zambiaZambian Breweries

Company Profile and History

Zambian Breweries evolved out of Northern Breweries Limited, a private company formed in 1963 by South African Breweries (SAB-80%) and Labatt Breweries of Canada (20%). In 1968, the Government nationalised the company when the Industrial Development Company Limited (“INDECO”) acquired 55% of the issued share capital from SAB. SAB’s remaining 25% was sold to ZAMIC, a subsidiary of the Anglo-American Corporation. In 1988, Labatt sold it’s 20% to INDECO and the company was renamed Zambian Breweries Limited, operating from two production facilities: one in Lusaka (Central Division) and another in Ndola (Northern Division).

As part of the Government’s 1990's privatisation program, the company’s assets and liabilities were apportioned into two newly incorporated companies. The Central Division was transferred to Lusaka Breweries Limited while the Northern Division was transferred to Northern Breweries (1995) Plc. Lusaka Breweries Limited later changed its name to Zambian Breweries Plc (“Zambrew” or the “Company”), which owned the assets and liabilities of Central Division, and the “Mosi” trademark.

SAB bought 45% of Zambrew’s shares and assumed management control under a sale agreement in August 1994. SAB was founded in 1895 and is the fourth largest brewer in the world, with breweries in Europe and the Far East as well as throughout Africa. The company became known as SABMiller in 2002, adding Miller to its name through the acquisition of the Milwaukee, US brewer.

Until 1998, Zambrew’s major competitor was Northern Breweries, which owned Nile Breweries Uganda. In 1999, Zambrew acquired 100% of the shares of Northern Breweries giving it a virtual monopoly in the clear beer industry.

In Country Location

Plot No. 6438 Mungwi Road
Heavy Industrial Area, Lusaka
Tel. +260 -1 246 555
Fax. +260 -1 240 642

Services and Products

Zambrew’s core activities are the production and distribution of clear beer and soft drinks. Zambrew brews the Castle (under license from SABMiller), Rhino and Mosi brands locally, and sells various imported brands including Castle Milk Stout, Hansa Pilsner, and Redds. Unlike its other brands, Eagle is produced 100% locally, using Zambian only natural resources.

The carbonated soft drink brands include Coca-Cola, Coca-Cola light, Fanta, Sprite and Schweppes mixers for sodas.

Overall production is spread across three different production sites. One in Lusaka where beers and Coke are manufactured, one in Kitwe for soft drinks and one in Ndola for beer products only.

Number of Employees

Zambrew employs 1,161 people

Financial Information

Financial Statements for Zambian Breweries plc (ZMB)
Currency In Millions Of Zambian Kwachas Apr 02
2006
Reclassified
Apr 02
2007
Apr 02
2008
Restated
Apr 02
2009
Revenues 352,916.0 373,900.0 -- 486,651.0
Total Revenues 352,916.0 373,900.0 -- 486,651.0
Cost Of Goods Sold 173,156.0 202,644.0 -- 255,136.0
Gross Profit 179,760.0 171,256.0 -- 231,515.0
Interest And Investment Income 229.0 287.0 -- 290.0
Net Interest Expense -6,227.0 -6,364.0 -- -15,378.0
Currency Exchange Gains (Loss) 173.0 551.0 -- -4,170.0
Ebt, Excluding Unusual Items 69,042.0 63,713.0 86,999.0 73,824.0
Gain (Loss) On Sale Of Investments -- -- 2,187.0 --
Gain (Loss) On Sale Of Assets -- -- 112.0 -348.0
Ebt, Including Unusual Items 69,042.0 63,713.0 -- 73,476.0
Income Tax Expense 28,352.0 19,454.0 33,070.0 29,384.0

Zambian Breweries Plc produced 94,103.0 hectolitres of clear beer in the first two months of Q2 of 2009 which was 29.5% higher than the first two months of the previous quarter. Output of soft drinks dropped by 14.7% in the first two months of Q2 of 2009 to 55,862.0 hectolitres from 65,499.0 in the first two months of the previous quarter.

ZBL sells some 630,000 hl of clear beer and 550,000 hl of sparkling soft drinks per year.

Volume (hl 000) Five-year summary
2005 2006 2007 2008 2009
Lager 577 604
Soft drinks 568 546
Other alcoholic beverages 1,122 1,723
Total volume 1,979 2,083 2,227 2,267 2,873

Market Share

Currently the Company has brewing capacity of up to a million hectolitres and packaging capacity of up to 750,000 hectolitres, however optimum efficiency for the packaging capacity is only realised at 50,000 hectolitres. The impact of this is that the Company is prohibited from fully meeting the Zambian market’s demand, which in turn has led to a significant influx of parallel importations from South Africa and Namibia. It is estimated along the Zambian borders, Zambian Breweries has lost about 50% of its market share and about 5% along the line of rail (i.e. Lusaka and the Copperbelt). However the Company continues to have a monopoly of the clear beer market in Zambia, with market share in terms of turnover and volumes in excess of 80%.

