Sechaba Breweries in Botswana is one of a number of brewers that will be affected by the proposed advertising bans and related alcohol levies, but for the moment, it continues to flourish.
“I think Botswana is a particular case. The government has regularly and steadily ratcheted up the alcohol levy, and they’ve curbed the [alcohol sellers from] being able to advertise their alcohol,” Christopher Blaine, equities analyst at African Alliance Securities, told CNBC Africa.
“It’s mostly because they’re concerned about the social impacts of excessive consumption. You’ve seen that manifest in the per capita consumption levels, which are about half of where they should be.”
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Blaine added that Kenya’s government has taken a similar move by raising levies on Senator Keg, a beer brand brewed by Kenya Breweries, as a means of raising tax revenue.
The same is being done in Zambia as well, where tax revenue also plans to be raised. Alcohol advertising in both countries is however not under the severe curbing it is in Botswana and South Africa. Botswana’s alcohol levy is however expected to rise as time goes by.
“The alcohol levy in Botswana was introduced at 30 per cent. It’s now at 50 per cent. What you’ve seen are two themes playing out: the one is that it has curbed consumption. The flipside of that is it’s strengthened the incumbency positions in the markets. Sechaba has one particular advantage from the rising levy,” Blaine explained.
“The increase in cost to consumer means that they’re quite value sensitive. The way that’s manifested is a shift in the market from disposable bottles and cans, more towards the 750 millilitre quart bottle, that’s become a large single serving. What that means then is that’s a returnable bottle. [For] Sechaba, because 80 per cent of retail activity is within Gaborone, they only have to transport their returnable bottles back to Gaborone, re-fill them and put them back out to market.”
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Heineken and Namibian Breweries, on the other hand, have to transport the re-fillable bottles between 500 kilometres to 1,000 kilometres extra back to Namibia and Johannesburg, which adds a large cost to company, makes margins tighter and makes it difficult to compete.
“The advertising bans, that makes it difficult for a new player to come in and establish a new brand because it’s difficult then to do that without advertising to get that brand buy in from consumers,” Blaine added.