an example, he said brewers have helped increase the price of the crop from Shs300 per kilo last year to Shs400. The expectation is that it would boost cassava growing in the country and make it more valuable to farmers.
He, however, warns farmers to keep a keen eye on the contracts they sign with beer companies. This is because, under their contract farming agreements, prices are fixed and yet market prices often change.
“We urge farmers to be mindful of the fact that prices today may not be the same tomorrow.” He also called on brewers to include clauses that take care of market changes in the contracts so that farmers are not exploited.
Both Nile and East African Breweries employ over 15,000 farmers of UNFFE’s 200,000 farmers.
But with the recent famine that has hit both Kenya and parts of Eastern and Northern Uganda, turning to more food crops may not be welcomed by many stakeholders in the agricultural sector. According to Ms Annunciata Hakuza an economist at the ministry of Agriculture, adopting cassava as a raw material for premium beer is likely to have food security implications if adopted.
“By using cassava they will reduce the food which is available for consumption,” Ms Hakuza said in a phone interview on August 26.
In Kenya, turning to sorghum for beer, has also led to a partnership between EABL, farmers and Equity Bank which is the nation’s fastest growing bank, according to the East African newspaper. Under the partnership, James Mwangi the bank’s Chief Executive Officer announced, they would lend up to $145,000 (Shs297 million) to farmers at a 10 per cent interest rate per annum.
Equity’s money is now being used by Kenyan farmers to buy quality seeds and fertilisers to boost sorghum production. With the extension of the bank to Uganda, Mr Mwangi mid this year announced that they would also support the agricultural sector.
Brief on cassava in Uganda
Cassava is among the high priority commodity crops on NARO’s research agenda. The crop was introduced in Uganda by Arab traders between 1862 and 1875.
Its cultivation greatly increased between 1931 and 1933 and subsequently became a cheap source of food.
It ranks second among the major food crops, regarded as the most important cheap source of staple food and cash crop.
Its flexibility in the farming and food systems, ability to do well in marginally stressed environments and apparent resistance/tolerance to pests and diseases, particularly locusts encouraged its rapid spread and adoption.
It is presently grown throughout the country. A total of 3.5 million metric tonnes of the crop were produced from 450,000 hectares of land grown until 1990 when mosaic epidemic devastated the crop.
The government recently announced that cassava will be adopted as the main hunger and famine food crop in Uganda. Sourced from Naro.com
Ref: Monitor News
Walter Wafula & Faridah Kulabako