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Consumers enjoy socialising over alcoholic drinks, with rising incomes boosting growth in beer and wine, although they often prefer lower-strength drinks. Artisanal drinks are widely available and affordable, creating strong competition. However, consumers are trading up to packaged brands due to expanding domestic production offering good quality and affordable options. Urbanisation and on- and off-trade development are also driving sales growth, which is likely to remain dynamic.
This report analyses the market for alcoholic drinks in Ethiopia. For the purposes of the study, the market has been defined as follows:
Explanations of terminology used in this report are as follows:
GBO refers to Global Brand Owner, which is the ultimate owner of a brand.
NBO refers to National Brand Owner, which is the company licensed to distribute a brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a completely separate company.
Off-trade refers to sales of alcoholic drinks through retail outlets including super/hypermarkets, discounters, convenience stores, internet and other store and non-store channels.
On-trade refers to sales through bars, restaurants, cafés, hotels and other catering establishments.
Market sizes are researched at category level, lower data levels are modelled.
Private imports/cross border sales, black market sales, duty free sales and institutional sales are excluded from coverage.
Attitudes to alcoholic drinks are shaped by a number of factors, including religion, gender, location, income and age. Over a third of the population is Muslim, with most of these consumers considering the consumption of alcoholic drinks to be taboo. While some Muslims drink alcoholic drinks, they will generally do so at home discreetly. Many orthodox Christians, the largest religious group, also view heavy intoxication in a negative light, while being open to consumption in order to socialise or celebrate special occasions. Orthodox Christians will also avoid alcoholic drinks around fasting days, which cover 180 days annually for laity.
Drinking alcohol remains more acceptable for men than women, with older consumers particularly likely to view female drinking in a negative manner. While women drink alcoholic drinks, they are more likely to opt for lower-strength options such as turbo mixed drinks made from beer, wine and carbonates such as lemonade. This drink is widely popular among men and women in the on-trade and at parties. Many women remain reluctant to drink spirits or unmixed beer, although a growing number of mid- to high-income women enjoy wine, which benefits from a healthy and sophisticated image. More affluent women are also increasingly socialising in the on-trade and enjoying cocktails and wine in bars and nightclubs.
Rural consumers are considerably more likely to drink artisanal wine, beer and spirits, although these products are also popular in urban areas. Low-income men in both urban and rural areas are significant consumers of areki artisanal spirits, as are male students in major cities. Rural and low-income women will also often drink artisanal beer such as tella and borde, with the latter appealing to many due to its healthy image.
Consumers are increasingly interested in packaged alcoholic drinks from leading brands, particularly in urban areas. This is linked to strong marketing for leading beer brands, alongside the image of wine and the prestige of global spirits brands such as Johnnie Walker. However, many consumers limit their consumption of these products to special occasions and socialising, partly due to cost considerations but also due to viewing alcoholic drinks as inherently linked to partying and celebration. Solitary drinking remains a strong taboo and drinking alcohol continues to be viewed as a social activity. Young adults (ie over 18 years) mainly drink in the on-trade and at parties, with drinking often accompanied by dancing, while older mid- to high-income workers are more likely to drink in upmarket hotel bars and restaurants.
Artisanal alcoholic drinks are widely produced in Ethiopia, with the government not attempting to control the production, consumption or sale of these products. This is due to the longstanding history of these drinks and their important role in local culture. These drinks continue to be mainly produced by women and their sale often serves to augment low-income households' income. One of the most significant is tej, a honey wine produced from water, honey and leaves from the gesho buckthorn shrub (Rhamnus prinoides). This drink ranges from 8-14% ABV and is served in tejbet bars, while also being drunk at parties and celebrations and served in many hotels and restaurants.
Tella is a home-made beer brewed from barley and wheat, which is usually 4-7% ABV. This is viewed as a harmless social drink and rarely sold in bars but generally in tellabets, which are family homes that are opened up for socialising. Tella is also drunk at family occasions and religious celebrations. This is the most commonly consumed alcoholic drink in the country, although it is losing share to packaged beer as disposable income levels rise and urbanisation increases. Shamita is another traditional beer, but it has lower alcohol content, with this generally being an overnight fermentation of roasted barley flour and drunk as a meal. Borde is an artisanal beer mainly drunk by low-income consumers in the southwest of the country and it is also used as a meal replacement, being often thick and made from fermented maize, sorghum and/or barley. Borde has a healthy image and is believed to increase lactation, meaning it is drunk by many new mothers.
