We provide succinct insight on industry news and regulatory developments
Beer today, beer tomorrow – How do listed alcohol beverage companies in sub-Saharan Africa compare with respect to water efficiency?
6 September 2013
Today brings to a close World Water Week, which focuses on water-related challenges and their impact on the world’s environment, health, climate, economic and poverty reduction agendas. Water is an essential input to many business sectors, including most notably agriculture and mining. However, the 2013 World Economic Forum Global Risks Report identifies water supply crises as one of the top five global risks for business in terms of likelihood and impact. Furthermore, the United Nations has warned that unsustainable growth patterns will mean that water scarcity and water pollution are likely to intensify.
Brewers leading the way
Brewers such as SABMiller and Diageo have been in the news in recent weeks for the positive steps they are taking towards addressing water efficiency and quality issues. Targets have been set and significant reductions in water usage made in many breweries.
Companies are now looking to address water issues in their supply chains, which account for the major portion of ‘water footprint’ used to produce one litre of beer. This has led some companies to address water issues as part of the water-food-energy nexus. This is key as greater water efficiency leads to both lower energy usage and reduced waste. Partnerships have been formed with organisations such as the WWF, while most major brewers endorse the UN CEO Water Mandate.
There are also growing signs of co-operation between beverage companies, even competitors, to reduce their impact on water systems. So how do the various brewers listed on sub-Saharan Africa’s stock exchanges measure up?
|Tanzania Breweries||Dar es Salaam||SABMiller||7.5||6.7||5.7||5.1||3.5 (2015)|
|Guinness Ghana||Ghana||Diageo||No data||No data||No data||30% by 2015|
|Zambian Breweries||Lusaka||SABMiller||12.6||10.5||9.9||8||3.5 (2015)|
|EABL||Nairobi||Diageo||No data||No data||No data||30% by 2015|
|Namibian Breweries||Namibian||Ohlthaver & List, Diageo, Heineken||4.8||4.3||4 (2017)|
|Guinness Nigeria||Nigeria||Diageo||No data||8.62||7.8||30% by 2015|
|Nigerian Breweries||Nigeria||Heineken||5.7||5.2||No data||3.7 (2020)|
|Bralirwa||Rwanda||Heineken||4.25||4||No data||3.7 (2020)|
|Delta||Zimbabwe||SABMiller||No data||No data||7.4||5.8||3.5 (2015)|
|Diageo – Africa, Eastern Europe & Turkey*||7.9||7.2||6.6|
There are a number of key points that emerge from the above table:
- The sub-Saharan African beer market is largely a three-way competition between Diageo, Heineken and SABMiller, along with SABMiller’s joint-venture partner Castel. These four companies represent around 80% of the beer market in Africa. Africa’s consumer growth story has made it an attractive region for brewers, as highlighted by recent acquisitions and new investment.
- The data (or perhaps just disclosure) is patchy, reflecting the challenge of undertaking ESG analysis in frontier markets. While Diageo provides water efficiency data across its operations (not just beer) by region in its Sustainability & Responsibility Report 2013, it does not provide this information at the country level nor do its various subsidiaries provide this data in their Annual Reports. Similarly, no 2012 data appear to be publicly available for either Nigeria Breweries, whose website is corrupted, or Bralirwa, which does not appear to have published a 2012 Sustainability Report.
- There is wide variation in performance. Different brewing processes and product mixes make like-for-like comparisons
between the different companies difficult. However, SABMiller’s Zambian Breweries uses twice as much water per unit of beer as its sister company in South Africa. At a ratio of 8:1, Zambian Breweries’ water efficiency is well above the global industry average of around 5:1. In Ethiopia, where some state-owned breweries have water consumption of 22hl/hl, the Harar Brewery saw reduced water consumption from 9.5hl/hl in September 2011 to 7.6hl/hl after it was acquired by Heineken.
It is also interesting to note that, while Diageo has heralded the attainment by its African operations of the target of reducing its 2007 water use by 30% by 2015 two years early, the absolute levels for Guinness Nigeria are higher than the majority of other listed brewers in sub-Saharan Africa.
Although water is a key production input for all brewers, the extent to which water is a material issue will depend not only on how efficiently water is managed but also on factors such as whether or not the company is in a water-stressed or water-scarce area. Water scarcity is dynamic and depends not only on availability of water, but also on the ability to access water through, for example, adequate infrastructure. This was recently highlighted in Ghana where Ghana Water Company’s supply problems meant that the Guinness brewery was forced to rely on water supplied from tankers.
Location of production facilities and access to water is particularly relevant in sub-Saharan Africa, which has the most water-stressed countries of any region in the world. All 12 of the Diageo facilities identified as being in water-stressed areas are in sub-Saharan Africa. A 2006 report estimated that around 38% of people in sub-Saharan Africa live in a water-scarce environment, which is one in which water supply is less than 1,000m3 per capita per annum. Beverage companies, and therefore investors, should be particularly aware of the impact their operations have not only on water supply and water quality, but also on the communities and ecosystems that depend on those water resources.
Sign up to receive occasional updates on industry news and regulatory developments.