Home brews eat into Chibuku's market share

Mbongeni Mguni | Friday October 11, 2013 15:46

 

The curious trend is contained in directors' comments as well as figures published recently as part of Sechaba Brewery Holdings 2013 Annual Report, containing commentary on the financial year ended 31 March 2013. The listed group holds controlling equity in both Kgalagadi Breweries (KBL) and Botswana Breweries Limited (BBL), the latter being the producer of the Chibuku opaque beer.

According to the directors, last July's traditional beer regulations banning residential sales of Chibuku and the resultant failure in the distribution line, resulted in both the former 'retailers' and their customers drifting to home-brews.

Sechaba directors did not specify whether the home brews referred to were of the illicit or traditional nature, the latter of which are accepted by regulators. The group's research showed that apart from the southern parts of the country, home brews were an issue nationwide.

Sechaba figures indicate that prior to July's regulations, residential Chibuku sales accounted for 86% of the opaque beer sales channel and 63% of total volume. The drop in sales has already forced the shutdown of the group's Palapye Brewery, with 43 workers redeployed and 21 axed.

'Evidence suggests that there has been an increase in the production of home brews in the wake of the prohibition of residential sales of opaque beer, driven by the dramatic decrease in the number of opaque beer and the need of former retailers to supplement their income,' said KBL group MD Johan DeKok.

He added: 'There would appear to be poor regulation of home-brewed alcoholic beverages, with the prescribed trading hours and hygiene standards not being enforced in many areas.

'It is further observed that the reduced availability and increased price of opaque beer has driven a significant segment of the market to these cheaper and less safe alternatives.'

Sales and Operations Director Wayne Fouche said illegal home brews were competing directly with BBL and were in many cases now the only beverages available to former Chibuku drinkers.

'Many (of them) find themselves out of reach of formal channel outlets,' he said.

The group's Finance Director Brian Hirsch attributed a 13% drop in overall alcoholic brand volumes during the 2012/13 financial year to the decline in Chibuku sales.

'The implementation of the traditional beer regulations and the consequent disruption of the opaque beer distribution channel was a significant factor influencing overall company performance,' he said.

'The company recorded a 24% decline in opaque beer volume sales, which translated into a 15% drop in revenue for BBL'.

A BBL official, speaking on condition of anonymity as he is not authorised to talk to the media, said distribution through depots was constraining Chibuku sales when compared to the home-based sales.

'It is not everyone who can go to the depot and their operating hours of 1400 hours to 2200 hours are different from the flexibility of home sales,' he said. 'Former home-based Chibuku retailers are suffering and some of them have gone into the Ipelegeng programme, which they also say is inadequate. That's why many have decided to brew their own traditional beer as their market is still available'.

The official said evidence showed that some former Chibuku home retailers had moved into illicit home brews while others preferred the recognised traditional opaque beverage production.

'Illicit brews such as khadi and setopoti take 24 hours on average to brew, while bojalwa jwa Setswana (traditional opaque beer) takes between four and five days,' the official noted.

'Just judging by these times, you can tell the health implications for those drinking the illicit beers.

'Some home-based brewers may prefer the fast turnaround time for the illicit brews, especially if there's demand from their customers.'

In response to the onslaught of the home brews, Sechaba has launched a Chibuku Beer Gardens programme under which existing operators are being assisted to prepare for licensing while more gardens are opened. The programme has already recorded some successes.

The beverages giant also plans to introduce Chibuku into areas and facilities that have traditionally been clear beer havens.

'Thus far, some beer gardens have been developed, with more in the pipeline,' said DeKok.

'The programme also seeks to make Chibuku available in what have previously been clear beer outlets and to take advantage of existing licensed premises with suitable outdoor space.

'The intention is to encourage retailers to upgrade their premises by providing satellite television, pool tables, and the like, so as to improve the ambience of the outlets, for enhanced customer experience'.

However, a complementary P10 million strategy to help home-based retailers establish licensed outlets has reportedly hit a snag due to the lack of land for development.