East Africa Food and Drink Report Q4 2012

Kenya The dynamics of a stronger currency, tight monetary policy and improved weather conditions suggest that domestic demand conditions should remain reasonably healthy in 2012. While the lagged impact of tighter monetary conditions could start to bite, we do not believe that this will bear a substantial impact on consumption spending in the coming quarters.

The Kenyan consumer-facing sectors are showing tremendous long-term promise. Although Kenya is not clearly distinguishable from its neighbours Tanzania and Uganda in terms of GDP per capita, Kenya’s consumer sector is significantly more developed than these countries. The domestic food and drink processing industry is much stronger, and internal trade systems are more developed, with organised grocery retail outlets much more widespread.

Following a challenging two-year period over 2008 and 2009, as post-election violence and then a sluggish economy reined in private consumption after a period of accelerated growth, Kenya is much more integrated into the global economy than the rest of the East African Community (EAC). Kenya is the EAC’s economic hub and its most developed consumer market.

Our strong Kenyan view is also backed up by the fact that we believe companies can more efficiently reach the end-consumer market in comparison with Tanzania and Uganda. Internal trade systems are stronger, with mass grocery retail contributing an estimated 5% to consolidated grocery sales compared with a non-Kenyan East African average of about 1%.

Headline Industry Data ?? Per capita food consumption is forecast to increase by 13.0% in 2012. To 2016, we are forecasting a compound annual growth of 10.6%. ?? Mass grocery retail sales are forecast to increase by 29.2% in 2012. To 2016, we are forecasting a compound annual growth of 31.6%. East Africa Food & Drink Report Q4 2012 © Business Monitor International Ltd Page 8

Sudan South Sudan is capturing the attention of a number of food and drink companies in the beer, soft drink and retail spaces. The referendum held in South Sudan over secession from Khartoum earlier in 2011 became reality on July 9. The separation of powers and the formation of an independent state will have profound implications spanning the political, economic and social divide. For Juba, South Sudan's capital, succession is somewhat of a coup given that around three-quarters of Sudan's oil output is produced in South Sudan.

The South, which can lay claim to about three quarters of Sudan's oil output, is going to try and attract investment into its non-oil economy over the next few years. We are already seeing interest with the announcement that the Kenyan food retailer Uchumi is planning to launch a store in Juba and may be followed by some of its regional rivals in the future. While there is certainly a lot of room for growth in organised retailing, we believe the most exciting opportunities from a food and drink point of view will lie in beer and soft drinks. Meanwhile, the North will also continue to hold appeal over the long term.

Headline Industry Data ?? Per capita food consumption is forecast to increase by 25.8% in 2012. To 2016, we forecast a compound annual growth of 17.2%. ?? Mass grocery retail sales are forecast to increase by 29.6% in 2012. To 2016, we forecast compound annual growth of 20.7%.

Tanzania There is tremendous room for growth on the consumer side in Tanzania. With incomes still low, there are potentially dynamic opportunities on offer for companies that can target the market with low-cost goods. The telecoms sector is a key example of the growth that can be achieved with the right amount of investment, particularly in distribution.

The manner in which mobile phones have caught on in Africa highlights what can be achieved on the consumer side. Tanzania’s telecoms industry is one of the region’s most competitive, with a host of big hitters jockeying for a share of the market. Our telecoms team believes that there were more than 52 mobile phone subscribers per 100 inhabitants in 2011, which is expected to rise to nearly 70 by 2016. These are phenomenal numbers, and one reason for telecoms firms' success is that they have been able to invest heavily in distributional infrastructure. In Tanzania and the wider region, getting products to the final consumer is probably the greatest challenge a company will have to overcome. East Africa Food & Drink Report Q4 2012

© Business Monitor International Ltd Page 9 There is still very little formal leverage across much of Sub-Saharan Africa on the consumer side – retail banking penetration is tiny, and formal home ownership financing is still mostly in its infancy. Much activity remains under the radar across much of the region, where the informal economy accounts for a big chunk of spending. The takeoff in mobile phones over the past decade shows that if the price is right, there are huge opportunities at mass market level, where consumers are willing to embrace new brands. Moreover, with incomes still low across the region, there are potentially dynamic opportunities on offer for low-cost goods targeting the mass market, and Tanzania is no exception. Demand for basic essentials such as toothpaste and shampoo will grow considerably over the next few years. Again, we highlight that with internal distribution systems in terrible shape, large investments into distribution must be made.

Headline Industry Data ?? Per capita food consumption in local currency terms is forecast to increase by 25.8% in 2012. To 2016, compound annual growth of 15.5% is forecast. ?? Mass grocery retail sales are forecast to increase by 30.1% in 2012. To 2016, compound annual growth of 19.4% is forecast.

Uganda Uganda’s organised food and drink industry is accelerating off a very low base, with per capita food consumption around US$250, per capita beer consumption below 10 litres and organised grocery retail’s proportional contribution to overall sales below 5%. As local consumers climb up the income ranks, these consumption levels will soar considerably over the coming years, underpinning our expectations that the Ugandan market will comfortably outperform the broader East African Community (EAC) region. Backing up BMI’s view on Uganda’s relative competitiveness, sector investments have been more forthcoming in its food and drink sector, with a number of companies opting to invest in Uganda before Tanzania, for example. Uganda’s beer industry has been the EAC’s most competitive for some time, and Kenyan retailers have been launching stores, with others expected to follow suit. The retailers are largely pursuing middle-to-high-income traffic, as the industry generally lacks the scale to pursue low-income traffic at this stage.

