07/12/2023

Beverage Alcohol in Africa: A heady mix of complexity and opportunity in 2024

IWSR analyses growth drivers for Africa's alcoholic drinks market

Beneficial demographics and an emerging middle class are creating enticing opportunities for beverage alcohol in Africa, but economic pressures place a fresh emphasis on affordable pricing.

“Alcohol consumption in Africa has been on a consistently upward trend, driven by population growth,” explains Russell Menezes, Research Director – Middle East & Africa at IWSR. “This has led to a substantial expansion of urban areas with younger LDA demographics migrating to big cities, making alcoholic beverages more accessible and boosting demand.

“Recent trends have been predominantly shaped by a young and dynamic middle class, while the proportion of women who consume alcohol is increasing, spurred by socio-economic changes such as improved education and better employment opportunities.”

More affluent consumers in South Africa, Nigeria and Kenya prioritise social status and image, and are increasingly influenced by global trends – which is translating into gradual growth for premium spirits and wines.

Meanwhile, economic pressures have intensified the opportunities for standard-and-below priced products. “As people face financial challenges and uncertainties, there is a growing preference for affordable alcoholic beverages that provide both enjoyment and cost-effectiveness,” says Menezes.

The market’s competitiveness is influenced by the presence of both local and international alcohol producers. Multinational companies have started producing alcohol locally, which is a more cost-effective approach compared to exporting alcoholic beverages from a central location. This approach results in shorter lead times and allows companies to tailor their products to local preferences and tastes. Heineken’s acquisition of Distell and Namibian Breweries in April 2023 is expected to bring additional investment into African markets and a greater focus from the merged company as well.

Spirits: Pricing is key, alongside pockets of opportunity in premium+

Africa’s spirits market is dominated by standard-and-below products, which account for 96% of volumes. Trends are often disparate and highly localised, with pricing strategies vital to success. In Angola, for example, local whiskies are highly popular, while local celebrity endorsement has helped to propel vodka’s momentum in Kenya. Meanwhile, rum recorded double-digit gains in both Nigeria and Ivory Coast in 2022, as spiced rum and Indian café rums gain popularity with young adult women as affordable drinks with a sweet flavour profile.

Premium-plus spirits, meanwhile, command 4% of the region’s total spirits market by volume, and around 20% of its value. South Africa dominates the premium-plus spirits market, followed by Nigeria and Kenya. Combined, they command almost three-quarters of the market volume.

In South Africa, volume share of the premium-plus spirits market is dominated by whisky, which holds over 50% of the market, followed by brandy and gin. Within the whisky category, Irish whiskey, for example, is enjoying sustained growth – seen by emerging middle-class consumers as an affordable alternative to higher-priced Scotch.

South Africa’s brandy market is also premiumising and skewing to Cognac, sales of which grew by 17% in 2022. Cognac is also seeing growth off a smaller base in markets like Ghana and Kenya.

“Cognacs strongly resonate with the image-oriented middle and wealthy classes,” says Menezes. “The Cognac segment in markets like South Africa is driven by continuous investment from leading Cognac houses, and is also witnessing increasing participation amongst women.”

Agave spirits are also experiencing strong growth off a small base, with 2021-22 volume growth of over 60% in both Nigeria and South Africa.

“Tequila’s recent breakthrough into the luxury segment bodes well for the category’s top end in the future, resonating with brand conscious consumers,” says Menezes. “Its involvement in the growing cocktail culture is expected to further boost demand.”

Beer & cider: Lager dominates, cider grows

Affordability is the primary driver of beer, supported by heavy promotions. Beer is well-suited to the hot climate in Africa, and locally brewed products will continue to drive substantial growth, with very limited penetration of international brands.

South Africa, Nigeria and Ethiopia are the region’s largest beer volume markets. In South Africa, beer volumes were up +13% in 2022, although growth is set to moderate, with standard and international brands driving premium lager to the fore.

A number of other countries, including Nigeria, Ethiopia, Cameroon and the DRC, are expected to experience steady growth in lager consumption in the years ahead as well.

In cider, leading market South Africa has witnessed strong consumption gains in nightclubs and post-work drinking occasions; after strong double-digit growth in 2022, the country is expected to record a 2022-27 volume CAGR of +3%.

Other promising cider markets include Zambia, where a 2019 excise duty cut boosted consumption, as well as Mozambique and Kenya.

“Demand for cider has steadily increased over the past two years as consumers are displaying a growing affinity for what they perceive as a more unisex and refreshing alternative to beer,” says Menezes.

Wine: Middle class aspiration

Still wine has experienced significant growth in recent years, successfully tapping into the emerging middle class, particularly in the low-priced and value segments. Key drivers include the penetration of urban and rural areas by major liquor store chains, the increasing participation of female drinkers, and new wine drinkers seeking sweeter options.

Boxed wine is a major trend in South Africa, where premium products are boosting its credibility. Meanwhile, Ivory Coast’s strong francophone heritage helps to fuel demand for low-priced, locally packaged wine, mostly in boxed formats, and Portuguese wine continues to dominate in Angola. Both countries are expected to see growth in the years ahead.

“While Champagne and other sparkling wines remain highly sought-after by aspirational, status-conscious African consumers, there is a strong opportunity in affordable sparkling wine products targeting the continent’s emerging middle class,” says Menezes.

RTDs: Rise of the cans

The RTD segment represents another growing opportunity, driven by factors including affordability, refreshment, convenience and the increasing participation of women in the drinks market. The future is dependent on the growing young LDA population, which is likely to fuel demand.

Packaging is becoming more attractive as formats shift from glass bottles to aluminium cans, with consumers seeking larger pack sizes as they look for better value.

South Africa’s RTD market grew by +14% in 2022, with a forecast CAGR of +3% between 2022 and 2027. The country is seeing increased potential for RTDs with vodka, gin and brandy bases, as well as cocktails and long drinks; meanwhile, other African markets are largely dominated by local FAB brands, which are prized for their affordability.

Planning for 2024

While growth opportunities are nuanced by market, a few key trends are apparent across the region, such as the growing influence of female consumers and their taste profiles, as well as increasing demand of the standard & below segment, and interest in more variety and flavour innovation – especially fruit-based flavours.

Brand owners should look to their marketing campaigns to be more inclusive of female drinkers, breaking down traditional practices and making mixed-gender drinking more visible . A focus on premium+ opportunities will also be key.