Beer consumption in Africa is growing fast and many of the world’s major brewery groups are increasing their activities in Africa. The potential in this emerging market is great, but there are many things to consider when it comes to building breweries in a developing market.

Designing and building a brewery right from the start, takes investment in the preparation and design. When the project is designed correctly from the start, there is a significant saving to be made, not only in the project procurement costs but also in the operating cost of the brewery. The following lists some of the important decisions to be made when creating the vision – and the plan – for your future brewery.

1. Consider the business perspective first
Many major companies are in investment mode particularly in African beer markets, but the risk rates (the Internal Rate of Return) requirements in African countries are assessed as relatively high by the accountants due to risks associated with payment, political instability, and economic variation resulting in fluctuations in beer demand.

Therefore, the cost of capital and the expected return rates make justification of building a new plant a rigorous business. It is initially worth considering if your existing network could be reconfigured and improved to enable further business growth without expensive capital investments. Utilisation and efficiencies in African breweries outside South Africa still generally show room for improvement, not yet realising their full potential to increase output.

2. Capital cost drivers from process design
Size is important, but bigger means more expensive and not necessarily better. Large plants have large footprints, large maintenance and cleaning overheads, and higher environmental impacts. They also have higher civil capital costs and hence higher depreciation charges. Reducing the footprint, maximising flow and output towards continuous production principles will reduce energy loads and costs.

The cost of stock holding in raw materials, or work in progress (beer storage) adds cost to the process, requiring extra holding capacity (Capex), using valuable energy in refrigeration, and ties up working capital. Designing the process and a brewery with reduced cycle times will reduce Capex and working capital.

3. People and technology
There is an inextricable link between the technology chosen for the brewery and the selection and training of the people required to operate, maintain, manage and support it. In Africa, the economics, risks and organisation dynamics need to be carefully considered and balanced. If you choose older design or 2nd hand equipment, you will need more maintenance staff and a higher operational manning level.

If a highly automated plant is chosen, then new people skills will be required that might not be readily available in the market. This will call for the hiring of people who can handle the specific training for the equipment, along with an ongoing training and development program for those operators.

4. Which processes and raw materials do you choose?
The availability of raw materials for brewing in Africa is under pressure from population growth, which globally has doubled to 6.8 bn in the last 50 years.

Corn is now 95% higher in price (March 2011) than it was a year ago, and African food supplies are struggling to keep pace with local population requirements. Elsewhere, the use of crops to provide material for bio-fuels means that agricultural land and water availability will continue to be an issue in the supply of the basic materials for making beer.

The importance of local raw materials and cost-effective processes to handle them mean that bespoke solutions are required for process design in African breweries.

Economics will drive the decision-making on local materials, helped by the investments in raw material varieties and farming improvements.

5. Environmental considerations
The obvious solution to building an environmentally friendly brewery is to reduce all forms of waste, and increase the proportion of energy used from alternative, renewable energy sources. In consideration of power sources, African breweries should consider the sun as the most plentiful renewable available energy resource on the continent.

Water shortages in Africa mean that the brewing companies have a responsibility in finding and distributing water supplies, not just for the brewery but in the sourcing of raw materials; (more than 20 times more water is required in growing raw materials than is required for the brewing process), in providing water treatment and waste water treatment plants to make the water potable, through nutritional soft drinks, beers and bottled water.

6. Location
It is estimated that up to about 55% of a brewery’s capital costs are heavily influenced by the location, with about 38-45% being equipment-related.

In many African countries, proximity to expert support cannot be taken for granted and needs to be assessed when deciding the total technology package of plant, control and supplier maintenance.

Investing in the growing African beer markets will continue to be an attractive opportunity for time to come, as economies, consumption rates and tastes develop.

The quality of investment must be inclusive in terms of modern process choices, raw material sourcing, supporting infrastructure requirements, roads, water supplies, waste water and supporting local communities. This means working closely with governments often at national level, and NGOs, sometimes internationally, to secure agreements and investment guarantees. This means by definition that the brewery is a long term investment.