Artisanal spirits are also popular in the country, with areki being the most significant and also known as katikala. This is produced from gesho leaves and grains, or from tella beer, and ranges from 30% to 50% ABV, with most areki being around 45% ABV. This drink is more expensive in comparison to other artisanal drinks and is viewed by many as strong and potentially dangerous. It is particularly popular in rural areas and the outskirts of towns. In urban areas, areki is often drunk on a regular basis by low-income men and alcoholics, which adds to its dangerous reputation. Areki is also popular with over 18-year-old students, however, due to its low price and their limited budgets. This spirit is also often served at social gatherings and celebrations and it is offered at bars and restaurants, with many outlets priding themselves on offering distinctive variants flavoured with ingredients such as coffee, milk, mint or lemon. Packaged areki is also available in the country. While sales continue to be constrained by competition from lower-priced artisanal variants, packaged products are benefiting from an expanding mid-income group and these consumers' concerns regarding the safety and hygiene of artisanal areki.
Artisanal alcoholic drinks are thus the main competitor to packaged alcoholic drinks. However, contraband trade is also present, with spirits being smuggled in from Somalia, Sudan, Eritrea, Kenya and Djibouti. Ethiopia has very porous borders, which makes it difficult to control this illicit trade. In 2012, the Ethiopian Revenue and Customs Authority (ERCA) implemented an online system for tracking imports but its impact on smuggling volumes was minimal. The government is however increasingly seeking to tackle contraband and in April 2016 singled out Addis Ababa's largest outdoor market Merkato as a key location for illicit sales. The police are thus increasingly raiding traders at this market. The appeal of smuggled and counterfeit spirits is however minimised by the widespread availability of artisanal alcoholic drinks, which are considerably more affordable.
Overall alcoholic drinks will see stronger value growth at constant 2016 prices in the forecast period than in the review period. Strong growth will be fuelled by increased domestic production capacity and an expanding mid-income group. Urbanisation and strong development in retailing will also drive growth, while the on-trade will benefit from a growing number of bars and nightclubs opening in major cities.
Beer will be the main driver of growth in the forecast period, benefiting from well-marketed domestic brands, affordable prices and good quality. Leading players such as Heineken will continue to invest heavily in advertising and expanding production capacity in the forecast period. Wine will also see a strong performance, thanks to its relatively healthy image and growing domestic production. Spirits will lag behind in terms of growth, with many consumers preferring weaker alcoholic drinks and those seeking stronger options often choosing artisanal areki. Artisanal alcoholic drinks will continue to pose competition but many Ethiopians will switch fully or partially to packaged products as disposable income levels continue to rise.
Income level has a significant impact on purchasing patterns within alcoholic drinks. While poverty levels are dropping, a dominant 69% share of Ethiopians lived below the international poverty line of USD2/day at the end of the review period. Many of these consumers face food insecurity and depend on the government's Safety Net programme for food assistance. These low-income consumers tend to view packaged alcoholic drinks as expensive and unaffordable and mainly consume artisanal alcoholic drinks such as tej wine, tella beer and areki spirits. Tella is often made at home but even when purchased in informal tellabet bars costs only ETB3-8 for a generous drink in comparison to ETB17 and upwards for a 330ml bottle of packaged beer.
Ethiopia is one of the fastest growing and most promising economies in Sub-Sahara Africa and is seeing strong growth in its mid-income group. This group's growing number and increasing purchasing power is driving consumer spending on alcoholic drinks. Mid-income consumers are increasingly aspirational and are trading up from artisanal to packaged drinks, with this trend encouraged by growing domestic production. These consumers are generally unable to afford imported products but are attracted by leading domestic brands in beer and wine such as St George Beer and Awash wine. They are also increasingly socialising in the on-trade, with beer and turbo mixed drinks made from wine, beer and carbonates being popular. While often unable to afford imported spirits in the off-trade, mid-income men will also often treat themselves to occasional whiskies in the on-trade. These consumers also often enjoy drinking while socialising or celebrating at parties and special events, when a mix of artisanal and packaged alcoholic drinks is often available.
High-income consumers, including most expatriates, are able to afford leading imported brands and are attracted by high-status brands such as Johnnie Walker whiskies. This group also has a preference for imported wine from countries such as South Africa and France, although the good quality and widening range of Ethiopian wine is also attracting many. Most view domestic beer as offering excellent quality, however, and will opt for brands such as Bedele Special in domestic premium lager.
