Habesha Breweries Share Company Prospectus

CONFIDENTIAL: FOR INTENDED RECIPIENT ONLY

Date: November, 2009

Prospectus

PROSPECTUS No. 01/01

HABESHA BREWERIES SHARE COMPANY

Prospectus

for the Offering of

250,000 Registered Ordinary Shares

at par value of Birr 1,000 each so as to increase the capital of the company

Habesha Breweries S. Co.

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Table of Content

Statement by the Board of Directors and Main Promoter 2

Summarized Information on Sales of Shares 4

Statutory Information 7

Establishment 7

Sales of Share 11

For foreign investors 14

Profit Allocation 15

Supplementary Information 15

Beer Consumption in Ethiopia 21

Strength and opportunities of Habesha Breweries S. Co. 22

Decisive Assumptions 23

Financial Considerations 24

Risk Factors under consideration 27


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Statement by the Board of Directors and Main Promoter

Beer is a universal product. Almost all societies in the world produce

beer in one form or another, whether such is at the industrial or the

home level. Its benefit, although scientifically analyzed and explained

only recently, had nonetheless been understood since thousands of

years ago. How else can one explain that beer, the world‟s oldest

alcoholic beverage, is even today, globally, the most widely consumed

drink after water and tea?

It‟s now an established fact that, taken in moderation & that is the

key word --- “in mo-de-ra-tion”--- beer can furnish the benefits of its

salubrious contents. According to a 1999 Texas Southern Medical

Center research, beer is fat-free, cholesterol-free and has a relaxing

effect. It reduces stress and helps one sleep better. For the elderly, it

helps promote blood vessel dilation, urination and sleep. It contains

„polyphones‟ (antioxidants) in similar amounts as red wine. One must

equally note that excess drinking of beer has been associated to a

number of health problems which include blood pressure and liver

disease.

In Ethiopia, beer has been there in various home brewed forms. Its

industrial production was a phenomenon that came about early

during the last century. It had a modest growth rate until recently

when due to urbanization and population growth, demand for it took

an upsurge and supply could not cope therewith; hence price

escalation and critical shortage.

Ethiopia‟s beer production in 2008/9 was about 2.9 million H.L or

(290,000,000 liters). The annual consumption per head is 4 Lt.

This figure compares as follows with that of African countries:

Kenya -------------------------- 22 Lt/head

Cameron ---------------------- 25 Lt/head

Nigeria ------------------------ 53 Lt/head

South Africa ----------------- 58 Lt/head


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Last three year‟s data of the existing breweries, shows that the

demand increases on an average of 11%.

Current Beer production capacity is 3.35 million hectoliter

It is easy to note from the above figures that the increasing

demand cannot be satiate even at the level of production forecast

with the expansion.

The expertise, the labor and the ingredients for making beer are

either readily available or can be made available domestically in a

short span of time. About the only foreign element is the

machinery and spare parts. Filling the gap not only avails beer to

the thirsty market but carries with it other benefits of national

concern:

Enhance the production of and provide the market for, the

ingredients for beer making;

Save the foreign exchange that would otherwise go for

importation of beer and raw materials like malt.

Provide training for people involved in the field.

Create an employment opportunity

Earns commensurate returns on investment.

Earns attractive dividend per share for the share holders.

Hence, this is our call to all prospective shareholders to join hands in

realizing this project that would bring a sizeable return on investment

for the shareholders and contribute in the development effort of the

country.


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Summarized Information on Sale of Shares

(For subscribers in North America)


Offers

250,000 registered ordinary shares

for public subscription so as to increase it‟s

capital to birr 250,200,000

PAR VALUE PER SHARE - BIRR 1,000.00

OFFERING PRICE PER SHARE - BIRR 1,000.00

SERVICE CHARGE PER SHARE

FOR SUBSCRIBERS - BIRR 60.00 (6%)*

TERMS OF PAYMENT - 40% payment plus the

service charge on subscription

20% by ========= June 8, 2010

20% by ========= Sept 5, 2010

20% by ========= Sept 5, 2012

MINIMUM INVESTMENT - 15 shares (Birr 15000)

MAXIMUM INVESTMENT - 122,500 shares

(Birr 122,500,000)

OFFER OPENS: - October 18, 2009

OFFER CLOSES: - April 8, 2010

MAIN PROMOTER: - Habesha Capital Services Plc.

