Beverage Industry in Ghana: Kasapreko, A Leading Beverage Producing Company

Interview with Richard Adjei, Managing Director of Kasapreko

We saw you in 2015 and we are now three years down the line. First, let’s talk about the beverage sector itself. Has there been any sort of modification in the sector, new entrants, or new strategic entities like big companies coming in? What has been happening?

Certainly, in the beverage industry, there have been changes over the past three or four years. We have seen one of the largest beer companies in the world, AB InBev, enter the market. They have recently bought SABMiller and are now in Ghana. Basically, the number one beer company bought out the number two beer company. They are quite huge throughout the world. In Ghana, Diageo is growing, especially in the premium spirits sector. Other international companies, like Coca Cola and Pepsi, have entered the market. Over the past few years, we have also seen new entrants into the bitters industry, such as Joy Industries and Angel Industries, which are coming in very strongly. Local companies that mainly used to be involved with herbal products, such as soaps and others, have now changed their model from an herbal product to mainly a bitters category. Soft drinks and water are also booming. Twellium has entered the soft drinks and water business. Bel Aqua were already in the water sector, but now they are also doing soft drinks. Multi Pac is currently growing in soft drinks and the energy drinks sector. Special Ice used to do only water, but is now in soft drinks as well. Kasapreko is also changing to become a total beverage company. Now, Kasapreko is truly the only total beverage company in Ghana. We are bottling spirits, wine, soft drinks, water, and we just started ciders through our partnership with Distell in South Africa.

You have become a global, total beverage company. What are your key competitive advantages?

Our main goal is to have our flagship product, Alomo Bitters, be present in most African countries. That is what we continue to push for.

One main key competitive advantage is our skill. We are able to produce in large volume, so we are able to offer quite affordable prices in the market. Secondly, for example, when you are doing an event such as a wedding or an engagement and Kasapreko has come onboard to be your beverage supplier, you do not need to go anywhere else. You have our water, soft drinks, spirits, cocktails, ciders, and we come in and take full control of the event. We are doing the same with shops. We go in and we are able to sell different categories of products. Kasapreko is now the number one exporter of beverages in Ghana which is also a strong competitive advantage in the market. We are able to bring in foreign currency to the country as well as hedge our foreign currency imports on our side.

How has your exporting progressed?

Over the past three years, we have progressed, and we have now been able to register our flagship product, Alomo Bitters, in the US market. We are the only company in Ghana that has a product that has been registered by the US Food and Drugs Board, which is a big step for us, and we have started selling into that market officially. There are other markets that are also growing, such as Liberia, Ivory Coast, Togo, Burkina, Nigeria, and South Africa. In exports, we are the number one exporter of local beverages in Ghana.

What is your strategy for exporting? Do you want to be strong in each sector or do you want to have a foothold everywhere?

Our main goal is to have our flagship product, Alomo Bitters, be present in most African countries. That is what we continue to push for. We want Alomo Bitters to be a story for many Ghanaians and we want Alomo Bitters to be a story that for any foreigner who comes to Ghana, if they want to drink a Ghanaian beverage, the first recommendation should be Alomo Bitters.

You are focusing on your main product for the export market. For this product, what sort of help do you need? Do you need distributors? Are you looking for partnerships? Do you only produce here and then export? Are you planning to produce somewhere else?

Currently, we produce all our products here in Accra and export outside. So, certainly, when we are exporting to other countries, our main aim is to find distributors in those countries. We are also open to partners that are already strong in new markets that would partner with us and take our product, possibly exclusively, in their markets. Over the past few years we have discussed some co-packing ideas with a few companies and we are still exploring such opportunities, and if they come up, we will be very happy to produce in those countries.

And that will be mainly them asking you?

Yes, mainly.

And you only export your main product?

There are a few other products that we export, but our main brand is Alomo Bitters.

For the Ghanaian market, you have a different strategy. You sell your main product, but you also sell a lot of brands. What do you want to develop the most? What is the main focus now for the Ghanaian market?

