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Date: November, 2009

Prospectus
PROSPECTUS No. 01/01

HABESHA BREWERIES SHARE COMPANY

Prospectus for the Offering of 250,000 Registered Ordinary Shares at par value of Birr 1,000 each so as to increase the capital of the company

CONFIDENTIAL: FOR INTENDED RECIPIENT ONLY

Habesha Breweries S. Co.

Table of Content
Statement by the Board of Directors and Main Promoter Summarized Information on Sales of Shares Statutory Information Establishment Sales of Share For foreign investors Profit Allocation Supplementary Information Beer Consumption in Ethiopia Strength and opportunities of Habesha Breweries S. Co. Decisive Assumptions Financial Considerations Risk Factors under consideration 2 4 7 7 11 14 15 15 21 22 23 24 27

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Statement by the Board of Directors and Main Promoter
Beer is a universal product. Almost all societies in the world produce beer in one form or another, whether such is at the industrial or the home level. Its benefit, although scientifically analyzed and explained only recently, had nonetheless been understood since thousands of years ago. How else can one explain that beer, the worlds oldest alcoholic beverage, is even today, globally, the most widely consumed drink after water and tea? Its now an established fact that, taken in moderation & that is the key word --- in mo-de-ra-tion--- beer can furnish the benefits of its salubrious contents. According to a 1999 Texas Southern Medical Center research, beer is fat-free, cholesterol-free and has a relaxing effect. It reduces stress and helps one sleep better. For the elderly, it helps promote blood vessel dilation, urination and sleep. It contains polyphones (antioxidants) in similar amounts as red wine. One must equally note that excess drinking of beer has been associated to a number of health problems which include blood pressure and liver disease. In Ethiopia, beer has been there in various home brewed forms. Its industrial production was a phenomenon that came about early during the last century. It had a modest growth rate until recently when due to urbanization and population growth, demand for it took an upsurge and supply could not cope therewith; hence price escalation and critical shortage. Ethiopias beer production in 2008/9 was about 2.9 million H.L or (290,000,000 liters). The annual consumption per head is 4 Lt. This figure compares as follows with that of African countries: Kenya -------------------------- 22 Lt/head Cameron ---------------------- 25 Lt/head Nigeria ------------------------ 53 Lt/head South Africa ----------------- 58 Lt/head
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Last three years data of the existing breweries, shows that the demand increases on an average of 11%. Current Beer production capacity is 3.35 million hectoliter It is easy to note from the above figures that the increasing demand cannot be satiate even at the level of production forecast with the expansion. The expertise, the labor and the ingredients for making beer are either readily available or can be made available domestically in a short span of time. About the only foreign element is the machinery and spare parts. Filling the gap not only avails beer to the thirsty market but carries with it other benefits of national concern: Enhance the production of and provide the market for, the ingredients for beer making; Save the foreign exchange that would otherwise go for importation of beer and raw materials like malt. Provide training for people involved in the field. Create an employment opportunity Earns commensurate returns on investment. Earns attractive dividend per share for the share holders. Hence, this is our call to all prospective shareholders to join hands in realizing this project that would bring a sizeable return on investment for the shareholders and contribute in the development effort of the country.

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Habesha Breweries S. Co. Summarized Information on Sale of Shares


(For subscribers in North America)

Habesha Breweries S. Co. Offers 250,000 registered ordinary shares for public subscription so as to increase its capital to birr 250,200,000
PAR VALUE PER SHARE OFFERING PRICE PER SHARE BIRR 1,000.00 BIRR 1,000.00

SERVICE CHARGE PER SHARE FOR SUBSCRIBERS TERMS OF PAYMENT -

BIRR 60.00 (6%)* 40% payment plus the service charge on subscription 20% by ========= June 8, 2010 20% by ========= Sept 5, 2010 20% by ========= Sept 5, 2012 15 shares (Birr 15000) 122,500 shares (Birr 122,500,000) October 18, 2009 April 8, 2010 Habesha Capital Services Plc. ADDRESS Yeka sub-City, Kebele 11/12, House No. new, Rebecca bldg, 6th floor Room no. 603/604 A.A, Tel: 0118602500

MINIMUM INVESTMENT MAXIMUM INVESTMENT

OFFER OPENS: OFFER CLOSES: MAIN PROMOTER:

AGENT IN NORTH AMERICA:

Hexa United Business & Investment LLC 13036 Jingle Lane, Silver Spring, MD 20906 Toll free: 1 800 575 2810

www.hexaunited.com 4

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NB Please note that the service charge paid by the subscriber is not refundable under any circumstance. The service charge would be 5% (Br 50) per share for those subscribers who will subscribe for shares on or before January 8, 2010. There is also a special discount applicable only for subscribers who would subscribe on the 1st week of the opening of the share offer. Hence the server charge would be 4% (Br 40) per share. Main Promoter: Habesha Capital Services Ltd. Co. Habesha Capital Services Ltd. Co. is staffed and managed by competent professional team who possess long experience in the management of sales of shares, consultancy services, marketing, planning feasible investment projects, project management, engineering and operation of local and foreign trade.