SABMiller market share

Total beer market share
% Owner market share
10% Zambia
90% SABMiller
Total soft drinks market share
% Owner market share
25% Zambia
75% SABMiller
Total formal sorghum market share
% Owner market share
15% Zambia
85% SABMiller

Business Objective

Strive to be the most admired company in Zambia, not just by financial performance, but by developing a sustainable business model.

Business Model

According to Zambrew, “a good corporate reputation is an extremely valuable asset to any company. It can, and does generate significant and sustainable competitive advantage in the market place that cannot easily be replicated by competitors. Reputation management is therefore an increasingly important component of our strategic agenda. The Zambian Breweries Group (ZBG) currently enjoys an excellent reputation as a progressive and responsible investor in the Zambian economy. As a Group, we value our reputation enormously and recognize that while it takes a long time to build a good reputation, it is possible to destroy all the good work very quickly with any ill conceived action which impacts negatively on the context within which we operate. This is why, as a business, we have elevated the profile of “reputation management” onto our strategic agenda and made it a key priority for the future.” Key to building its reputation is its strong social marketing campaign which focuses on initiatives aimed at encouraging responsible consumption of alcohol and environmental policy.

The Group is also busy with an extensive capital upgrade programme the end result of which, in three years time, will be world class manufacturing capabilities for both beer and sparkling beverages, in both Lusaka and the Copperbelt. In addition, the Group will have replaced its entire populations of crates and bottles and upgraded the capability and appearance of its distribution fleet.

Zambian Breweries has further continued to make significant capital investment in order to further improve their delivery system. The Company plans to spend US$ 100 million as part of a five-year capital investment plan that is intended to enhance its infrastructure.

The company also aims to further stimulate the market with new product introductions, new packaging, innovative marketing, efficient delivery and caring customer service.

SABMiller’s strategy in Zambia revolves around enhancing product quality and availability. This will be achieved through the consolidation of production sites while simultaneously upgrading best practice and also increase per capita consumption by investing in brand renovation across the portfolio as well as remapping the route-to-market strategy.

Ownership of Business

Zambian Breweries Group, a subsidiary of SABMiller, is a holding company of National Breweries Plc, Copperbelt Bottling Company, Northern Breweries Plc, Zambia Bottlers and Zambian Breweries Plc.

The Group’s interest in its subsidiaries, all of which are unlisted:

Benefits Offered and Relations with Government

In February 2007, excise rates on malt based clear beers were raised from 70% to 75%. The Group was forced to increase consumer prices which in turn, had the immediate effect of suppressing demand for all brands. Within the Southern African region, Zambia already had the highest rate of excise (the next highest rate being 40% in Mozambique) and the increase to 75% was not expected. One negative result of the high excise is the proliferation of imported beer which is sold in most outlets at prices that are extremely competitive with locally produced beer.

The devaluation of the Kwacha put costs under pressure, especially the cost of major imported inputs such as malt and hops, plant equipment and spares parts, the cost of which collectively went up by 121% in 2007. In addition, periodic shortages in the availability of sugar in the Zambian market and Government imposed restrictions on importations resulted in increased (holding) costs. Ultimately the Company was permitted to import sugar through Zambia Sugar Plc.

In 2009 the government reduced excise duty on clear beer from 75 percent to 60 percent and this saw a reduction in the price of local beer. Zambrew is involved in discussions with government to facilitate a further reduction in excise duty on clear beer so that the local industry is not subjected to unfair competition.

Product Development

Zambrew is in the process of introducing the following innovations in the market: a Poly Ethylene Terephthalate (PET) plastic bottling system; a plastic crate making machine; a carbon dioxide plant; procurement of additional carbon dioxide storage and transport tanks; installation of a water treatment plant; and an installation of labeller

ZamBrew created its Manual Distribution Centre (MDC) programme for soft drinks distribution in order to give company employees and external entrepreneurs the opportunity of becoming independent business owners. MDCs serve outlets in high-density areas where normal, motorised delivery methods are not suitable.

New product launches since 2001 include Burn, a new range of soft drink flavours under the Fanta Label and Fusion Ice, a highly successful “Alco pop” product. In 2009 the company launched locally produced Carling Black Label beer to be and available in 375 ml returnable bottles.

One of the company’s most successful supply chain projects has been the small scale sorghum farming project with some 2,600 small scale farmers in 14 districts countrywide now participating in the programme to produce good quality sorghum for Eagle lager production.

In 2009 Zambrew announced plans to grow barley locally, a measure that will save Zambia’s foreign currency earnings and provide about K50 billion revenue to farmers annually. ZB had engaged 4,000 small-scale farmers to grow sorghum for production of the Eagle lager brand.