Entrepreneur watch: Microbrewery competing with multinational players

The Kenyan beer market is expected to register significant growth in coming years with research from investment analysts forecasting increased consumption driven by population growth, rising incomes and urbanisation trends. Alan Murungi, founder and managing director of Ozzbeco Ltd, the firm behind Kenya’s first boutique brewery business, is one of few individuals who have dared invest in the beer market dominated by large multinationals. Sierra Premium Beer comprises of the Sierra Amber, Sierra Blonde and Sierra Porter brands. Murungi, 35, told How we made it in Africa’s Dinfin Mulupi about the inspiration behind Sierra and why his is a smart investment.

Sierra Premium Beer's three brands.

Sierra Premium Beer’s three brands.

What inspired you to establish a microbrewery?

Ten years ago, I visited a friend in Thailand and this was just when the microbrewery boom was beginning in Asia. I visited a number of microbreweries, which were a combination of breweries and restaurants and I thought this was a cool concept. However, I knew nothing about making beer. I went to the University of California to study a brewery programme after which I worked at a microbrewery in the US which gave me extensive training on German brewing. I moved back to Kenya in 2005, pulled resources together and opened the brewery and restaurant the next year.

You would need around US$2-3 million as capital to set a microbrewery of this size. We produce our beer according to German tradition with no preservatives, no additives and no added sugar. The product is completely natural. Currently, about 80% of our sales are within Nairobi. Our production capacity is about 20,0000 hectoliters. The concept behind a microbrewery is that it is small and unlike large breweries, this is more about art and not just churning out products.

To be honest we were a little bit too early for our time. We are only starting to see proper growth now. Even within Africa, microbreweries are starting to pick up just now. In South Africa, there are about 20 to 30 now, but none of any significant size. They are simply microbreweries. The market is growing and there is more and more appreciation for different products and quality. More importantly, Kenya is my home and that is why I am here.

Who is your target market?

Our target market is 21 to 40 year old young professional Kenyans. These people are ambitious. People who are looking for quality and do not want to be one of the masses. They distinguish themselves and are looking to be different. As the economy continues to grow so will alcohol consumption. The potential for growth is in tandem. In another ten years, the Kenyan beer industry could be five to six times what it is today. As people become more affluent, they demand more premium products. Currently our premium market is 5% but growing. Our investment may have been too early, but it is a smart investment.

The Kenyan beer market is dominated by multinationals; how do you cope?

Competing with the multinationals is difficult mostly because of resources. Like any other commercial product, the consumer needs to know that you exist, try your product, become a loyal customer and have consistent access to the product afterwards, which is a long and difficult chain. When you are competing with companies that have big budgets to take care of distribution and marketing, it becomes a bit difficult. We have to be clever in understanding our niche, our consumers and where they are.

Describe some of the other challenges you face.

One of the major challenges is the high cost of energy, which is set to go up again next month. Infrastructure is also a challenge in terms of importing materials due to delays at the port. We source our raw materials locally but sometimes we have to import. For instance, we import malt from Germany, which makes up less than 5% of the composition of a bottle of beer.

Is Africa really rising?

Yes. However, we have a lot of work to do. When you look at currency issues in countries like Malawi and Zimbabwe it is disheartening. Doing business in a lot of African countries is really difficult. The glass is half full and we can only go up. The potential is huge in Africa and if you are smart enough to come in early, you will reap big. There is a definite increase in the spending power of the middle class across the continent. Some countries are big economies because of minerals, but it is not trickling down. Kenya has a more robust structure in terms of the spread of wealth.

We are seeing a lot of young people in Kenya going into business. What could be the reason behind this?

Kenyans are fairly entrepreneurial people. This is more of keeping up with the Joneses; when you go to your neighbour’s place and they have a flat screen you want the same or even better. We have a competitive culture. We want to be more and to be better. Our greatest strength is that we are not lazy, and we don’t wait for handouts.

What advice would you give other entrepreneurs?

Be patient, work hard and get your numbers right.

Your future plans?

We want to grow with the premium market sector. We also want to expand our Sierra Brasserie restaurants because it is a lucrative area. We plan to open two to three more restaurants. On the brewery side, we are looking at continued expansion, more marketing and new product extensions. We are also looking to increase our market share in the premium market and growing in tandem with the whole economy and the industry.