Ethiopia has a young and expanding population, with the country having a median age of just 18 years in 2016 and seeing 13% population growth over the review period. While the drinking age is set at 18 years, many teenagers enjoy socialising at parties and in the on-trade, with underage drinking becoming a growing concern. The government is likely to take measures to address this issue in the forecast period, which could result in tighter controls over on- and off-trade sales.
The Ethiopian government is keen to encourage foreign direct investment and offers attractive tax incentives, while also seeking to reduce the country's levels of bureaucracy. However, the country's complex government structure and a lack of coordination between different state entities can create challenges, resulting in lengthy delays in areas such as business permits and land acquisition. Strong government connections can help and players are advised to work closely with the state. Dashen's 2015 opening of a new brewery and malting plant benefited from the company's strong connections with regional government in Gondar. Other challenging factors include power shortages, while obtaining direct electricity lines for plants can also prove a lengthy process.
Despite bureaucratic and power issues, domestic production is the key to success in many product areas within alcoholic drinks. High import duties result in imported alcoholic drinks being generally unaffordable to consumers. International players are increasingly investing in the country. However, in addition to building or buying production facilities, establishing raw material supplies within Ethiopia is also important in order to maintain steady volumes. Diageo and Heineken are for example working with a large number of barley farmers and investing in developing their operations in order to ensure supply.
Ethiopia also poses logistical challenges to players. The country's road network is seeing heavy investment and dramatic improvements, with a focus on connecting rural communities. However, many rural roads remain in poor condition and can be impassable in wet weather. There is also little formal on- and off-trade development in rural areas, with informal bars and artisanal alcoholic drinks often all that rural consumers can access. 80% of the population lived in rural areas at the end of the review period. Most urban roads are however in good condition and both the on- and off-trade are well developed in major cities such as Addis Ababa. Many beer players invest in branding for bars and nightclubs, often also supplying these outlets with branded chilled display cabinets in order to ensure that beer is served cold.
The off-trade accounts for the bulk of sales, with consumers generally purchasing alcoholic drinks from alcoholic drinks specialist retailers. Wine however sees its strongest off-trade sales via supermarkets, due to these outlets offering a wider range. Mid- to high-income consumers are more likely to buy in supermarkets and hypermarkets, often making bulk purchases alongside their regular grocery shop. Low-income consumers are more likely to buy packaged alcoholic drinks in small quantities as required, while also being more likely to use informal retailers.
The on-trade is strong, however, with drinking generally viewed as a social activity. This is particularly true of wine, with the consumption of wine with restaurant meals resulting in on-trade sales dominating total volumes in this category. Even alcoholic drinks purchased in the off-trade are generally consumed at parties or while socialising. Within the on-trade, mid- to high-income consumers are most likely to visit restaurants and nightclubs. Low-income and rural consumers are more likely to visit informal bars.
Cross-border/private imports are not significant in Ethiopia, with organised smuggling being more common. Few cost-conscious consumers are interested in cross-border/private imports, due to the widespread availability of low-priced artisanal alcoholic drinks.
Duty free shops are present at Ethiopia's international airports, such as Addis Ababa Bole International Airport. Sales are however limited, due to high prices. The most popular products include whiskies among high-income Ethiopians and Ethiopian wine among tourists. Duty free sales have little impact on on- or off-trade demand within the country however.
Both the legal drinking age and the legal purchasing age for alcoholic drinks are set at 18 years, although this is not strictly enforced. Many urban teenagers start to drink at around the age of 15 years, generally at parties and in on-trade bars and nightclubs. There is however growing concern over underage drinking, particularly at daytime music events where alcohol is easily available.
Driving with a blood alcohol level of over 0.8g/dl is banned by law in Ethiopia for all drivers. This legislation was not widely enforced during the review period, with a lack of random breath testing and police checkpoints.
There is however growing concern over the level of alcohol-related accidents in the country, with these increasing by 63% over 2013-2016. Levels are particularly high in the capital Addis Ababa, due to its vibrant nightlife. The city thus opted to become one of 10 cities participating in the Bloomberg Philanthropies Initiative for Global Road Safety, which aims to reduce road traffic injuries and fatalities. As a result of this partnership, Addis Ababa launched a major public safety campaign in September 2016, including emotionally-charged TV advertising. The government also plans to strengthen its enforcement of drink driving legislation and is considering increasing its training for police in this area, with the forecast period likely to see stricter controls.