ADDRESS

Yeka sub-City, Kebele 11/12,

House No. new, Rebecca bldg, 6th

floor Room no. 603/604 A.A,

Tel: 0118602500

AGENT IN NORTH AMERICA: Hexa United Business & Investment LLC

13036 Jingle Lane,

Silver Spring, MD 20906

Toll free: 1 800 575 2810

www.hexaunited.com


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NB

Please note that the service charge paid by the subscriber is not

refundable under any circumstance.

The service charge would be 5% (Br 50) per share for those

subscribers who will subscribe for shares on or before January

8, 2010. There is also a special discount applicable only for

subscribers who would subscribe on the 1st week of the

opening of the share offer. Hence the server charge would be 4%

(Br 40) per share.

Main Promoter: Habesha Capital Services Ltd. Co.

Habesha Capital Services Ltd. Co. is staffed and managed by

competent professional team who possess long experience in the

management of sales of shares, consultancy services, marketing,

planning feasible investment projects, project management,

engineering and operation of local and foreign trade.

Advisors of the Company

1. Ato Wubishet Workalemahu: General Manager of Anbessa

advertisement and Public Relations Company. Formerly,

President of Addis Ababa and Ethiopia Chamber of Commerce.

2. Ato Yilma Tiruneh: Formerly: (1) General Manager of Ambo

Mineral Water Factory, (2) General Manager of factories under

Textile and Food Corporations within the former Ministry of

Industry.

3. Ato Sime Kulala: Formerly, General Manager of MEWIT;

founder and board member of Nib International Bank S.C and

Nib Insurance S.C.

4. Ato Mekonen Abebe: Formerly, Executive Officer Marketing, in

the Ethiopian Air Lines.

5. Ato Tesfaye Bedada: Formerly: (1) Master brewer and later

General Manager of Bedele Brewery; (2) Quality controller,


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chemist and Master brewer of Meta Abo Brewery; brewer and

later Head of Production Department of Harar Brewery.

6. Ato Yilma W/Senbet: Formerly: (1) Master brewer and later

Head of Production Department in Meta Abo and Melotti

Breweries, (2) General Manager of Assela Malt Factory.

7. Ato Eskinder Desta: Formerly, Manager of Marubeni

Corporation A.A Liaison Office; currently Board Director of

Habesha Cement S.C and Zemen Bank S.Co.

8. Ato Mersha Alemu: Director of Administration and Finance at

HAGBES; formerly Associate Promoter of Habesha Cement

S.Co.

9. Ato Ahmed Teyib: Formerly: (1) Manager of Natural Gums

Production and Marketing Enterprise, (2) Sales Manager of UD,

Nyala Motors Company.

10. Ato Bisrat Woldu: General Manager of Bahir Dar Ghion

Hotel.

11. Ato Mekonen Demisse: Formerly, Head of Contract

Administration in the Ethiopian Air Lines; formerly Civil

Affairs Officer of the Rehabilitation Program in

Yugoslavia, under the United Nations.

12. W/ro Getenesh H/Mariam:- Managing Director of General

Insurance Brokers. Former staff of Ethiopian Insurance

Company, worked as head of various operational duties.

13. Ato Bezzaworq Shimellash:- Law Consultant and Attorney,

he has worked as Legal Advisor of Export Trade Ministry, and

served as High Court Judge and Principal Public Prosecutor of

Special Court.

14. Ato Mebratu Lemma: - Formerly: (1) Deputy Commissioner

Ethiopian Tourism and Hotel Commission. (2) Addis glass

Factory Manager, (3) St. George brewery and Meta Brewery


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General Manager, (4) General Manager of Walta Ethiopia S.

Co., (5) Board director at NIB International Bank S. Co. and

currently Board director of NIB Insurance S. Co.

Auditor

To be appointed by the General Meeting of Shareholders/

Subscribers.

Bankers

United Bank S.Co. Misrak Branch;

Commercial Bank of Ethiopia, Addis Ababa Branch;

Dashen Bank S. Co. 22 area Branch;

Wegagen Bank S. Co. Bole Medhanialem Branch;

Bank of Abyssinia S. Co. Olympia Branch;

Awash International Bank S. Co. Legehar Branch;

Nib International Bank S. Co. Balcha Abanefsso Branch;

Zemen Bank S. Co. Main Branch;

Buna International Bank S. Co. 22 mazoria branch

Statutory Information

Establishment

Habesha Breweries is a Share Company established as per the

Commercial Code of Ethiopia (1960). It is registered with the Ministry

of Trade and Industry on 02/10/09 E.C under registration number

04/2/25619/02 proclamation No. 67/1989.