In stark contrast to the demographic ‘time bomb’ being faced by most developed countries, Uganda’s population is one of the most youthful and fastest growing in the world. According to statistics published by the US Census Bureau, Uganda’s total fertility rate is 6.5 births per woman, second only to Niger. Given that we expect the birth rate to be sustained at this high level, the country’s population pyramid is likely to be as widely based in three or four decades from now as it is at present.

East Africa Food & Drink Report Q4 2012 © Business Monitor International Ltd Page 10 Headline Industry Data ?? Per capita food consumption in local currency terms is forecast to increase by 20.7% in 2012. To 2016, we forecast compound annual growth of 14.1%. ?? Mass grocery retail sales in local currency terms are forecast to increase by 27.8% in 2012. To 2016, we forecast compound annual growth of 19.4%.

Table of contents

Chapter 1 - BMI Industry View

Kenya

Sudan

Tanzania

Uganda

Chapter 2 - Business Environment

BMI’s Core Global Industry Views

Table: Core Views

Sub-Saharan Africa Food & Drink Ratings

Table: Risk/Reward Sub-Factor Ratings Q (scores out of )

Table: Sub-Saharan Africa Food & Drink Risk/Reward Ratings Q

Chapter 3 - Macroeconomic Outlook

Kenya

Table: Kenya – Economic Activity, -

Sudan

Tanzania

Table: Tanzania – Economic Activity, -

Uganda

Table: Economic Activity, -

Chapter 4 - Industry Forecast Scenario

Kenya

Food, Drink, Mass Grocery Retail

Food

Table: Kenya – Food Consumption, -

Table: Kenya – Meat, -

Table: Kenya – Fish, -

Table: Kenya – Dairy, -

Table: Kenya – Snack Foods, -

Drink

Table: Kenya – Beer, -

Table: Kenya – Carbonated Drinks, -

Table: Kenya – Fruit/Vegetable Juice, -

Mass Grocery Retail

Table: Kenya – Mass Grocery Retail Sales, -

Sudan

Food, Drink, Mass Grocery Retail

Food

Table: Sudan & South Sudan – Food Consumption, -

Drink

Mass Grocery Retail

Table: Sudan & South Sudan – Mass Grocery Retail, -

Tanzania

Food, Drink, Mass Grocery Retail

Food

East Africa Food & Drink Report Q

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Table: Tanzania – Food Consumption, -

Table: Tanzania – Fish, -

Table: Tanzania – Corn Oil, -

Table: Tanzania – Liquid Milk, -

Table: Tanzania – Cheese, -

Drink

Beer

Table: Tanzania – Beer, -

Carbonated Soft Drinks

Table: Tanzania – Carbonated Soft Drinks, -

Mass Grocery Retail

Table: Tanzania – Mass Grocery Retail

Uganda

Food, Drink, Mass Grocery Retail

Food

Table: Uganda – Food Consumption, -

Table: Uganda – Sugar Confectionery, -

Table: Uganda – Dairy, -

Drink

Beer

Table: Uganda – Beer, -

Soft Drinks

Table: Uganda – Carbonated Soft Drinks, -

Hot Drinks

Table: Uganda – Tea, -

Mass Grocery Retail

Table: Uganda – Mass Grocery Retail, -

Chapter 5 - Market Overview

An Overview Of The East African Food And Drink Industry

Chapter 6 - Key Regional Industry Trends And Developments

SABMiller’s Sechaba Breweries: SSA’s Most Efficient Beer Company?

Chapter 7 - Demographic Outlook

Kenya

Table: Kenya's Population By Age Group, - (')

Table: Kenya's Population By Age Group, - (% of total)

Table: Kenya's Key Population Ratios, -

Table: Kenya's Rural And Urban Population, -

Sudan

Table: Sudan's Population By Age Group, - (')

Table: Sudan's Population By Age Group, - (% of total)

Table: Sudan's Key Population Ratios, -

Table: Sudan's Rural And Urban Population, -

Tanzania

Table: Tanzania’s Population By Age Group, - (‘)

Table: Tanzania’s Population By Age Group, - (% of total)

Table: Tanzania’s Key Population Ratios, -

Table: Tanzania’s Rural And Urban Population, -

Uganda

East Africa Food & Drink Report Q

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Table: Uganda’s Population By Age Group, - (‘)

Table: Uganda’s Population By Age Group, - (% of total)

Table: Uganda’s Key Population Ratios, -

Table: Uganda’s Rural And Urban Population, -

Chapter 8 - Risk/Reward Ratings Methodology

Table: Rewards

Table: Risks

Weighting

Table: Weighting

Chapter 9 - BMI Food & Drink Industry Glossary

Food & Drink

Mass Grocery Retail

Chapter 10 - BMI Food & Drink Forecasting & Sourcing

How We Generate Our Industry Forecasts

Sourcing

Related research categories

By sector: General drinks

By market: Africa