Friday, April 19, 2024
InterviewThe new normal in the beverage market

The new normal in the beverage market

Komari Beverages is the company behind the new drink that is making rounds in the city – Arada. Komari came into being in 2018, as the first seltzers producer in the country investing about USD 29 million on a plant in Cheki, in North Shoa Zone of the Amhara region. Brook Abdu sat down with David Speller, the CEO of Komari Beverages to learn more about the business and the beverage industry. Excerpts:

The ReporterLet us begin by discussing how Komari come into being? Tell us about the concept behind it and your investment?

David Speller: We have a vastly experienced managing team, seven of us all together have somewhere between five–10 years’ experience in Ethiopia. I myself have been here for 10 years. Working in other beverage companies, we saw that there is a lack of choice in the market. It is very much dominated by beer companies. There are very few alternative choices.

We conducted various focus groups with potential consumers for a new beverage product and we received positive feedbacks directly from the consumers. They said they wanted more choice. That was really the start of it. We created a business to give the consumers more choice. We wanted to make products chosen by Ethiopians made by Ethiopians for Ethiopians. We initially planned to engage with about 20,000 consumers to receive feedback about the product and flavors, but because of COVID-19, it was not possible, only managing to reach about 10,000 consumers.

Once we knew there would be a demand for our products, we raised a total of USD 29.4 million, with some USD 11 million being in Foreign Direct Investment and the remaining covered by a bank loan from Dashen Bank. Our head office is located in Addis Ababa and our world-class production facility is in Cheki, Amhara Region.

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At the moment, we are focused on alcoholic beverages but we do have plans to expand our product range. We really want to give the consumers as much choice as possible that may include adding other flavors, other alcoholic beverages and also non-alcoholic beverages. Currently, Komari is relatively small, we only became active in April 2021 and with any new beverage company, there is an eight month period where visibility is still being built.

It takes some time for the consumers to become fully aware about the products, what is contained in the product and to find the flavor they like. Having overcome the political instability in the country, we are beginning to see a rise in our sales. Now, our sales in January are approximately double of what they were, in any day or week in 2021.

The per capita intake of alcohol is said to be very low in this country compared to other countries in the region. So, why did you pick Ethiopia? What was the deal here?

Well, we saw an opportunity that there’s a gap, despite the assumptions being quite dire. You know Ethiopia is the second biggest country in Africa after Nigeria. The population is approximately 110 million people. So, despite the per capita consumption being lower than other countries, there is still a very strong market and a significant market size to tap into. That is where we saw we can catch-up, and get a share of that market, if we provide consumers with more choices and create products that they actually want to drink.

There is an opportunity for us to get a portion of the market share dominated by beer, and even if the portion is small you can still have a very successful company.

The name Komari is a catchy name and is commonly used to refer to Ethiopians who produce and sale alcohol locally in households. How did you come up with this name? And how many alternatives did you choose from?

Yeah; it was something that we felt captures the small drinking houses by people who create their own alcohol at home, mostly dominated by females.

One of the key things we targeted for Komari is to have a strong approach to appoint female employees. We want to create a job market that supports women. And we have adopted a zero percent gender pay gap in Komari.

You launched the company in 2018. That was around the time when Ethiopia introduced advertisement bans in the country, banning TV commercials, and so on. What challenges did you face in terms of getting into the market?

When we came up with the idea of Komari, the market was a little bit more stable. Obviously, we had to go through various stages, in setting up the company in terms of sourcing FDI’s and raising significant debt financing here in Addis, and then obviously, by the time we actually launched the company, the market had changed a little bit.

One of the biggest problems we did face was the legal changes. The ban of all kinds of TV and radio advertising really was a big challenge for us. It’s just much harder to actually get a new company and new products to the consumer and make the consumer fully aware of this new company and products available without adverts.

It just means a revision to the strategy. These days, we have to be very much focused on driving consumption in outlets. Since we could not rely on a simple TV AD, we had to actually be in the bars and restaurants and develop a physical promotion our products needed, communicating what it is, and what Komari stands for.

We just had to come up with new ways of making the product visible and really have a face and a strong brand that sticks in the minds of the consumer.

The political dynamics in the country since 2018 has also been a challenge for investments in the country that come attracted by the huge potential of both the local and foreign markets. How did the political developments affect you?

I think for us, it did not affect us too much in terms of the actual construction of the factory. We still managed to complete the construction on time. There were some COVID related delays in terms of importing machineries, but in terms of actually building a factory, we didn’t see any major challenges.

On the security side of things, it was once we launched the sales of the product, which obviously is in 2021, that it really became a bit of a challenge. Our sales in 2021 weren’t as high as we expected, simply because people weren’t going out and spending as much as they have been previously. 

We’ve seen a reserved nature from consumers across the beverage industry. From our side, we pride ourselves on our ability to be agile; we can be adaptable to any sudden changes that happen.