Name of the Company - Habesha Breweries S. Co.

The Head Office of the Company is located at Kirkos Sub-City, Kebele

02, House No. 676/05, Addis Ababa, Ethiopia.

Objectives, Strategies and Goals

The business objectives of the Company as stipulated in Article 4 of

the Memorandum of Association of the company include the

following:


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To produce, sell and distribute bottled beer and draft beer;

To produce, sell and distribute non alcoholic beer;

To produce bottles and crate of beer;

To import and distribute raw materials and spare parts needed

for the production of beer;

Existing Capital

The Company is established with capital of Birr 200,000 which is

fully paid in cash. The capital is divided into 200 shares whose par

value is Birr 1000.

Organization and Management

The Company will ensure that it has the necessary staff (in terms of

both skills and qualifications) to perform its tasks when it begins

operations.

Organization

The highest decision-making body of the Company will be the General

Meeting of Shareholders. This would normally meet once a year

(Annual General Meeting) to elect the Directors and fix their

remuneration, approve the reports of the Board and the External

Auditor, and decide on the appropriation of the net profits of the

Company. However, a General Meeting of Shareholders can be held

more often, according to the Company Statutes, in terms of an

Extraordinary General Meeting.

The Board of Directors, consisting of 5 members, each elected for a

period of 3 years, will be the policy organ of the Company. It is

responsible for policy matters, approval and follow-up of annual

programs and budgets, and the appointment of the General Manager

of the Company. The first five Directors are appointed by the Meeting

of Subscribers (in accordance with Articles 320 and 321 of the

Commercial Code). As stated in the Memorandum of Association of


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the Company the number of the directors can be increased to 12

members.

Management

The Company has set up an office, headed by the General Manager of

the Company and its main promoter Habesha Capital Services Plc.

Auditors

To be appointed by the General Meeting of Shareholders/

Subscribers.

Financial

Present Status

The Company is offering 250,000 shares at par value of Birr 1000 to

increase its capital from Birr 200,000 to 250,200,000. The offer

includes a 6% (six percent) service chare (premium) which is

accounted separately from the equity investment amount. This is to

cover all organizational and expenses of the capital increase process.

All subscribers should note that the service charge (premium) paid by

them is not refundable under any circumstance.

Bank and Other Loans

There are no bank loans at present and the Company intends to raise

finance primarily through equity finance in terms of the current offer

and through investors‟ deposits. Loans from banks to full fill the

equity portion.

Dividend Policy

Each shareholder is entitled to a dividend on the net profit of the

Company. The General Meeting of Shareholders will declare the

amount of dividend to be paid.

Summary of Memorandum of Association

The Memorandum of Association of the Company contains 12

Articles. These deals with the founding of the Company, including the


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Founding Shareholders and the business objectives of the Company,

which includes

To produce, sell and distribute bottled beer and draft beer;

To produce, sell and distribute non alcoholic beer;

To produce bottles and crate of beer;

To import and distribute raw materials and spare parts needed

for the production of beer;

The share to be issued so as to increase the capital of the Company is

250,000 shares, and shares may only be issued registered in the

name of the holder (no bearer shares). The Memorandum outlines the

organs of the Company and their respective powers, as well as details

of the powers of the General Manager, and clauses on Auditors,

effective date, etc.

Summary of the Articles of Association

The Articles of Association of the Company contain 60 Articles. These

deals with various procedural and administrative matters such as

calling of general meeting, quorum, and proxy as well as majority

requirements at General Meetings, powers and duties of the Board

and General Manager, keeping accounts and financial reporting of

the Company, withdrawal of membership and death of a member. The

relevant Articles of Association also stipulates that there is only one

class of shares and the rights attached to such shares as well as the

rights and liabilities of shareholders.

Documents Available for Inspection

The Memorandum of Association of the Company

The Articles of Association Company

The principal registration certificate of the Company

The TIN of the Company


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Sale of Shares

Description of Shares

250,000 ordinary registered shares are offered for sale.

The par value of one share ……… Birr 1,000.00

Premium on one share …………… Birr 60.00 (6%)

For those who subscribe up to January 8, 2010, the premium shall

be Birr 50 (5%)/share.

