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SABMiller Africa
Enterprise Development: A Partnership in Innovation with Smallholder FarmersDriving value and competitive Driving value and competitive advantage through localisation advantage through localisation of our supply chainof our supply chain
AgriBusiness Forum 2011
Johannesburg, October 2011
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
So what’s new ?
New approach to the commercialisation of cassava: new mobile technology set to revolutionise the cassava industry in Africa and add substantially to economic and rural development
”Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers
Novel brewing technology to produce a clear good tasting lager beer using cassava as the main ingredient, allowing access to new beer growth markets
New-style 3-way public-private partnerships (Government-private enterprise-NGO/donor organisation) creating a real ”win-win-win” relationship driving agricultural development in Africa
© SABMiller plc 2005 2
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Presentation Outline
SABMiller introduction
Business imperative for enterprise development
The cassava story
The Mocambique cassava pilot project
Game changing innovations min)
Total: 20 min
© SABMiller plc 2005 3
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011© SABMiller plc 2005 4
Managed operations in 17 countriesManaged operations in 17 countries Castel operations in 22 countriesCastel operations in 22 countries SABMiller and CastelSABMiller and Castel
– Coca-Cola bottlers in 20 of their Coca-Cola bottlers in 20 of their 36 countries36 countries
Africa volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL paAfrica volumes (inc associates): 35.7m HL pa
SABMiller in Africa (excl South Africa)Operations in 39 of 52 African countries
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Cost Breakdown of a Typical Bottle of Beer
© SABMiller plc 2005 5© SABMiller plc 2005
Crowns: 5 %Water: 2 %Labels: 8 %
Malt: 46 %
Hops: 16 %
Adjuncts: 10 %
Cost Breakdown
On average 77% of
all inputs by value
are imported
Glass: 13 % (RB)
43% 0% 51%
80%
100%
55 %
Imported % (av)
96%
Our target is more
than 55 % local by
2014
77 % of cost of typical bottle of beer is imported
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
The Enterprise Development initiative rests on 3 strategic business pillars
© SABMiller plc 2005 6
Taking costs out through collapsing our supply chain
Drive new growth markets in the affordability sector
Enhance our license to trade
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011© SABMiller plc 2005 7
Substantial growth potentialOutside of South Africa, Beer consumption per capita is low
00
1010
2020
3030
4040
5050
6060
Cam
ero
on
Litr
es p
/cap
itaLi
tres
p/c
apita
950m950m
South Africa
Namibia
Botswana
Zim
bab
we
An
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laT
un
isia
Ken
yaC
ote
d’I
voir
e
Zam
bia
Ug
and
a
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zan
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Mo
zam
biq
ue
Nig
eria
Gh
ana
Mad
agas
car
DR
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rocc
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Eth
iop
ia
Mal
awi
Alg
eria
Eg
ypt
Nig
er
So
mal
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Su
danMal
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Gu
inea
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egal
Ch
ad
PopulationPopulation
Source: Plato, November 2007 and August 2010Source: Plato, November 2007 and August 2010
Litres p/capita consumptionLitres p/capita consumptionLitres p/capita consumptionLitres p/capita consumption
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011© SABMiller plc 2005 8
~80 % of raw materials historically ~80 % of raw materials historically importedimported
Driving costs savings through raw Driving costs savings through raw material substitutionmaterial substitution
Government support and new Government support and new excise regimesexcise regimes
Licence to TradeLocalising our supply chain
Barley % Self SufficiencyBarley % Self SufficiencyBarley % Self SufficiencyBarley % Self Sufficiency
From 18,000 From 18,000 to 45,000 to 45,000 farmers farmers
within the within the next 2 yearsnext 2 years
From 18,000 From 18,000 to 45,000 to 45,000 farmers farmers
within the within the next 2 yearsnext 2 years
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Driving New Growth Markets in the Affordability SectorOur target market: informal liquor
© SABMiller plc 2005 9
Typical cost p/serveTypical cost p/serve
$0.50 – 0.75$0.50 – 0.75
$0.85$0.85
$1.00$1.00
$1.20 +$1.20 +
$1.50 +$1.50 +
$0.15 - 0.30$0.15 - 0.30
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
What is cassava ?
3 min)
Total: 20 min
© SABMiller plc 2005 10
■ Root crop with ~78 - 85% starch on dry basis (21 - 25% on wet basis)
■ Root stable in the ground, but starts to degrade as soon as it is harvested, challenging handling logistics
■ Approx 9 – 12 months to maturity, but can then be harvested at any time (not seasonal)
■ Needs ambient temperatures of >30 ° C, ideal for warmer countries (north of RSA / Namibia). Africa in top 3 global producers
■ 3rd largest source of carbohydrates / starch for human food in the world . In Africa generally a subsistence crop.
