Bralirwa Ltd, Rwanda’s largest brewery and soft drinks manufacturer by market share has reported a strong performance for the first half of the year.The company announced that it had posted a 40 percent net profit, coming at a time after its successful Initial Public Offer at the Rwanda Stock Exchange(RSE).In this exclusive interview Bralirwa’s Managing Director Sven Erik Piederiet talks to Fred Oluoch-Ojiwah of The NewTimes about the Bralirwa’s post IPO issues and the larger prospect of Rwanda’s beverage industry.
What is the magic behind the latest figures?
First I am must say that we are very happy with the results. Last year, we showed a net profit increase of 64 percent and for the first half of this year it is 40 percent. Share prices have doubled in the past months. These results are happening in the current context of various economic challenges such as rising inflation. Now to answer your question, I will say that there is no magic formulae. Basically, it is the result of hard work. The hard work is centered around our three core values. Which is passion for quality, enjoyment for life and respect for the people, society and environment we live in. The first point is that we always focus on the consumer. Consumer is king. The consumer likes high quality products. If you look at our products I can say that year on year we have been improving the quality of our products. The quality of our products is acknowledged not only by our consumers but also by external quality assurance firms. I must mention here that our company comes top most in the entire East
African Community with the highest number of quality assurance certificates.
Let me interject by asking you whether on quality assurance certificates, Bralirwa Ltd beats your external competitor, The East African Breweries Ltd (EABL)?
Yes. That is a fact.
That is very interesting fact. What else can be said to be behind the results?
Quality assurance can also be seen by the global quality award Bralirwa Ltd received from Diageo Plc, the owners of Guiness for brewing the second best Guiness beers outside of the production system in Ireland- the original producers of this kind of product. Through Bralirwa, Rwanda came second after Malaysia. We have for two years in a row won the Coca Cola Gold award for production excellence. It means that we are the best Coca Cola bottler in the whole of Africa. It also means that we have the highest standards of any Coca Cola company in Africa for 2009 and 2010.For the last 6 months of this year, for the Heineken side, I must add that the Gisenyi breweries was voted the best brewery out of the 35 Heineken units in Africa in terms of quality, safety, efficiency and management systems beating leading Heineken units in Europe in terms of overall global rankings.
After talking about all those beautiful things, the question is- are we likely to see Bralirwa Ltd seeking a bigger portion of the EAC market share?
Bralirwa Ltd is already exporting to the EAC. This year our exports to the EAC are up by 50 percent.
How has competition changed things at Bralirwa Ltd?
In principle, not that much. I say so due to the fact that if you look at our mission we have always said that we want to be world class. We want to satisfy our consumers with exciting brands and we respect the environment .We did that in the past and we are still doing it. I must add that competition is not something new. It has been there for the last 10 years in terms of imports. That has not changed much with Rwanda joining the EAC. However, the big change has come with the local competitor in the form of Mille Colline Brewaries Ltd(MCB). In principle that has not changed our mission. The fact of the matter is that such form of competition gives more excitement in our organization. The local competitor gives us more motivation to prove to the consumer that we are there to serve them as we believe that we have the best products that they are willing to buy.
Somebody was saying that Skol the flag ship product of MCB has taken 25 percent of the market share in Rwanda. Yet, we know that before Skol came Bralirwa Ltd was controlling over 95 percent of the market share. What do you have to say to that?
I have been reading such statements with keen interest. My first reaction is, I would like to know how such reports were compiled and the authenticity of such statements. If you are talking about facts, my opinion is that it is difficult to talk about market share in precise terms. I do not have their numbers.And they do not have my numbers. Nobody can calculate in precise terms the market share split. But having said that, if you go to the market where we happen to have a more prominent role, we have a rough estimate. If such an estimate is combined with our numbers, Bralirwa Ltd has been growing by 26 percent. If they have been increasing their market share, it means that they have been growing by over 50 percent. I can tell you that it is not the truth. But then it is up to them to claim a certain amount of market share. I am very happy for them. As for Bralirwa Ltd, I can say that their impact is rather limited.