Terms of Payment

1st Payment - 40% upon subscription plus the entire service

charge (premium) of 6% for the shares subscribed

2nd Payment - 20% by June 7/2010

3rd payment - 20% by September 5/2011

The remainder 20% by September 5/2012 (This balance of payment

may be covered by the first dividend as the Brewery begins operation)

Minimum Investment

15 shares (Birr 15,000 plus premium Birr 900.00 [6%])

Maximum Investment

122,500 shares (Br. 129,850,000)

Offer Opening Date - October 19, 2009

Offer Closing Date - April 8, 2010

Subscribers who subscribe up to April 8, 2010 shall benefit from the

special benefit allocation to founders.

The capital from the shares shall be deposited in a blocked account

and shall be operated only upon the resolution of the General

Assembly of Shareholders. The premium shall be deposited in a

Current Account opened in the name of Habesha Breweries S. Co.

The fund shall be used for the various pre-operational activities and it

shall be audited by the external auditors.


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Sales Agents are not entitled to collect cash.

How to Subscribe - Details of the Offer including Important Dates

Prospective investors, who wish to subscribe for shares of the

Company, may acquire a copy of the Prospectus from the Company‟s

main promoter office located in Yeka sub-city, Kebele 11/12, House

No. new, Rebecca bldg, 6th floor Room no. 603/604, or from the

authorized sales agents/ representatives. For those subscribers from

North America, please contact Hexa United Business & Investment

LLC at 13036 Jingle Lane, Silver Spring, MD 20906, phone: 1 800

575 2810. The Prospectus is available in Amharic and English.

Subscribers are advised to read the Prospectus, and, for any inquiry

they may have, to seek clarification from the promoting Company or

from their own professional advisers (lawyers, accountants, etc.). The

offer is open from 18/10/09 until 08/04/10.

An Application Form (Same for individual and for corporate

applications) is attached at the end of this Prospectus. Subscribers

may obtain the form from our office or our sales agents. Each share

costs Birr 1,000, plus a service charge (premium) of Birr 60 per share

(equivalent to 6%) to be collected from each subscriber. All

subscribers should note that the service charge (premium) paid by

them is not refundable under any circumstance.

The payment can be made either partially or in full. Partial

payment is in the form of 40% payment on subscription (Birr 400

per share, plus the full service charge (premium)), followed by

20% on or before (8/07/10), the next payment of 20% by

(05/09/11) and the final payment of 20% by (05/09/12).

Investors, who make the full payment, i.e. by settling 100% of the

value of the shares subscribed for upon subscription, will be entitled

to a 1% (Br 10) per share discount.


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Subscribers are kindly requested to deposit the amounts for the

investment amount including Birr 60 (6%) per share as part of the

service charge (premium). The total sum should be deposited in the

Bank account maintained in the name of the Company with the

Banks listed herein. Full details are on the application forms.

Please present the filled application form in person to the promoting

Company‟s head office or to our sales agents, together with the

deposit slips from the bank; and check that the correct sales agent

has completed on the lower part of the form. Any incomplete forms or

forms without deposit slips may not be accepted.

Payment for Subscription

Upon submission of the application form, subscribers are expected to

pay either 40% or 100% of the total value of shares they have

subscribed for, plus the Birr 60 (6%) per share service charge

(premium) either by cheques or in cash, with cleared funds to be

received by Habesha Breweries S. Co. on or before 08/04/10.

Payment can be made to the Company‟s closed account numbers.

Please bring the bank slips to the promoting Company‟s Head Office.

The receipt voucher and/or the deposit slip should be kept with due

care since they are evidence of the subscriber‟s shareholding

application until a formal share certificate is issued upon 80% or full

payment for the total number of shares subscribed. For the

convenience of prospective subscribers, the promoting Company has

appointed a number of sales agents in Addis Ababa, outside Addis

Ababa & in North America by duly signed and sealed contract. Any

subscriber may acquire a copy of the Prospectus and an application

form or obtain any basic assistance from these agents.

Please note that the sales agents are not expected to handle cash.

Therefore, all transactions are to be made by bank deposit at one of

the Company‟s bank accounts (for details, see application forms).


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Share Certificates will be given only after the completion of payment

for the total number of shares subscribed, with the certificate marked

according to how much of the payment has been received. The

minimum investment is for 4 shares, i.e. the amount of Birr 4240

including service charge (premium). The maximum investment per

single applicant is for 122,500 shares, i.e. Birr 129,850,000

including service charges (premium).

For any further clarification or assistance, please contact the

promoting Company at the following address;

Habesha Capital Services Plc.

Yeka sub-City, Kebele 11/12, House No. new,

Rebecca bldg, 6th floor Room no. 603/604, A.A

Tel: 0116-622176/77 0912-053217

For foreign investors of non-Ethiopian origin

Minimum capital requirement for investment in partnership

with domestic investors is USD 60,000.