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
The importance of cassava to Africans is epitomised in the Ewe name for the plant, Agble, meaning "there is life”
© SABMiller plc 2005 11© SABMiller plc 2005
Cassava accounts for a daily calorie intake of 30% in Ghana and is grown by nearly every farming family
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Global Distribution of Cassava
© SABMiller plc 2005 12
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Using Cassava to Drive Growth in the Affordable Sector“Aligned to African agricultural agendas and Government priorities …”
© SABMiller plc 2005 13
Great “yield headspace”
- Subsistence farming yields average between 2 and 10 MT/Ha- Average commercial yields average between 25 and 35 MT/Ha- New cultivars are seeing yields of 60 to 80 MT/Ha lading to major reductions in production costs- Potential starch yield per ha typically 2-3 x average maize starch yield with lower inputs and lower risk
Can control the value chain: cost of product + “fair” return model vs. market pricing
Main subsistence crop in sub-Saharan Africa – key to smallholder farming development on the continent.
Government priority in terms of agricultural and rural development: top of government’s agenda
Commercialization opportunities and synergies following from that
Drive competitive advantage: supply chain and cassava technological “know-how”
Not in the mainstream food chain such as sugar and maize: commercialisation of cassava will aid food security
The perfect sustainable development crop
New brewing technology has resulted in an excellent tasting clear lager cassava beer
Cassava is a “known” raw material on the continent: largest crop grown, but least commercialised. Features in country MDG’s
10 great reasons why ...
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Relative Extract CostsCassava very competitive with other processed adjuncts
© SABMiller plc 2005 14
Cost of Producing Starch from Cassava*
* 20 t per ha yield
Just under 60 % of cassava fair price influenced by cost of growing
• Remaining 40 % processing cost
Potential cassava starch yield 2-3 x equivalent maize yield with lower input costs and risks Cassava derived starch very competitive with other adjunct derivatives – approx 15-20 % cheaper
than the nearest competitors - further opportunities driven by yield productivity and ownership of the value chain.
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
CDM Cassava Beer Project (Brand “X”)
Economics driven by lower material costs and new excise regime
© SABMiller plc 2005 15
Based on success in other Sub-Saharan African countries, SABMiller, the parent Company of
Cervejas de Mocambique (CDM), is engaged in a local sourcing initiative to stimulate agriculture
in Mozambique.
The project utilises recent breakthroughs in brewing techniques to enable SABMiller to produce
clear beer replacing traditionally imported malted barley with locally grown cassava.
The project is based on reducing the price of the beer produced from locally grown cassava to
ensure that the product is affordable to a much wider section of society thereby creating a
product with sufficient demand to commercialise the underlying crops.
CDM is investing in the development of a new commercial cassava industry in the country, in
order to produce and market a new range of quality affordable lager beer products in a
sustainable and financially viable manner.
Cassava is not generally used in lager beer brewing, but a prototype lager beer (Brand ‘X’) has
been developed as a result of our own in-house product development program, in which it
substitutes in part for imported barley malt to produce a quality product. This will be the first
commercially produced cassava based lager beer in our African portfolio, and the learning’s will
be used to roll out the product to our other African businesses.
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
CDM Cassava Beer Project (Brand “X”)
Economics driven by lower material costs and new excise regime
© SABMiller plc 2005 16
The Mocambique Government has indicated strong support for the initiative by levelling the
playing field and approving a “favourable” excise regime for the new category at the 10 % ad
valorem rate (25 % of mainstream beer excise @ 40 %) .
With this lower-than-beer excise rate the intention is to produce a more affordable clear lager in
Moçambique from locally grown and processed cassava and is expected to retail at about 70 %
of the price of a “mainstream” beer. At this price level it will appeal to consumers currently
consuming various forms of “affordable alcohol” (including “cheap” liquor, illegal - and often non-
excised - spirits and dubious quality home-brews), and will constitute an aspirational purchase.
As such the brand is expected to generate in excess of 660 000 hl pa of new beer volumes over
the next 5 years (30 % of our brand portfolio).
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Some dimensions of the project
Will create a demand for over 45 000 tpa cassava root
Will generate over 1700 new farming jobs
New income > $ 1125 per farmer per annum min)
Total: 20 min
© SABMiller plc 2005 17
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Some challenges in farming cassava
© SABMiller plc 2005 18
■ Cyanide Content Concentrated in skin – removed on peeling No traces found in cassava flour or brewing process SABMiller MD has done the taste test …….. and lived !
