A good gulp: The beverage segment provides a framework for expansion

Beverage manufacturing is an example of a diversified and competitive industry. Government policies such as tax breaks to allow for importing agro-processing equipment provide incentives, and the increase in disposable income should translate into significant growth in the coming years. Some firms are already tapping into the export market, showing that Ghana indeed has potential as a regional manufacturing centre.

The sector contains the familiar names of global leaders, such as Coca-Cola, Pepsi, Guinness, SAB Miller and Nestlé. However, particularly in certain segments, such as in fresh juices, water and carbonated drinks conditions are ripe for indigenous producers of all sizes. The National Association of Sachet Water Producers has registered over 1800 small and medium-sized enterprises active in the industry, generally producing beverages in 500 ml quantities bagged and sold across the country. However, that number may fall as the government has increased taxes on plastic beverage sachets in an effort to reduce damage to the country’s environment and clean up roadside garbage piles.

FRAMEWORK: Production is overwhelmingly local: 88% of alcoholic drinks come from domestic sources, as do 83% of fruit juices. Producers suffer from the common constraints in Ghana, such as the rising cost of electricity and irregular access to inputs. “The most successful companies are those that are able to ensure regular supplies,” according to “An Enterprise Map of Ghana”, a broad economic study released in the spring of 2012. Currency risk is also a major factor, as in most cases inputs must be imported.

The market segment with the least reliance on imported goods is fruit juices, thanks to Ghana’s abundant supply of pineapples, mangoes and other tropical fruits. The potential exists to do more in this segment if government plans to boost agricultural output and foster more agribusiness are successful (see analysis).

Higher output and agricultural infrastructure, such as irrigation techniques, would eliminate boom and bust periods in fruit supply and allow juice companies to establish more reliable production schedules. In the alcoholic beverages segment, brewers and distillers have signalled openness to using local grains such as sorghum or cassava, and additional production capacity could boost the agricultural sector, as well as help the beverage makers cut costs and reduce currency risk.

CROSSING BORDERS: Export markets in Africa include the band of arid and desert countries to the north of Ghana. Beyond export markets in Africa, Europe would be a natural destination for fruit juice, but only a handful of Ghanaian companies have been able to meet EU product standards. Nevertheless, existing exporters such as Aquafresh, which sends 15-20% of its output to other countries in West Africa via overland transport, are proving that despite the risks and constraints, Ghana can indeed export to its neighbours at a profitable rate. Others, such as Accra Brewery, told OBG that their plans include exporting.

A STIFF DRINK: In the alcohol segment of the market, spirits are consumed at a far greater rate than beer, and opinions are divided on whether this presents an opportunity or a ceiling on growth. Ghana’s alcohol consumption – about 1.54 litres of pure alcohol a year per person on average – is the lowest rate in Africa. However, as disposable income grows, that could change. “Since GDP is rising, there is more disposable income, and people are buying more premium, safe and hygienic products,” said Peter Ndegwa, managing director of Ghana Guinness Breweries. “The environment for alcoholic beverages in Ghana is improving, however, alcohol must be marketed responsibly, and for us following a strict marketing code is paramount.”

A key consideration regarding alcoholic beverages is that consumption per capita is far lower than in neighbouring countries. Still, the government has exhibited a degree of concern about alcohol abuse, which has driven it to enact a National Alcohol Policy. Drafts of this policy have been circulating for several years, and should it be enacted, the legislation would contain moves to ward off abuse, which may affect the sector.

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The Report: Ghana 2012

Industry chapter from The Report: Ghana 2012

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