Maximum investment for foreign investors of Ethiopian and

non-Ethiopian origin who will subscribe in foreign currency is

49% of the total equity. This investment in foreign currency will

contribute significantly for the foreign currency need of the

project.

Investment Guarantees and Protections for Foreign Investors

Ethiopia is a member of:

Multilateral Investment Guarantee Agency (MIGA), which

issues guarantees against non-commercial risks to

enterprises that invest in signatory countries;

International Center for Settlement of Investment

Disputes between States and Nationals of other States

(ICSID)

In addition, the country has signed double taxation

avoidance treaty with various countries.

The company operates in accordance with the capital repatriation

and remittance provisions of the investment proclamation which

allows payment to be made in convertible currency.


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Profit Allocation to Founders/ Subscribers, Main Promoter,

Advisors and Significant contributors.

10% (ten percent) of the “net profit after tax” will be allocated to founders /subscribers, Main promoter, Advisors and significant

contributors of the company for the first three years after the

company started operation and will be distributed as stated below.

3% (three percent) to the founders /subscribers of the company.

7% (seven percent) to the main promoter, Advisors and significant contributors of the company.

The 7% allocated to the Main promoter, Advisors and significant

contributors of the company. will be distributed as follow:

3% (three percent) to the Main promoter.

3% (three percent) to be shared equally among the advisors.

The remaining 1% (one percent) is reserved for significant

contributors who would play a significant role towards the

realization of the project and whose effort and contribution is recognized by the Main promoter. To facilitate this, the main

promoter will notify in writing to those individuals or companies

how much they will be entitled to from the 1% allocated to this

group.

The starting date of operation is the date after the official completion

of Commissioning of the plant.

By applying for subscription of shares each applicant irrevocably

agrees that ten percent (10%) of the net profit for the first three years

of operations will be allocated to the Founders/ subscribers, Main

promoter advisors and significant contributors of the company as stated above.

SUPPLEMENTARY INFORMATION

1. Investment Environment and Considerations

The business environment in Ethiopia is very favorable and the

government gives special support to those who want to build breweries. The demand-supply gap for beer is big and there will be a

significant unsatisfied demand for beer for years to come as the

economy is expected to grow in double digits for the foreseeable

future.

Encouraged by these factors some investors have planned to enter

the market and more are still planning to do so. Unfortunately,

investing in brewery is a capital intensive undertaking and needs

specialized knowledge and skills. These factors prohibit almost all


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individual investors interested to enter the beer market and we do not

expect local investors to build large scale plants in the near future.

Small scale breweries (pub breweries) won‟t pose a serious competition to large scale producers. Therefore we believe that the

risk associated with this investment is very small.

Highlighted below are a number of points which could serve as guide

in considering an investment in the Company.

1.1. Beer making Literature review

The process of making beer is known as brewing. A dedicated

building for the making of beer is called a brewery, though beer can

be made in the home and has been so for much of beer's history. A

company which makes beer is called either a brewery or a brewing

company. Beer made on a domestic scale for non-commercial reasons

is classified as home brewing regardless of where it is made, though

most home brewed beer is made in the home. Brewing beer is subject

to legislation and taxation in developed countries, which from the late

19th Century, largely restricted brewing to a commercial operation

only.

Today, the brewing industry is a global business, consisting of several

dominant multinational companies and many thousands of smaller

producers ranging from brew pubs to regional breweries. More than

133 billion liters (35 billion gallons) are sold per year (the equivalent

of a cube 510 meters on a side), producing total global revenues of

$294.5 Billion ($147.7 billion) in 2006.

The basics of brewing beer are shared across national and cultural

boundaries and are commonly categorized in to two main types—the

globally popular pale lagers, and the regionally distinct ales which are

further categorized into other varieties such as pale ales, stout and

brown ale. The strength of beer is usually around 4% to 6% alcohol

by volume (abv.) though may range from less than 1% abv. to over

20% abv. In rare cases beer forms part of the culture of various beer-

drinking nations and has acquired various social traditions and


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associations, such as beer festivals and a rich pub culture involving

activities such as pub crawling or pub games such as bar.