Advisors of the Company


1. Ato Wubishet Workalemahu: General Manager of Anbessa advertisement and Public Relations Company. Formerly,

President of Addis Ababa and Ethiopia Chamber of Commerce. 2. Ato Yilma Tiruneh: Formerly: (1) General Manager of Ambo Mineral Water Factory, (2) General Manager of factories under Textile and Food Corporations within the former Ministry of Industry. 3. Ato Sime Kulala: Formerly, General Manager of MEWIT; founder and board member of Nib International Bank S.C and Nib Insurance S.C. 4. Ato Mekonen Abebe: Formerly, Executive Officer Marketing, in the Ethiopian Air Lines. 5. Ato Tesfaye Bedada: Formerly: (1) Master brewer and later General Manager of Bedele Brewery; (2) Quality controller,

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chemist and Master brewer of Meta Abo Brewery; brewer and later Head of Production Department of Harar Brewery. 6. Ato Yilma W/Senbet: Formerly: (1) Master brewer and later Head of Production Department in Meta Abo and Melotti Breweries, (2) General Manager of Assela Malt Factory. 7. Ato Eskinder Desta: Formerly, Manager of Marubeni

Corporation A.A Liaison Office; currently Board Director of Habesha Cement S.C and Zemen Bank S.Co. 8. Ato Mersha Alemu: Director of Administration and Finance at HAGBES; formerly Associate Promoter of Habesha Cement S.Co. 9. Ato Ahmed Teyib: Formerly: (1) Manager of Natural Gums Production and Marketing Enterprise, (2) Sales Manager of UD, Nyala Motors Company. 10. Ato Bisrat Woldu: General Manager of Bahir Dar Ghion Hotel. 11. Ato Mekonen Demisse: Formerly, Head of Contract Administration in the Ethiopian Air Lines; formerly Civil Affairs Officer of the Rehabilitation Program in Yugoslavia, under the United Nations. 12. W/ro Getenesh H/Mariam:- Managing Director of General Insurance Brokers. Former staff of Ethiopian Insurance Company, worked as head of various operational duties. 13. Ato Bezzaworq Shimellash:- Law Consultant and Attorney, he has worked as Legal Advisor of Export Trade Ministry, and served as High Court Judge and Principal Public Prosecutor of Special Court. 14. Ato Mebratu Lemma: - Formerly: (1) Deputy Commissioner Ethiopian Tourism and Hotel Commission. (2) Addis glass Factory Manager, (3) St. George brewery and Meta Brewery
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General Manager, (4) General Manager of Walta Ethiopia S. Co., (5) Board director at NIB International Bank S. Co. and currently Board director of NIB Insurance S. Co.

Auditor
To be appointed by the General Meeting of Shareholders/ Subscribers.

Bankers
United Bank S.Co. Misrak Branch; Commercial Bank of Ethiopia, Addis Ababa Branch; Dashen Bank S. Co. 22 area Branch; Wegagen Bank S. Co. Bole Medhanialem Branch; Bank of Abyssinia S. Co. Olympia Branch; Awash International Bank S. Co. Legehar Branch; Nib International Bank S. Co. Balcha Abanefsso Branch; Zemen Bank S. Co. Main Branch; Buna International Bank S. Co. 22 mazoria branch

Statutory Information
Establishment
Habesha Breweries is a Share Company established as per the Commercial Code of Ethiopia (1960). It is registered with the Ministry of Trade and Industry on 02/10/09 E.C under registration number 04/2/25619/02 proclamation No. 67/1989. Name of the Company - Habesha Breweries S. Co. The Head Office of the Company is located at Kirkos Sub-City, Kebele 02, House No. 676/05, Addis Ababa, Ethiopia. Objectives, Strategies and Goals The business objectives of the Company as stipulated in Article 4 of the Memorandum of Association of the company include the following:
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To produce, sell and distribute bottled beer and draft beer; To produce, sell and distribute non alcoholic beer; To produce bottles and crate of beer; To import and distribute raw materials and spare parts needed for the production of beer;

Existing Capital
The Company is established with capital of Birr 200,000 which is fully paid in cash. The capital is divided into 200 shares whose par value is Birr 1000.

