African beer keeps head as other markets go flat

By Alistair Thomson and Joe Bavier

DAKAR/KINSHASA (Reuters) - As the sun sets over the Congo River, drinkers trickle into Kinshasa's "Staff Franc Congolais" bar, testament to the resilience of Africa's thirst for beer even in difficult places and tough times.

"I get by. The Congolese drink every day. It's a distraction -- there's no world crisis as far as beer is concerned," says a co-owner, known as "Franc Congolais" after the local currency.

He adopted the nickname when rebels seized the vast country, formerly Zaire, in 1997 and changed its name back to the Democratic Republic of Congo.

Its many violent upheavals habitually involve looting, although residents say breweries are mostly left untouched.

"If I can sell 120 bottles at 200 francs ($0.25) profit each in a day, that's enough for me," Franc Congolais said.

Big brewers operating in Africa may be slower to dismiss the threat from the global economic crisis that has caused economic havoc in the Democratic Republic of Congo and elsewhere.

Some brewers report a slowdown in sales growth, but they say Africa nevertheless offers rich expansion prospects compared with elsewhere, and even reduced growth on the continent will outstrip that of other regions this year.

"For sure we're seeing an impact, but still Africa is in growth, is providing more growth than many other parts of the world, and that's the environment where we're operating," said Nick Blazquez, Diageo's managing director for Africa.

The International Monetary Fund has cut its 2009 economic growth forecast for sub-Saharan Africa to 2.2 percent from 5.1 percent six months ago, although that is still well ahead of the 3-percent-plus contraction expected in advanced economies.

Lower commodity export revenues and a slowdown in remittance income from workers overseas are squeezing disposable incomes and currency fluctuations are hurting some breweries, which mostly rely heavily on imported materials.

East African Breweries, Kenya's leading brewery which is majority-owned by Diageo, is cutting jobs after pre-tax profit growth slowed to 5 percent in the six months to December 31 from 22 percent a year earlier, mainly as a result of high input costs.

HOLDING UP

With beer sales holding up better than in most regions, investments in new capacity in Africa, including those that have been on the cards for years, have taken on new importance.

"We are putting money into Africa based on the assumption there will be growth," Mark Bowman, Africa managing director of the world's number two brewer, SABMiller, told Reuters in Johannesburg.

The company is building four new plants in Africa, including Sudan's sole industrial brewery, and increasing capacity at existing plants to cater for double-digit volume growth across its beer and associated soft drinks businesses.