Only alcoholic drinks that are below 12% ABV may be advertised in Ethiopia, while drinks below this level can be freely advertised.
As competition increased during the review period, there was a significant rise in advertising and marketing investment for beer. In addition to TV, radio and billboard advertising, there are also numerous branded bars and outlets. Beer companies also invest heavily in sponsorship, including events, books and movies. Heineken’s Walia beer even sponsors the Ethiopian National football team.
The capital Addis Ababa introduced a smoking ban at public gatherings and venues in May 2016. This followed a law permitting such bans being passed by the government in 2014, with the northeastern town of Mekelle being the only other area to have introduced a ban. Those flouting the smoking ban in Addis Ababa face a fine of ETB2,000 (USD92) while those sending children aged below 18 years to buy tobacco products face a fine of ETB2,500 (USD116). Ethiopia signed up to the WHO Framework Convention on Tobacco Control in 2004 and has until 2020 to implement the ban on smoking in public places across the country, with further bans thus set to be introduced in the forecast period.
Public smoking bans are unlikely to impact on-trade demand for alcoholic drinks, however, due to the low incidence of smoking in Ethiopia. According to 2012 WHO data, less than 9% of Ethiopian men smoked, alongside less than 1% of women. These levels are not believed to have risen dramatically during the review period.
There are no legal restrictions on opening hours for on- or off-trade outlets, with outlets able to open when they want. Indeed, no licence is required to sell alcoholic drinks, with these outlets operating under the general trade licence that applies to all merchandise. There are also no restrictions on location for on- and off-trade outlets.
On-trade outlets will generally serve alcohol until their last clients leave, typically in the late night or early morning. Off-trade channels, such as supermarkets, food/drink/tobacco specialists and independent small grocers, only sell alcoholic drinks during their operating hours. Supermarkets follow strict operating hours, typically from 0900-1900hrs. Smaller retail outlets have more flexible operating hours. Most typically open at a set time each day, often around 0700hrs, but will close depending on customer traffic.
Taxation and duty levies
High import tax levels for alcoholic drinks offer domestically-produced goods a strong price advantage in Ethiopia. Alcoholic drinks face up to five separate import taxes charged in a compounding and sequential order, with customs duty followed in order by excise tax, VAT, surtax and withholding tax. All these taxes must be paid at the time of import. While some of these taxes are fixed for all products, such as VAT at 15%, others have varying rates with alcoholic drinks among the highest tax bands. Excise tax on alcoholic drinks is for example 50%.
High taxes on imports are thus encouraging many leading players to invest in domestic production facilities in order to offer competitive prices. This is further encouraged by the government offering attractive incentives to foreign direct investors, including import duty exemption for all capital goods and export and income tax breaks.
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Chart 1 Alcoholic Drinks in Ethiopia in 2016 Chart 2 Ethiopia Socioeconomic Trends
Chart 3 Alcoholic Drinks: Traditional Retailer: Independent Small Grocer
Taxation and duty levies