How has the IPO enhanced transparency, accountability and shareholder value at Bralirwa Ltd?
The IPO has been a great success. It was a very exciting process. It took over one year and half. It was new for all the stakeholders, the stock exchange people, government, advisors and even us though we had back up from Heineken. I must add that not many Heineken operations are taken to the stock markets. So it was new for everyone. The main objective was to support the government to dynamize and set up a thriving stock exchange. I think we did that. The Bralirwa IPO has set the pace. You are aware that after the Bralirwa IPO the one for Bank of Kigali followed. That said, I am happy to say that we now have new shareholders. I am more happy to say that we have more of that new type of shareholders being Rwandans. It is good to have Rwandan shareholders as they know the market and this is the kind of people who can support us in doing our business. Of course before the IPO we only had two shareholders but now we have new ones. It thus means that we have to explain our activities more openly.
We have for instance never released half year results. This is the first time it is happening.
Closely related to accountability and reporting could you break down the figures you have reported?
The key point is that we have a volume growth of 26 percent. That means that if we compare ourselves with other breweries in Africa or the world, we are one of the leading operations in terms of overall growth. I have the figures of Heineken operations all over the world and comparatively we are doing quite well. Our earnings before tax and interest grew by 33.3 percent and the net profits grew by 40.1 percent. These healthy results are attributable to strong growth of the economy that have been made possible by constructive and prudent policies of the government. I would quickly add that modernizing agriculture by government has boosted our supply chains such as suppliers of sorghum that goes into manufacturing of beer.
In your view, how does the strong growth of the economy affected your consumers?
We are witnessing with time, the additional entry of previously large sections of the population into the formal economy. This means that such people now have added purchasing power courtesy of the growth in the economy. The reforms within agriculture is a case in point. Farmers have come together to consolidate their land holdings. They are grouped together as cooperatives. They have better seeds to grow for instance sorghum that we use in our production systems. The end result is that such farmers are now able to produce more and earn more. The trickle down effect for us at Bralirwa Ltd is that such people can now afford to purchase more of our products. That is how we are able to report such healthy results. In a nut shell such good policies along with our internal systems combine to produce the results reported for the first half of the year.
While Rwanda’s other sectors are experiencing the true and proper rhythms of competition a case in point being telecoms, how do you see your industry evolving in the next 5 years?
We are very positive about Rwanda’s future. Our industry depends very much on the growth of the economy. For the next 5 or 10 years we foresee a strong growth in Rwanda’s economy. If economic prospects are placed at around 7 to 8 percent, we believe that our growth is projected at 1 or 2 percent above the GDP growth for the next 5 to 10 years.
Closely related to the above, what are Bralirwa Ltd’s broad strategic plans for the next 5 years?
Priority number one is investments. If we are talking about pursuing such growth plans, we need more investments. For the past 2 years we have been working on expansion plans. We are working on an investment plan for the next 10 years. It is almost finalized before it is taken for board of director’s approval. The issue is to step up capacity investments both in Kigali and Gisenyi. We are going to significantly increase our production capacity. That also means that we will also invest in quality assurance including our people. We also intend to bring more innovations into the market. Being part of both Coca Cola and Heineken companies there are very many products still available for us to bring to this local market. It is only up to us to figure out how to go about it. We have ambition to lead the local beverage market. We believe that the Rwandan consumer needs something new and is willing to pay for it. We will bring new things to the market and this is a continuous efforts.
What would happen if East African Breweries Ltd(EABL) would set up a plant in Rwanda? Imagine a scenario whereby EABL decides to put up a US$200 million investment, as part of its regional investment plans to take on Bralirwa Ltd.
Of course that would be a very interesting scenario if at all it does happen. As I have said, we are part of Heineken Group whereby in many markets we compete with global companies in this business be it SAB Miller or Diageo Group that owns EABL. Competition is part of life. It is normal for us. If at all what you are talking about happens, the market might grow faster. EABL will definitely bring in more excitement given their impressive track record in East Africa. We have a lot of respect for them.