The basic ingredients of beer are water, a starch source, such as

malted barley, able to be fermented (converted into alcohol): a

brewer's yeast to produce the fermentation; and a flavoring such as

hops. A mixture of starch sources may be used, with a secondary

starch source, such as maize (corn), rice of sugar, often being termed

an adjunct, especially when used as a lower-cost substitute for

malted barley. Less widely used starch sources include millet,

sorghum and cassava root in Africa, potato in Brazil, and agaves in

Mexico among others. The amount of each starch source in a beer

recipe is collectively called the grain bill.

The starch source in a beer provides the fermentable material and is

a key determinant of the strength and flavor of the beer. The most

common starch source used in beer making is malted grain. Nearly

all beer includes barley malt as the majority of the starch. This is

because of its fibrous husk which is important in the sparing stage of

brewing and also as a rich source of sugar and digestive enzyme.

Flavoring beer is the sole major commercial use of hops. The flower of

the hop vine is used as a flavoring and preservative agent in nearly all

beer made today. The flowers themselves are often called "hops."

Beer is composed mostly of water. Water has different mineral

components; as a result water in some places in originally better

suited to making certain types of beer, thus giving them a regional

character. Hard water is suitable for making stout (such Guinness)

while soft water is suitable for making pale lager (such as pilsner).

Yeast is the microorganism that is responsible for fermentation in

beer. Yeast metabolizes the sugars extracted from grains which

produces alcohol and carbon dioxides and thereby turns wort into

beer. Yeast is also indicated to influence the character of flavors.


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The alcohol in beer comes primarily from the metabolism of sugars

that are produced during fermentation. The quantity of fermentable

sugars in the wort and the variety of yeast used to ferment the wort

are the primary factors that determine the amount of alcohol in the

final beer. Additional fermentable sugars are sometimes added to

increase alcohol content, and enzymes are often added to the wort for

certain styles of beer (primarily "light" beers) to convert more complex

carbohydrates (starches) to fermentable sugars. Alcohol is a

byproduct of yeast metabolism and is toxic to the yeast; typical

brewing yeast cannot survive at alcohol concentrations above 12% by

volume. Low temperatures and too little fermentation time decrease

the effectiveness of yeasts and consequently decrease the alcohol

content.

Beer is categorized into two main types based on the temperature of

the brewing which influences the behavior of yeast used during the

brewing process. The two types are lager which is brewed at a low

temperature and ales which are brewed at higher temperatures.

1.2. Global Growth trends in alcohol

Studies indicate that beer is the world's oldest and most widely

consumed alcohol beverage and the third most popular drink overall

after water and tea. It is produced by the brewing and fermentation of

starches, mainly derived from cereal grains—the most common of

which is malted barley. Although wheat, maize (corn), and rice are

widely used most beer is flavored with hops, which add bitterness

and act as a natura preservative, though other flavorings such as

herbs or fruit may occasionally be included

During the past five years, on a pure alcohol-equivalent basis, beer

has increased its share of total alcohol consumption to 41.1%. In

2008 the trend slowed somewhat and beer's year-one-year share of

total alcohol consumption remained flat. in emerging markets, beer

has generally shown higher growth than other alcohol categories as


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consumers gradually switch from local, generally high-alcohol,

subsistence products towards attractively packaged, higher-quality,

commercially produced beer.

In South and Central America, beer's share of total alcohol

consumption is now 51.5% with increases in Colombia party offset by

recent declines in Mexico and Brazil. In Eastern Europe, beer has

been gaining share from spirits for some time and now accounts for

48.0% of alcohol consumption. The past five years have also seen

consistent gains in Africa and Asia where beer's share of

commercially produced alcohol now stands at 49.0% and 32.8%

respectively, partly, to a greater emphasis on quality and

accessibility.

Over the past five years, the beer industry has seen a trend towards

consumers trading up to more expensive beers. As a result, premium

beer now constitutes 17.9% of total beer sales. For mainstream beer

consumers, particularly in emerging markets the most common

trade-up proposition is to attract, local, premium brands.

This trend of shifting towards expensive premium quality beer is also

seen in Ethiopia. Bedel and Met breweries have begun selling

premium beers which are relatively more expensive than normal beer.

1.3. Beer Consumption in Africa

According to Beer in Africa Report (SABMiller), beer consumption has

been experiencing impressive growth in Africa in recent years. The

study further indicates that many of the world's major brewers have

been increasing their operational activities in this fast emerging

market, attracted to the vast long-term potential. These major

brewers which are expanding their business activities and strategies

are SABMiller, Heineken and East African Breweries three of the key

players in this market.