Table 1 Sales of Alcoholic Drinks by Category: Total Volume 2011-2016 Table 2 Sales of Alcoholic Drinks by Category: Total Value 2011-2016 Table 3 Sales of Alcoholic Drinks by Category: % Total Volume Growth 2011-2016 Table 4 Sales of Alcoholic Drinks by Category: % Total Value Growth 2011-2016 Table 5 Sales of Alcoholic Drinks by Category by Off-trade vs On-trade: Volume 2016 Table 6 Sales of Alcoholic Drinks by Category by Off-trade vs On-trade: Value 2016 Table 7 Sales of Alcoholic Drinks by Category by Off-trade vs On-trade: % Volume 2016 Table 8 Sales of Alcoholic Drinks by Category by Off-trade vs On-trade: % Value 2016 Table 9 Forecast Sales of Alcoholic Drinks by Category: Total Volume 2016-2021 Table 10 Forecast Sales of Alcoholic Drinks by Category: Total Value 2016-2021 Table 11 Forecast Sales of Alcoholic Drinks by Category: % Total Volume Growth 2016-2021 Table 12 Forecast Sales of Alcoholic Drinks by Category: % Total Value Growth 2016-2021 Table 13 GBO Company Shares of Alcoholic Drinks: % Total Volume 2012-2016 Table 14 Distribution of Alcoholic Drinks by Format: % Off-Trade Volume 2012-2016 Table 15 Distribution of Alcoholic Drinks by Format by Category: % Off-trade Volume 2016
Table 16 Sales of Beer by Category: Total Volume 2011-2016 Table 17 Sales of Beer by Category: Total Value 2011-2016 Table 18 Sales of Beer by Category: % Total Volume Growth 2011-2016 Table 19 Sales of Beer by Category: % Total Value Growth 2011-2016 Table 20 Sales of Beer by Off-trade vs On-trade: Volume 2011-2016 Table 21 Sales of Beer by Off-trade vs On-trade: Value 2011-2016 Table 22 Sales of Beer by Off-trade vs On-trade: % Volume Growth 2011-2016 Table 23 Sales of Beer by Off-trade vs On-trade: % Value Growth 2011-2016 Table 24 Forecast Sales of Beer by Category: Total Volume 2016-2021 Table 25 Forecast Sales of Beer by Category: Total Value 2016-2021 Table 26 Forecast Sales of Beer by Category: % Total Volume Growth 2016-2021 Table 27 Forecast Sales of Beer by Category: % Total Value Growth 2016-2021 Table 28 NBO Company Shares of Beer: % Total Volume 2012-2016 Table 29 GBN Brand Shares of Beer: % Total Volume 2012-2016 Table 30 Distribution of Beer by Format: % Off-trade Volume 2012-2016 Summary 1 Beer Pricing: 2016
Chart 4 Wine: Modern Retailer: Supermarket Chart 5 Wine: Modern Retailer: Supermarket Chart 6 Wine: Modern Retailer: Supermarket
Table 31 Sales of Wine by Category: Total Volume 2011-2016 Table 32 Sales of Wine by Category: Total Value 2011-2016 Table 33 Sales of Wine by Category: % Total Volume Growth 2011-2016 Table 34 Sales of Wine by Category: % Total Value Growth 2011-2016 Table 35 Sales of Wine by Off-trade vs On-trade: Volume 2011-2016 Table 36 Sales of Wine by Off-trade vs On-trade: Value 2011-2016 Table 37 Sales of Wine by Off-trade vs On-trade: % Volume Growth 2011-2016 Table 38 Sales of Wine by Off-trade vs On-trade: % Value Growth 2011-2016 Table 39 Forecast Sales of Wine by Category: Total Volume 2016-2021 Table 40 Forecast Sales of Wine by Category: Total Value 2016-2021 Table 41 Forecast Sales of Wine by Category: % Total Volume Growth 2016-2021 Table 42 Forecast Sales of Wine by Category: % Total Value Growth 2016-2021 Table 43 Distribution of Wine by Format: % Off-trade Volume 2012-2016 Summary 2 Wine Pricing: 2016
Chart 7 Spirits: Modern Retailer: Supermarket Chart 8 Spirits: Modern Retailer: Supermarket Chart 9 Spirits: Modern Retailer: Supermarket
Table 44 Sales of Spirits by Category: Total Volume 2011-2016 Table 45 Sales of Spirits by Category: Total Value 2011-2016 Table 46 Sales of Spirits by Category: % Total Volume Growth 2011-2016 Table 47 Sales of Spirits by Category: % Total Value Growth 2011-2016 Table 48 Sales of Spirits by Off-trade vs On-trade: Volume 2011-2016 Table 49 Sales of Spirits by Off-trade vs On-trade: Value 2011-2016 Table 50 Sales of Spirits by Off-trade vs On-trade: % Volume Growth 2011-2016 Table 51 Sales of Spirits by Off-trade vs On-trade: % Value Growth 2011-2016 Table 52 Forecast Sales of Spirits by Category: Total Volume 2016-2021 Table 53 Forecast Sales of Spirits by Category: Total Value 2016-2021 Table 54 Forecast Sales of Spirits by Category: % Total Volume Growth 2016-2021 Table 55 Forecast Sales of Spirits by Category: % Total Value Growth 2016-2021 Table 56 NBO Company Shares of Spirits: % Total Volume 2012-2016 Table 57 GBN Brand Shares of Spirits: % Total Volume 2012-2016 Table 58 Distribution of Spirits by Format: % Off-trade Volume 2012-2016 Summary 3 Spirits Pricing: 2016
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