Nile Breweries Limited expands foot print to Western Uganda
Aug 24, 2013
Nile Breweries Ltd has expanded its operations in Uganda with the establishment of a new brewery in Mbarara. NBL Managing Director Mr Nick Jenkinson, spoke to the New Vision’s Donald Kirya. Below are excepts:-
Nile Breweries Ltd has expanded its operations in Uganda with the establishment of a new brewery in Mbarara. NBL Managing Director Mr Nick Jenkinson, spoke to the New Vision’s Donald Kirya. Below are excepts:-
Q: Give a brief background of NBL and its operations in Uganda?
A:Nile Breweries Limited was established in 1951 by a group of businessmen, associated with the Construction of Owen Falls Dam. A leading Asian-Ugandan entrepreneur Muljibhai Madhvani and Company bought and managed it from 1957 till 1972, when Idi Amin expelled Asians from Uganda.
It remained a state enterprise until 1992 when the Uganda Government divested itself under a wide-ranging privatisation programme. Nile Breweries was returned to the Madhvani Group. In 1997, the Madhvani Group went into partnership with South African Breweries Ltd (SAB), with the latter acquiring a 40% stake. It was a happy partnership, which quickly led to SAB Ltd fully acquiring NBL in July, 2001.
In May 2002, SAB acquired Miller Brewing Company in the US, thus forming SABMiller plc. SABMiller plc is the world’s second largest brewer with interests in over 75 countries. With the commissioning of the Mbarara plant, the capacity of Nile Breweries Limited now stands at 2.4 million hectoliters, making NBL the No 1 provider of locally- produced beer in Uganda.
Nile Breweries Limited is the producer of Nile Special, Club Pilsener, Eagle Lager, Eagle Extra, Eagle Dark, Nile Gold, Castle Milk Stout and Redd’s. Other products include Redd’s Vodka Lemon, Castle Lite, Chairman’s ESB and Chibuku and imports and distributes Castle Lager and Grolsch in Uganda.
The company’s rich portfolio of brands is complemented by Rwenzori Mineral Water, following the integration of Rwenzori Bottling Company, the SABMiller water subsidiary in Uganda, into Nile Breweries.
How much have you invested in the new brewery in Mbarara?
The total investment in the new Mbarara Brewery is $90.6 million and follows hard on the heels of the $29 million expansion of the Jinja brewery in 2009. The $25.6 million malting and effl uent treatment plant projects in 2011 brought our capital investment in major projects in Uganda to over $200m in the last five years.
How much tax do you pay to the Government annually?
In spite of concessionary rates of excise designed to encourage import substitution and stimulate local production of brewing raw materials, the Government has also been a significant beneficiary of our operations; excise and VAT have increased sharply from sh40b in 2004 to over sh185b in 2013, representing a compound annual growth of 18% in tax revenue.
What is the production capacity of the Mbarara Brewery?
The Mbarara brewery has an initial capacity of 650,000 hectoliters of beer per annum, expandable to 1.8 million hectoliters.
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Some of the products from Nile Breweries
What economic reasons propelled you to expand to Mbarara?
The World Health Organisation (WHO) famously ranks Ugandans amongst the highest consumers of alcohol in Africa, if not the world. An analysis of the WHO statistics for Uganda reveals that 94% of alcohol consumed is informal in nature.
This includes home-brewed and fermented beverages such as tonto, kwete, malwa, kasese, liralira and ajon. Commercial or clear beer accounts for a miniscule 4% of alcohol consumed by Ugandans, and at a paltry 8 liters per annum per capita consumption, Uganda is dwarfed by South Africa at 60 litres per capita, and the Czech Republic at 137 liters per capita. This partly explains the rapid growth in commercial beer consumption in Uganda, as per capita GDP growth.
It also shows a rapidly increasing population drive consumers to trade up from cheap informal alcohol to more expensive commercial branded alcohol, with volumes up by 28% for the 12 months ended in December, 2011. During this period, Nile Breweries was operating a single brewery on the River Nile in Jinja.