The study further notes that beer has been the fastest-growing

alcoholic drink in terms of total volume in recent years, benefiting


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from foreign investment and rising disposable incomes, a trend which

it expects will continue in coming years. While in the past many

people would drink home-brewed beer or other traditional drinks,

they are now turning to commercially produced brews. This is due to

a number of factors, including aggressive advertising campaigns by

major brewers, rising urbanization and the growing prevalence of

drinking as a social activity.

Many of these African countries are experiencing very strong

economic growth on the back of newly discovered hydrocarbon

resources like Nigeria and Angola. Both countries have major beer

industries which are forecast to experience impressive growth, driven

by this surge in GDP. Along with economic expansion, it has also

been the emergence of a burgeoning middle class that is driving

growth in the alcoholic drinks sector, and it is the inspirational

segment of this new middle class that many brewers have been

targeting with their premium beer ranges.

However, it is not just economic factors that are examined but there

are a variety of other factors behind the growth of the beer sector.

One of these is the changing role of women in society and the

acceptance of their drinking beer, the role of Islam and the varying

role this can play in alcohol consumption levels. In sum, there are a

number of factors the make the African beer market very attractive to

foreign investors. Essentially, the attraction is the massive size of the

market, which is still unsaturated, paired with the rapidly rising GDP

and a fast-emerging middle class. Ethiopia is experiencing economic

growth, middle class emergence, and the changing attitude of women

and beer drinkers and as result it is believed that there are grew

opportunities for increased beer consumption.


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1.4. Beer Consumption in Ethiopia

According is the Statistical Abstract of 2007 produced by CSA,

breweries in Ethiopia produced 1.56 million hectoliter of beer during

2006 and this represented 37% of all beverage produced by

commercial producers. It was second to soft drinks which produced 2

million hectoliter during the same period and this represented 48%.

The rest included wine and other alcoholic spirits.

There are hard facts that indicate that beer market in Ethiopia has

been growing and the breweries are also making profits from their

operations. Good instances are that Meta Beer factory and Harar Beer

that have undertaken substantial expansion projects. It has also

become a good source of revenue for the government from excise tax

which believed makes the bulk of the selling price of beer. The

Government breweries name Bedele, Meta, and Harar are also

generating huge profits yearly.

There may be some investment projects in the pipeline, though as the

South Africa Brewing company (SABMiller) and the Ethiopian firm,

International Beverage Corporative reported failed to raise adequate

capital to solicit loans from local sources and as result which the

investment projects have been shelved. In addition, a local firm, Star

Business Group, which showed interest to build a brewery at Dukem

also failed to continue with the project for different reasons. We also

learned that Kangaroo business and other small firms are

undertaking a study to establish a brewery.

There are currently five breweries in Ethiopia namely BGI Group

(Societe des Brassiere et Glaciers Internationale), Dashen, Harar,

Meta and Bedele Factories. Harar Brewery Produces Stout beer

named Hakim Stout and also Harar Soft, a nonalcoholic beer

intended for the predominantly Muslim population of the area.

Because of its proximity to Addis Ababa, 75%- 80% St. George

Brewery is draft beer and uses kegs and barrels in addition to St.


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George beer, BGI Produces Bati and Castel, which was initially

intended to export market.

1. Strength and opportunities of Habesha Breweries S.Co.

1.1 The Brewery which shall have a production capacity of 300,000

hecto litres (30 million litres) shall be erected in the vicinities of

Debre Berhan and Menagesha towns, respectively, which are

located within a short distance from Addis:

1.2 Water covers 85% of the input raw materials of beer and the right

type of this natural ingredient is abundantly found in these

areas.

1.3 As the plants shall be erected in locations near by Addis, sales

and distributions shall be easily managed.

1.4 Further to the easy access of the Addis Ababa markets,

distribution to northern and Eastern Ethiopia from the Debre

Berhan plant and to Western and Southern Ethiopia from

Menagesha; the sales and distribution activities to other Ethiopia

towns shall be carried out efficiently.

1.5 One of the assumptions in considering the establishment of an

industry is the achievement of the possible maximum profit with

the minimum expense. One of the factors to achieve this motive

is to be able to distribute at least 30 - 40% of the production

within a radius of less than 100 km of the location of the plant

and the proximity and availability of the direct and indirect

inputs and services.

1.6 Trained manpower is decisive for any successful project and

investigations reveal that this is available in the vicinity of the

selected sites and professional experts can be attracted from

Addis.


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1.7 While the direct raw materials are malt (barley), hop and yeast,

the brewing process is absolutely free from artificial

chemicals;

1.8 The project sites being located on the roads leading to Djibouti

port and South Sudan, the plan to export the product of the

plant is feasible.

