Beer accounts for around 99 per cent of total alcohol consumption in Ethiopia, with the average adult expected to consume around 18.4 litres in 2022, slightly above 18.2 litres being Sub-Sahara African average, according to Fitch Solutions.
Dominating the alcoholic drinks market in Ethiopia, it is expected to drive growth of the sector in 2022 and into the medium-term. Spending on alcoholic drinks is forecasted to grow by just over 30 per cent year-on-year in 2022, taking total spending to ETB4.6 billion (US$90 million).
“Ethiopia’s beer market dominates the formal alcoholic drinks segment in the country, accounting for 98.9% of total consumption in the sector in 2022. With Africa’s second largest population, brands such as Diageo, Heineken and the Castel Group have targeted Ethiopia, creating a highly competitive beer market.”
Fitch
According to Fitch, the medium-term forecast is still strongly positive for the industry, thus leading to a forecast average growth of 19.2 per cent a year, over the next five years, seeing total spending growing to ETB8.5 billion (US$130 million) by 2026.
Over the medium term, Fitch expects a steady increase in Ethiopian beer consumption, averaging 3.4% year-on-year, slightly below the SSA average of around 6.8%. While low base effects have to be considered, beer spending remained resilient during the height of the pandemic in Ethiopia and grew on a similar path to Ethiopia’s inflation.
Inflation to Strain Spending
However, a tight consumer spending arising from inflation is likely to strain spending on beer, and even consumption of goods in general. Over 2022, Fitch forecasts inflation to reach a year-on-year average of 34.2 per cent.
“Our medium-term forecast is more positive, with forecasted inflation expected to average 18.5% in 2023, then tailing off to 10% over 2024, 2025 and 2026. High inflation will continue to place pressure on household budgets, with essential spending being prioritised. However, we forecast strong growth in total household spending, with levels rising from ETB4.6 trillion (US$89.2 billion) in 2022, to ETB8.7tn (USD135.3 billion) by 2026.”
Fitch
As household spending grows, some of the growth will filter through into non-essential spending categories such as alcoholic drinks and tobacco, over the medium term. Essential spending will continue to demand over 75 per cent of total spending, Fitch noted.
“We forecast a 20.9 per cent average annual increase in non-essential over the 2022 to 2026 period. We believe the alcoholic drinks category will be a key beneficiary of this growth.”
Fitch Solutions
Ethiopia has the second largest population in Africa, totaling 121 million inhabitants. Ethiopia has a young demographic, with 49.8 per cent on the population to be older than 20 years of age, “meaning an addressable market of 60.2 million people for the beer segment.”
While the young population of Ethiopia is favourable for growth in beer, and more broadly alcoholic drinks spending, the country has a large rural population.
Moreover, with the large rural population, cereal-and-fruit based traditional fermented alcoholic beverages are preferred since they are cheaper and often more accessible, Fitch noted.
There are new developments in Ethiopia’s alcohol industry which Fitch highlights. These include the latest acquisition of Meta Abo Brewery by BGI Ethiopia from British multinational beverage alcohol company Diageo. The company also acquired local competitors, Zebidar and Raya, adding to BGI’s increased market share.
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