We have a very good support from our foreign investors and also our banking partner here in Ethiopia, to ensure that the company can ride out any challenges and be successful in the market. Now we’re seeing that in January and February with a significant increase in sales.

What do you mean by the products are made for Ethiopians by Ethiopians.  What does your production look like? And how does this ideal fit to your ambitions in exporting product to other countries, visiting the region or other parts of the world?

We have a motto of having products made by Ethiopians for Ethiopians and that really starts from the co-creation approach we have, when we engage with consumers on choosing the flavors. In terms of ourselves and our team, currently, we have 130 employees of which 127 are Ethiopian.

In terms of export, we want to target the countries where there is a strong diaspora presence.

In terms of the product itself, it is made up of approximately 99 percent local ingredients. This is something that we’re very big on – supporting the local economy.  The machinery used to make the products is brought from abroad, but the raw materials that go into that product are sourced locally, as much as possible, working very closely with a lot of local suppliers.

That’s how we see the future for Komari and our products. We want to create a much larger company that will exist in Ethiopia for many years. We will get to a point within two years where we double our number of employees.

We may be seen as a small company now, with only 130 employees, but if you look at the wider network of all of the local suppliers we work with indirectly, Komari is creating thousands of jobs for Ethiopians.

You’ve been in the wine industry and drinks market for a while now. And as you know, the market is dominated by beer. Why venture into the drinks industry in light of this context?

We have a strong team, plus the management team has a very good experience in Ethiopia, working for a number of companies in Ethiopia. We also saw other company’s successes in the market.

That covers a range of things. Generally, the beverage market is made up of increasing number of beer companies and they just push the new beer onto the consumer. We avoided that by engaging with the consumers on what they want.

But it is not just about the product. We have a big focus on developing our team and we initially employed a very young team. This team really can be the leaders of Komari in the future. People like myself, will not plan to be with Komari for many years. We have a target of five years to train the next generation of leaders in Ethiopia, and we’ve committed to this approach from day one.

Relatively compared to other beverages, products like this are new to the market, tell us what your product is and how you want to push them in the markets?

Yes, it is a very new product. We’ve created a new product category. Within that category, we’ve created new products as well. Generally, there was probably a lack of awareness of such products in Ethiopia, but these types of products have been very successful in other countries internationally. However, we don’t want to just push products that are successful in other countries into Ethiopia.

That is why with every new flavor, we did a range of testing with the ultimate consumers of the products, to hear their feedbacks on the products we’re producing. If they don’t like the products, obviously we won’t proceed with it. 

I was looking at a research, which the CNN reported that the market for seltzers is on a decline? What kind of future do you see for the seltzer market in Ethiopia, including yours?

We have not seen that internationally and we have our own market research department in Komari. We have data that shows the opposite of a decline. From the research we’ve conducted showed, predominately in America and also in parts of Europe as well, that the hard seltzer market is still very strong.

For Ethiopia, obviously it’s still very new. Many of our consumers won’t be fully aware of such products in other countries such as America. It’s a risk for us to create a new product category and then new products within that category. But we reduced the risks by our agile approach that we can make a range of beverage products.

We still fully believe in our hard seltzer. We think the future for our business is very strong. And we can see that since our sales is increasing every month, they’re not declining.

It has been eight or nine months since the launch of the product. So far, our products have been very well received. Obviously, we plan to continue to develop the brand and branch out into other products at the right time. 

You are the sole hard seltzer manufacturer in the country. Do you expect any competition in the near future or you’ll have that free ride?

We expect competition to come into the market. We think it’s very good that we’re first. Being first movers is often crucial to develop a strong affinity for the products with consumers. We can probably compare it to St. George – they have been around the longest, which partly attributes to their success.

We think our brand is playful, it’s fun, it is disruptive. It’s kind of exciting. So, it is a very different brand than what you would have seen before in Ethiopia. Most of the other industry players focus on having the company name as a key integral part of their branding. We don’t have that, meaning Komari is not in our logo. We have created a different branding.

The aim is to create a tribe of consumers, and so far, it is working and we have a very strong network of followers on social media.

So, we think at the moment that kind of tribal nature to the brand is working. Obviously any new company or existing company could copy the Komari sort of approach. We’re not afraid of that. We believe that the market is more than big enough. Perhaps a new competitor would have to do something a little bit different rather than just copy what Komari has done.

What do you aspire to create from where you are standing right now?

Our vision is to create a much larger company. I would say our team is an integral part of the company, so we train the next generation of Ethiopians to manage the company within five years. We believe we are different, we have a different approach, we have a very different product, and we need to keep developing that kind of creative mindset. 

We want to continually innovate and not rest with the flavors you’re seeing in the market today. We have a strong approach to our corporate social responsibility. And we recognize that we can create thousands of jobs across the country.

Export obviously would be another component of that. So initially, we target bringing in approximately USD three million per year of foreign currency. 

We have a world-class production facility that has a vast production capacity enabling us to supply both the Ethiopian market, as well as foreign markets, and then that can generate significant foreign currency for Ethiopia.

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