Wednesday, July 24, 2024
Money TalksPockets of consumption surges for local spirits

Pockets of consumption surges for local spirits

The economic, political and social realities in Ethiopia seem to be going from bad to worse. Politically, disintegration of the country is no more the implausible scenario put forward by extremist politicians but a tangible threat. Economically, living conditions change for the worst on a daily basis. The Birr is continuously losing its purchasing power and people have been financially stretched beyond their capacity. Social cohesion also seems to be at its lowest as ethnic motivated killings have been witnessed across the country. Generally, there is a gloomy sense to the current conditions in Ethiopia.

Going to the bar for drinks and detaching oneself from the cruel realities of life, albeit for a short time, would normally be an option for some people but that option is not as easy as it used to be anymore. Especially those who drink bottled and draft beer have recently seen a second surge in beer prices in two years. Accordingly, the price of a crate of BGI’s beers has increased from 440 to 500 birr while that of a barrel of draft beer has gone up from 1160birr to 1360 birr. The excise tax reintroduced in 2020 levied 40 percent tax on beverages with alcoholic content of less than seven percent.

The combined effect of the price increases and the opportunistic endeavors of beer retailers to raise their profit margins pushed the price of beer from 13birr to 30birr in just over a year. Night clubs and bars that want to depict themselves as descent charge 100birr or more for a bottle of beer. The situation has changed the market considerably. Abraham Alebachew, a small bar owner around the Fana Park area of Bole, told The Reporter that his beer sales have plummeted by more than half.

Bar owners in Addis and Jimma argue that the surge in the price of beer has raised the demand for local spirits. Used as a more reasonably priced replacement, bar owners The Reporter spoke to indicated that the demand for local spirits such as Gin, Aperitif and Araki (an Ethiopian spirit) has risen up in recent weeks. Abraham, the small bar owner stated above, remarked that the consumption of these drinks has picked up pace recently in his bar. He stated: “The consumption of alcohol has increased. Considering the price of beer has gone up, the surge in the use of local spirits could be taken as a shift to a more affordable alternative.” He further noted that he now takes 30 percent more local spirits from suppliers as his stock for a month now only lasts about 20 days.

Edget Asaye, Manager of Sodo Minch small bar in Jimma, stated that the number of customers who drink local spirits has noticeably surged. He pointed out that house special cocktails of local spirits have especially become popular recently. Accordingly, he claimed to have seen consumption of these spirits double recently, leading to his increased solicitation from suppliers. Edget further explained that the sale of spirits is the reason the bar hasn’t gone bankrupt as the small profit margin of beer sales and the price control by factories has rendered beer sales less attractive.

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Despite the accounts of bar owners from different parts of the country, local spirit factories insist the opposite is the reality. Marathon’s Addis Ababa sales head, Tamrat (father’s name not specified) told The Reporter that the sales decreased. He pointed out that factors such as the COVID-19 pandemic, the excise tax levied on spirits, and the people’s economic troubles of inflation have made it very difficult for people to consume alcohol.   

An informant from Rorark, the company that produces Super Eagle, also seconded Marathon’s claims by stating that sales have decreased. The informant indicated that there have been less events in the rainy season and farmers are busy toiling their land, with the combined effect reducing sales. According to the source, July is normally a time when sales dip. Under current sales conditions, explained the source, the expected daily sales in Addis Ababa and the regions are not being met.

Sheleme Girmachew, Alcohol Beverages Processing Expert at the Food, Beverage and Pharmaceuticals Industry Development Institute, told The Reporter that the 11 factories in the field are not producing at full capacity because of input (ethanol) shortages. He indicated that the companies complain of the strain they have been forced to endure from the excise tax levied on them and the double taxation they have been subjected under as they pay taxes for the import of inputs and during sales of the product.

An expert from Addis Ababa University who spoke to The Reporter on condition of anonymity explained that the conflicting reality of the bar owners and the factories could be explained by the presence of pockets of growing markets in an otherwise shrinking national market. The scholar explained that the ongoing war in Northern Ethiopia (Afar, Amhara and Tigray), political instability in other regions such as Benshangul, parts of Oromia and the Southern Nations regions could considerably harm the alcohol beverages market. The surge in the consumption of local spirits in stable parts of the country could, on the other hand, be a normal reaction to the recent surge in the price of beer, the scholar explained. At a national stage, however, it could take more significant surged in stable areas to offset the market loss in areas of political instability.  

The scholar concluded that the surge in the consumption of local spirits in some pockets could be a great opportunity to revive the sector. He noted that factories should work hard to capitalize on the situation and ensure that they keep new customers. 

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