For the Ghanaian market, we are in spirits, wine, water, and soft drinks. Now, there is a lot of demand for soft drinks and water, so we are investing more to expand that business. The spirits business is also growing, but at a much slower pace because of the competition that has come in. However, in Ghana, our main focus and our strategy is to be a total beverage company, so we want to grow in every sector where we are present. When we enter a sector, we expect to be one of the top three leaders within four years and if we cannot achieve that, we will probably leave that sector.

Do you want to attract international brands for you to produce here?

Kasapreko is the only local beverage company that has been able to attain an ISO certification in Ghana, which we attained last year in December. We are now ISO 22000 certified. We have a lot of capacity, especially on the spirits side, and we are in talks with three or four different companies to contract bottle for them. We recently signed a deal with Distell South Africa to contract bottle their brands, Savanna and Hunters, and at the same time, distribute some of their products, such as Knights Whisky and 4th Street wine. Currently, we are in talks with two international soft drink companies that are looking to bottle with us.

What percentage does your exports represent?

We are now doing about 27% in exports.

Do you want to see that increase?

We hope to push that to 40% in the next three years.

Are you looking for investments or partnerships in technology or other sectors?

In technology, we are not specifically looking for any partnerships. But, we are very happy to talk to any partner that has a good strategy or idea in technology that benefits our way of production, distribution, and controlling finances. We currently use SAP for our systems here and it is working well for us.

On the financial side, you work with the local banks. The rates are now going down. Are you in talks with international investors or financial entities?

The majority of our investment has been through the local banks. However, over the past three to four years, when we are buying equipment from Italy or Germany for example, the suppliers are able to link us up with some funding companies that are able to support us internationally with far better rates than those in Ghana. We hope that the government will keep supporting the industry and keep bringing the rates down. Over the past two years, the rate has come down from 30% to around 18% currently.

What are the challenges that you face?

There are no major challenges, but with the new government in place, there are new laws, rules, and regulations that we must abide by. There are regulations that sometimes require a $200,000 or $500,000 investment, such as tax stamps. The government passed a law requiring beverage companies to put a stamp on each and every single bottle that we produce, which has caused us to invest almost $200,000 into equipment in order to be able to meet this regulation. As one of the biggest beverage companies in Ghana, Kasapreko must take that step in order for the smaller companies to follow.

What is your opinion of the regulations and the global action of the government towards the private sector?

In general, the government has a good plan for the private sector. They genuinely feel that the policies they are putting into place will help the private sector. The some of our power cost has come down over the past year, which we are very happy about. Investment and the cost of funding has come down in the banks in Ghana. The government has put into place the “one district, one factory” policy, which is very good for manufacturing. Manufacturers, in general, as well as investors, should be able to tap into that idea. For example, we are trying to put up a new factory in Kumasi in the Ashanti region. We hope that the government can take onboard some of these new projects as part of the “one district, one factory” agenda. There is certainly more that can be done. There are a few taxes that have been implemented that are negative towards the private sector, such as the policy change in VAT which is increasing our costs by 5%. We now have to pass some of these costs on to the consumers. For the tax stamp, we now have to buy the stamps, which is increasing costs as well. The government implements some policies that help us but also some policies that are not as beneficial for us. However, the tax stamp is there for the government to be able to monitor their taxes as far as the excise taxes that they are supposed to receive. In general, it is a good policy, but we wish the stamps were free. On the whole, the government is doing quite well to support private industry.

What is important to you as a company?

Kasapreko is one of the major investors in the beverage industry in Ghana. Over the past few years, most governments have mainly focused on foreign direct investors that are coming in, so most incentives are aimed towards them. However, the government should also turn their attention to local investors and try to push some of those incentives and tax waivers to them as well.

What is your vision? What do you want Kasapreko to be in the medium term, two to three years’ time, if everything goes well and according to plan?

We want to be in the top four out of all the beverage companies. By 2020, we want to be in the top two. But, combining our water, beer, and soft drinks together, in terms of revenue, our main goal is to be the number one company in the beverage industry.

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