■ Cassava Process Cassava needs to be processed as soon as it is harvested –
logistics challenge Purification / concentration / drying process relatively
capital & energy intensive Simplified mobile process critical to ensuring economic
viability Possibility of maltose manufacture
■ Cassava Growing Challenge will be to convert subsistence farmers to cash crop
farmers and ensure reliable and sustainable supply chain Introduction of disease resistant, higher yielding cultivars
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Conventional cassava starch processing plant
© SABMiller plc 2005 19
Rotary Dry Peeler Rotary Washing PeelerCassava Root intake Chopping and Rasping Conical sieve separators Crude Starch tank
Hydro Cyclone
Concentrator bankFine sieve separatorsDeaeration
Final washing hydro cyclone system
Fine concentration recovery
Pure Starch Milk Tank
Rotary Vacuum Filter
Flash Dryer
Starch injection
Air Intake
Cyclone bank Air Cooling & Blower
Starch storage silo
Discharge bag or bulk
165 degrees C
250tonne/day
60/65tonne/day650kg/m3
Blower
Steam
Chopper
Hopper
Rasping
Pulp waste
CASSAVA PROCESSING FLOW DIAGRAM
Utility requirementsSteam: 4.5t/hr boilerElectrics: 1.6 MVA
Water: 12m3/hr fresh water
Building size64m x 24m
M/S S/S
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Supply Partnership with DADTCO NVOutsourcing to third parties of non core activities
© SABMiller plc 2005 20
Supply “partnership” has been formed between CDM and DADTCO
Mandioca (Shareholders: DADTCO NV and Mocambican partner
(still to be selected – preferred Farmer Co-op))
• Scope of supply co will be:
• Supply and implement cassava processing technology
• Manage the farming programme: farming model based on
“hub and spoke” and comprising commercial farmers
• Cassava processing
• Smallholder farmer development
• Cassava development
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
DADTCO AMPU cassava processing unit(Autonomous Mobile Processing Unit)
© SABMiller plc 2005 21
Africa Seminar | March 2011© SABMiller plc 2011 2222SABM Africa: MD’s Forum Botswana 2011:
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Concept of the AMPU Using mobility to overcome obstacles of high water content and perishability
© SABMiller plc 2005 23
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Farming Model: “Hub & Spoke” model combining commercial and smallholder farmers in a symbiotic relationship
© SABMiller plc 2005 24
2 or 3 commercial farmers in the Nampula area (radius max 100 km from Nampula) with a smallholder development
Role of the commercial farmers will be to:
Manage the cassava supply from the smallholder units
Develop the agri skills of the smallholder farmer
Provide on the ground advice to the smallholder farmers and overview the cassava production at critical stages
Assist with inputs as necessary
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
“Hub & Spoke” Farming Model Using commercial farmers to drive smallholder development
© SABMiller plc 2005 25
(approx 150)
(approx 150)
(approx 150)
Cassava
Cassava Root
Cassava Root
Cassava
Root
Cassava
Cassava
Cassava Processing Unit
Cassava Cake
CDM – DADTCO Cassava Processing AMPU
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
Establishing a “Win – Win -Win” Three-way Public-Private Partnership
© SABMiller plc 2005 26
Benefits to SABMiller / CDM / Dadtco
Creates new employment to farmers and service providers – +1700 farmers + 30 000 indirect
New employment leads to growth in the economy through the “multiplier” effect
Knowledge / skills transfer
Additional excise receipts: $ 2.2 m and foreign Exchange savings: $ 1.4 m
Commercialization of cassava industry may lead to other agricultural commercialization (e.g. wood)
Contributes to Government Strategy:
- Food security- Millennium Development Goals - Beira corridor incentive - Rural development
- Gender equality - Water conservation
- Infrastructure development- Agricultural Productivity + R&D
- Health
Opportunity to access “affordable beverage” market estimated to be at least equal in size to the formal beer market – game changing
New profit pool / new markets
Additional incremental contribution of new beer volumes
Sets up competitor barriers to entry
Brand “X” model for the rest of Africa
Protects / enhances our license to trade
Access to “best-in-class” technology
Decreased risk
Replicable in the rest of Africa
Benefits to Mocambique Government
SABMiller (CDM)
DADTCO NV3rd Party
Service ProviderIFDC
Donor Funding
Country Government (Mocambique)
Public-Private Partnership
A successful partnership with Government will stand out as an excellent example of a value-adding public-private partnership adding to positive economic growth
Revenue Management – An approach for SABMiller Africa AgriBusiness Forum October: 2011
So where is the innovation ?
© SABMiller plc 2005 27
New approach to the commercialisation of cassava: distributed raw cassava processing systems with centralised secondary processing.
– Combines advantages of mobility and simplicity with economies of scale
New mobile containerised cassava processing technology: only requires a water source
„Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers
Novel brewing technology allowing access to new beer markets
New-style 3-way public-private partnership creating a real ”win-win-win” relationship
SABMiller AfricaWinning in Africa
Questions
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