2. Decisive Assumptions as to the quality standard of

Habesha Brewery products.

It is appropriate, before erecting a plant, to conduct a wide and

in depth feasibility study and answer such questions as what

type of produce and the degree of quality. Cognizant of these

elements, Habesha Brewery has conducted a careful research

with respect to the decisive factors of the quality standard.

2.1 Regarding Production Machineries.

The production machineries shall be carefully selected from the

European counties with international reputation for the

manufacturing of such machineries.

2.2 Regarding the Technological Process

Among the countries of central Europe, Germany, Check

Republic, Denmark, and Holland have the lead in the

brewery technology. However these countries may also have

minor differences in their processes. Due to this fact

Habesha Brewery has preferred the eclectic approach and is

prepared to produce a superior quality beer by

implementing the most beneficial and appropriate processes

from each country, thereby creating a hybrid technology.

2.3 Regarding Trained Manpower

Habesha Brewery is staffed with technical personnel who

are highly competent professional trained locally and abroad,

with long years of experience in the Ethiopian breweries in


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various positions such as quality controller, production

supervisor, chief brewer and general manager. It is therefore

expected that, under the strict control and supervision of

these distinguished brewers, the quality of Habesha beer

shall be superior.

2.4 Regarding the Standard of the Direct Raw Materials

Direct Raw Materials are certainly decisive to the quality of

the production and in this respect Habesha Brewery has

been exploring as to the best source of these ingredients

and has now identified its taste. Therefore the choice of these

raw materials from leading suppliers, e.g. hops from the

Check Republic, yeast from Denmark shall make the

production highly reliable.

3. Financial Considerations taken from the pre-feasibility

study of Habesha Breweries Share Company

Draft beer/lit (in Birr.) Bottled beer/lit(in Birr.)

Revenue/lit 9.50 13.76

Cost Ex. factory/lit 7.01 8.09

Gross Income 2.49 5.67

Less Adm/ Sales Exp. 0.25 0.25

Income/lit 2.24 5.42

@300,000 hl (10%) 30,000 hl (90%) 270,000 hl

Income 6,720,000 146,340,000

Total income 153,060,000

Earning per share 153,060,000 113.4% 135,000,000

ROI 153,060,000 34%

450,000,000


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Annual Production and Revenue

Revenue (Birr)

Year Production

(hl)

From bottle From draft Total

1st (85%) 255,000 315,792,000 24,225,000 315,792,000

2nd (95%) 285,000 352,944,000 27,075,000 380,019,000

3rd (100%) 300,000 371,520,000 28,500,000 400,020,000

The estimated cost of machinery for a new brewery of 300,000

hl/annual capacity is about 25,000,000 Euro or Br. 450

million;

Last three year‟s data of the existing breweries, shows that the

demand increase on an average of 11%;

Current Beer production capacity is 3.35 million hectoliter;

Current Production of Beer (consumption) is 2.9 million

hectoliter;

The demand increase of 11% per year entails that the current

Production capacity should be doubled by the end of the 8th

year;

Current Ethiopia‟s beer consumption per head is 4 liters/ year;

For comparison purpose the beer consumption per head of few

African countries:

- Kenya ------------- 22 lit/ year

- Cameroon------------- 25 lit/ year

- Nigeria ------------- 53 lit/ year

- South Africa----------- 58 lit/ year


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Project Assumption:

Production capacity 300,000 hectoliter;

Product mix of draft and Bottled Beer is 10% and 90%,

respectively;

The actual investment cost would be Br. 450 million; of

which 30% (135 million birr) will be covered by share capital

and the remaining 70% (315 million birr) will be secured

from banks.

Demand Projection for the coming 10 Years at annual growth rate of 11%:

Years Demand

(thousands of hl)

Years Demand

(thousands of hl)

2008/2009 2900 2014/2015 5424

2009/2010 3219 2015/2016 6021

2010/2011 3573 2016/2017 6683

2011/2012 3966 2017/2018 7418

2012/2013 4402 2018/2019 8234

2013/2014 4887


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3 Risk Factors under consideration:

Shortage of Foreign currency for importation of the

machinery;

Delays in availability of imported raw materials that could

not be available locally may somehow affect the production

process of the factory;

Upcoming competition from existing and regional breweries;

Shortage of power supply may be a cause not attain a

production level at full capacity;

Signed in Addis Ababa, on 18/10/2009.