News Column

Nile Breweries Seeks to Recoup Investments First

August 6, 2014

Alon Mwesigwa

Greg Meltcalf is the new managing director of Nile Breweries Limited (NBL) Uganda, after joining from Ghana. He had earlier worked in Uganda. As he takes office, he told journalists what he planned to achieve. Alon Mwesigwa captured the excerpts.

Compare Uganda and Ghana in terms of business prospects:

A lot of people want to know how Uganda and Ghana compare. In many ways [they are] very similar. I found people to be quite similar and the economies also similar. Interestingly when I left here, Uganda was talking about oil and when I arrived in Ghana, it was all talk about oil. Luckily for Ghana, they are now pumping oil; the technical challenges are a little bit easier and they are able to benefit from oil.

The economy there is obviously getting some of that benefit from oil. But in many respects some of the emerging economies that are competing for the world stage face overly similar challenges like education skills, [and] infrastructure. In terms of our business [beer], to be very honest, I spent a lot of time there trying to implement the things that were done in Uganda.

So certainly on the beer business, Uganda leads. In Ghana, when I arrived there, it was really a struggling business in many respects. We actually tried to learn a lot from Uganda.

According to your figures, your market share is 60 per cent. How do you intend to grow it?

I am glad we [SAB Miller] are the second largest brewing company in the world. We have grown from a relatively small South African company to a world player. What made us successful is that we are ambitious and competitive and I don't think I would be working in this company if I was contented with the 60 per cent market share.

It's part of our culture that we continually strive to do better. We would not be happy if in five year's time we are sitting on 60 per cent market share.

Government has just proposed the termination of tax exemptions for most agricultural inputs and some of the people to be affected are suppliers of cereals and sorghum, a key ingredient for your business. Do you think the tax will have any impact on your business?

In terms of agricultural subsidies, I don't [want] to comment too much because obviously I am fairly new in Uganda, picking up on certain things. I am aware of the government's intention to withdraw VAT [exemption] on certain inputs into agriculture.

Tell us how the situation in South Sudan has affected NBL operations...

Our business here in Uganda does not directly get involved in the South Sudan business. Our South Sudan business did have to shut down for a while but it is up and running again. And it still has some challenges - obviously demand has been affected. But it is able to operate again.

Uganda's economy has been slow with people's disposable income low. Has it affected beer consumption?

As far as disposable income is concerned, I am very aware Uganda has been through a pretty rough time economy-wise in the last couple of years. Again, it's a similar situation in Ghana. We have seen beer volumes here drop. And you know people assume beer demand is something that always grows, but it's not really the case when you say the disposable income doesn't affect the consumption.

But during the course of this last quarter, I can say we have started to receive some recovery. All signs are emerging that things are turning a little better, but it is slow recovery. At this time we are at a situation where volumes are where we wouldn't expect them to be. You are aware that as a company we invested in a new plant in Mbarara and that's a massive investment. Obviously as a company, we would have wanted to have a much stronger volume demand from the time that brewery was commissioned.

Has the Mbarara plant been affected by this low demand?

At the moment, we have excess capacity between our Jinja and Mbarara plants. We didn't design the plants to meet existing capacity. We designed them to meet the future demand. That's a good thing, which means we have the capacity for future growth.

What new things do you intend to bring to the table?

When you ask what I bring differently, I don't think I would bring anything new dramatically to what my predecessor had. I believe as a company, we all tend to follow the same way of doing things. We of course have few differences - like there are things that I would emphasize more than my predecessor, but generally, we sort of walk the same [path] and there is nothing wrong with that because he was a very successful model.

What's your opinion of Uganda's beer industry in terms of growth prospects?

The fact that we committed more than a $100m to build a brewery shows we do believe in the future of this industry. Companies don't usually commit that amount of capital without a strong belief. Uganda still has a relatively small per capita consumption of beer - about seven litres per annum. I think the average for Africa is around 10 litres per annum. Uganda still represents a significant long-term growth.

How do you intend to grow the low end market?

It's really a continuation of a strategy that we already have, like sourcing of local materials. Take for example, Eagle [lager] produced with local sourcing and through that, we partner with government which gives us a reduced excise duty on the beer and we pass that price to consumers.

So the strategy is that we make more affordable beer, which competes with the local liquor. Of course in getting more people to take our beer, we do generate taxes for government. We deal with some 20,000 farmers.

Lastly, what are your investment plans?

I think in the past five years we have invested some $200m in our business, which is a huge sum of money. We wouldn't be keeping that kind of investment level because frankly you have to pay back that investment. I think our focus will be on paying back for the next couple of years, but our business typically does tend to consume a lot of investment. So, we do continue to invest in upgrading equipment where it is ageing or inefficient.

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Source: AllAfrica

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