The brewery was originally built in 1956 and underwent a major $29m expansion in 2009, effectively doubling its capacity to 1.8 million hectoliters. Only three years after this expansion, the Jinja site was already approaching its maximum capacity, with sales growth and market share gains driven by an expanded portfolio and improved availability of Nile Breweries’ brands across Uganda.
This pointed to the need for more capacity to be added by 2013, in order to ensure an uninterrupted supply of Nile Breweries’ brands to the market. In 2011, a study was undertaken to determine whether new capacity should be added to the Jinja site, or via a greenfield brewery at another location in Uganda.
With Western Uganda constituting our biggest and fastest growing beer market, Mbarara was identified as the ideal location for a new brewery, based on its status as the major transport hub for the region and its superior infrastructure. Proximity to important export markets in eastern Democratic Republic of Congo was an added factor in choosing this location.
After an extensive search, the land at Ruharo was chosen because of its position on the River Rwizi, as a reliable source of good quality water, which is essential to the establishment of a successful brewery. Proximity to a reliable source of power and major transport routes were also important considerations in selecting this site.
How will the new brewery benefit the people of western Uganda and the country at large?
The brewery provides direct employment for approximately 180 people and about 32,000 indirect jobs in the wider economy. This was deduced when applying the job multiplier calculated for Nile Breweries by Professor Ethan Kapstein of INSEAD and Dr. Rene Kim of Stewart Redqueen, in their socio-economic impact study of Nile Breweries operations in Uganda for the year ended March, 2011.
Western Uganda is a stronghold for our rapidly growing sorghum-based Eagle beer brands, so it could be argued that the region itself is the main architect of this new brewery. Supplying raw materials to the brewery represents a great opportunity for the farmers in the Ankole and Kigezi regions to join the ranks of the estimated 20,000-plus farmers who are already growing sorghum, barley, maize and sugar for Nile Breweries.
We currently procure about 20,000 tons per annum or over 60% of our brewing requirements locally. We plan to increase this figure up to 40,000 tons or over 90% of brewing requirements by 2017. Western Uganda stands to be a major beneficiary of this drive for raw material self-sufficiency, providing farmers with a guaranteed market and a guaranteed price for their crops.
This enables them to significantly improve their standard of living and also provide better education and healthcare for their families. Already, even before it is officially opened, the brewery has created tremendous changes within the Ruharo community.
Some enterprising residents have turned their homes into groceries and rental houses to cater for the brewery employees and contractors. Similarly, farmers are lining up daily for spent grains to use as animal feed.
The Nile Breweries plant in Mbarara
What Corporate Social Investment is NBL undertaking in Uganda?
We have drilled 15 boreholes in water-scarce farming communities across 15 districts over a period of four years. As a result, over 12,125 farmers are benefiting from 70.3 million litres of water per annum and enjoying improved health care from drinking clean water.
The water initiative has generated a total social return on investment (SROI) of sh5,600 for every sh1,000 invested. As a commitment to protect the environment, we have planted 14,000 trees among farmers to protect their farms from soil erosion. We have also planted trees in our main trading towns through the Green Towns Project. The company has constructed two modern effluent treatment plants (ETP) at the Jinja and Mbarara plants respectively. We actively participate in initiatives for the conservation of the River Nile and River Rwizi catchment areas.
Nile Breweries was recognized by National Environment Management Authority (NEMA) as the best corporate entity in environmental conservation in 2012. We are in active partnership with NEMA, NWSC, DWD, Ministry of Environment, National Forestry Authority, municipalities and UPDF while executing these environmental responsibilities.
Under our From Grain to Glass programme, we provide HIV/AIDS, malaria, TB, reproductive health and wellness training to farmers, truckers, employees, communities near our breweries, bar workers and consumers. With an investment of over $600,000 in fi ve years, the programme has resulted in the training of 802 HIV/AIDS peer educators, with VCT being provided to 9,000 farmers, 3,194 community members, 5,300 bar workers, and 823 truck drivers.
We have given health awareness and support to over 22,500 people across Uganda through the “From Grain to Glass” campaign. In addition, we have supported over 200 orphans and vulnerable children (OVC), 80 people living positively have been given livelihood support; and over 100,000 condoms have been distributed by NBL. We work in partnership with USAID, BPART, HIPS, St. Francis Health Care Services, Mild May, TASO, JCRC, and the Ministry of Health to implement these programmes.
