|
 U.S. fund managers who originally entered the African market by
investing in infrastructure said the continent's youthful
demographics - large swaths of the continent are at prime
beer-drinking age - and favorable economics brought by local
production are a recipe for a profitable outlook.
"It would cost four or five times more for Tanzanians to import beer
than to make it domestically," said Babatunde Ojo, portfolio manager
for Harding Loevner's $600 million Frontier Emerging Markets
strategy.
His fund has added in recent months 730,000 shares of Tanzania
Breweries Limited and 900,000 shares of East African Breweries, also
a Tanzanian company, according to Lipper data.
The Templeton Frontier Markets Fund noted that it added $3.58
million to East African Breweries and $11.80 million to Nigerian
Breweries.
Roughly 45 percent of Tanzanians are between the ages of 15 and 45,
prime ages for drinking beer, said Ojo.
Those demographics are reflected elsewhere in the continent. Cities
including Dar-es-Salaam and Lagos, hubs for young professionals, are
expected to experience rapid growth of their young populations,
according to a 2015 trends report by Ernst and Young.
Africa is expected to see the largest increase in the legal drinking
age population by 2018, while in western Europe and North America,
the cumulative decline in beer volumes since 1998 has been between 5
percent and 10 percent, according to Rabobank Research.
Mark Mobius, executive chairman of the Templeton Emerging Markets
Group, is particularly enthusiastic about Nigerian Breweries Plc,
which is majority owned by Heineken Holding NV. Templeton Asset
Management Ltd. holds 0.83 percent of the company.
"Relative to its competitors, the company (Nigerian Breweries)
imports considerably fewer raw materials - reducing its exposure to
the depreciating naira, and lessening the impact on profit margins
and turnover - and also has the strongest distribution capability
among its peers," Mobius wrote in an email to Reuters last week.
[to top of second column] |
To be sure, share prices in Nigerian Breweries and other African
peers have been falling this year as some countries suffer from
decreased revenue and other commodities and in part because of
uncertainty among minority investors about how and whether large
global liquor companies Heineken and Diageo PLC will take their
interests in Africa.
Should they choose to deemphasize beer at the expense of spirits,
that could hurt the brewers.
Furthermore, some of these stocks are thinly traded and investing in
Africa is still considered risky by many.
"If you invest in Africa, it will be a rocky ride between the
possibility of economic and political instability, but if you look
at the long-term potential, the rewards you can reap are very
interesting and worthwhile," said Francois Sonneville, Director in
Food and Agribusiness Research at Rabobank International, a Dutch
banking company.
Sonneville also said governments could impose tough taxes on beer
companies if economic growth remains low this year.
Furthermore, not all of Africa may be equally ripe for beer sales.
North African countries with large Muslim populations have some of
the highest abstention rates in the world, according to the World
Health Organization's 2014 global status report on alcohol and
health.
(Reporting by Tariro Mzezewa; Editing by Linda Stern and Alan
Crosby)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