We run the Equality Scholarship, an initiative started in 2011 to provide secondary school scholarships to gifted children of rural farmers to study in Uganda’s elite secondary schools. It aims to bridge the income gap and allow special talent to blossom— bringing life-long changes to the fortunes of poor households through quality education. The scholarship will cost sh1.5 billion to fully cycle the first six years of admissions (2011- 2023).
To date, 33 students from the diverse and largely rural districts of Amuria, Apac, Dokolo, Lira, Hoima, Katakwi, Soroti, Serere, Pallisa, Bukedea, Oyam, Kitgum, Kiryandongo,Budaka, Ngora, Kumi, Kitgum, Kabermaido, Kapchorwa, Bukwo, Kween, Kisoro, Kabale, Kibaale, Nebbi, Kamuli, Mubende, Rakai, Mbarara and Zombo, have been offered scholarships.
Seven of the 33 scholars are girls, with two admissions as a minimum for girls each year. In a related initiative, Nile Breweries offers secondary school scholarships for all orphans of the victims of the July 11, 2010 twin terrorist bombings in Kampala, which targeted fans watching the finals of the Soccer World Cup.
We are in partnership with Gayaza High School, Nabisunsa Girls School, Uganda Martyrs Namugongo, Kings College Budo, St. Mary’s College Kisubi, Ntare School, Namilyango College, Seeta High School, Namirembe Hillside High School and St. Mary’s College Lugazi to provide the two scholarship programmes.
How will NBL manage waste at the Mbarara plant without affecting the environment?
The scope of the new brewery includes bottled water as well as beer production and a modern water and effluent treatment plant. This is meant to ensure water of the highest quality is used for brewing and clean waste water, complying with national standards is returned to the environment. Water usage for the new plant is designed to meet a standard of 3.5 litres of water per litre of beer produced or less.
This is a significant improvement on the Jinja water usage of 4.5 litres of water per litre of beer, which is one of the most efficient of the SABMiller African breweries. Talbot and Talbot, a reputable international company specialising in the treatment of waste water, which has partnered successfully with SABMiller on a number of previous projects, has been the main contractor for this aspect of the new brewery.
How are you promoting responsible consumption of alcohol?
We believe our beer adds to the enjoyment of life. Nonetheless, we are conscious that alcohol when abused leads to negative consequences. Accordingly, our number one priority in promoting sustainable development is to discourage irresponsible drinking of alcohol.
We have a rigorous policy on commercial communication (POCC) to ensure that we market our beer in a responsible manner. We have strengthened and expanded our marketing codes of practice through establishing the Marketing and Sales Compliance Committee (SMCC) that vets all company commercial communication and is chaired by an independent external person.
The SMCC meets regularly to review new marketing campaigns. All our agency contracts include a clause on adherence to the SABMiller policy on commercial communication (POCC). Our beer does not contain energisers or added stimulants such as caffeine, guarana and taurine.
All our promotional materials, including digital, contain the SABMiller approved responsible messaging and easily understood symbols or equivalent words to discourage drinking and driving; consumption by those under-age; and consumption by pregnant women. All company corporate and brand websites include reference to www.talkingalcohol. com, a SABMiller website that gives details about alcohol from health specialists.
Access to these websites is denied to persons under the legal drinking age of 18 years in Uganda. We have implemented a responsible retailer training campaign in partnership with the government, through the Uganda police. Through this campaign, 2,703 retailers have been trained in responsible alcohol consumption and selling. They are also issued with codes of practice.
The training discourages drinking and driving; consumption by those under the legal drinking age (18); consumption by pregnant women, and consumption by the intoxicated. This year, we have conducted training in Nansana, Kireka, Mukono, Tororo, Luwero and Kalangala, and we plan to extend the training to Masindi and Bushenyi. We are engaging the Government on how to address underage purchase and consumption, through appropriate partnerships and programmes.
We developed and rolled out the 3D campaign Don’t drink and drive in partnership with the Uganda Police, to increase awareness of the risks of drinking and driving. The campaign has reduced the number of accidents caused by drunk drivers, according to the Traffic Police.