Organization and Management


The Company will ensure that it has the necessary staff (in terms of both skills and qualifications) to perform its tasks when it begins operations.

Organization
The highest decision-making body of the Company will be the General Meeting of Shareholders. This would normally meet once a year (Annual General Meeting) to elect the Directors and fix their remuneration, approve the reports of the Board and the External Auditor, and decide on the appropriation of the net profits of the Company. However, a General Meeting of Shareholders can be held more often, according to the Company Statutes, in terms of an Extraordinary General Meeting. The Board of Directors, consisting of 5 members, each elected for a period of 3 years, will be the policy organ of the Company. It is responsible for policy matters, approval and follow-up of annual programs and budgets, and the appointment of the General Manager of the Company. The first five Directors are appointed by the Meeting of Subscribers (in accordance with Articles 320 and 321 of the Commercial Code). As stated in the Memorandum of Association of
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the Company the number of the directors can be increased to 12 members.

Management
The Company has set up an office, headed by the General Manager of the Company and its main promoter Habesha Capital Services Plc.

Auditors
To be appointed by the General Meeting of Shareholders/ Subscribers.

Financial
Present Status The Company is offering 250,000 shares at par value of Birr 1000 to increase its capital from Birr 200,000 to 250,200,000. The offer includes a 6% (six percent) service chare (premium) which is accounted separately from the equity investment amount. This is to cover all organizational and expenses of the capital increase process. All subscribers should note that the service charge (premium) paid by them is not refundable under any circumstance. Bank and Other Loans There are no bank loans at present and the Company intends to raise finance primarily through equity finance in terms of the current offer and through investors deposits. Loans from banks to full fill the equity portion. Dividend Policy Each shareholder is entitled to a dividend on the net profit of the Company. The General Meeting of Shareholders will declare the amount of dividend to be paid.

Summary of Memorandum of Association


The Memorandum of Association of the Company contains 12 Articles. These deals with the founding of the Company, including the
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Founding Shareholders and the business objectives of the Company, which includes To produce, sell and distribute bottled beer and draft beer; To produce, sell and distribute non alcoholic beer; To produce bottles and crate of beer; To import and distribute raw materials and spare parts needed for the production of beer; The share to be issued so as to increase the capital of the Company is 250,000 shares, and shares may only be issued registered in the name of the holder (no bearer shares). The Memorandum outlines the organs of the Company and their respective powers, as well as details of the powers of the General Manager, and clauses on Auditors, effective date, etc. Summary of the Articles of Association The Articles of Association of the Company contain 60 Articles. These deals with various procedural and administrative matters such as calling of general meeting, quorum, and proxy as well as majority requirements at General Meetings, powers and duties of the Board and General Manager, keeping accounts and financial reporting of the Company, withdrawal of membership and death of a member. The relevant Articles of Association also stipulates that there is only one class of shares and the rights attached to such shares as well as the rights and liabilities of shareholders.

Documents Available for Inspection


The Memorandum of Association of the Company The Articles of Association Company The principal registration certificate of the Company The TIN of the Company

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Sale of Shares
Description of Shares 250,000 ordinary registered shares are offered for sale. The par value of one share Premium on one share be Birr 50 (5%)/share. Terms of Payment 1st Payment 2nd Payment 3rd payment 40% upon subscription plus the entire service charge (premium) of 6% for the shares subscribed 20% by June 7/2010 20% by September 5/2011 Birr 1,000.00 Birr 60.00 (6%)

For those who subscribe up to January 8, 2010, the premium shall

The remainder 20% by September 5/2012 (This balance of payment may be covered by the first dividend as the Brewery begins operation) Minimum Investment 15 shares (Birr 15,000 plus premium Birr 900.00 [6%]) Maximum Investment 122,500 shares (Br. 129,850,000) Offer Opening Date Offer Closing Date October 19, 2009 April 8, 2010

Subscribers who subscribe up to April 8, 2010 shall benefit from the special benefit allocation to founders. The capital from the shares shall be deposited in a blocked account and shall be operated only upon the resolution of the General Assembly of Shareholders. The premium shall be deposited in a Current Account opened in the name of Habesha Breweries S. Co. The fund shall be used for the various pre-operational activities and it shall be audited by the external auditors.
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Sales Agents are not entitled to collect cash. How to Subscribe - Details of the Offer including Important Dates Prospective investors, who wish to subscribe for shares of the Company, may acquire a copy of the Prospectus from the Companys main promoter office located in Yeka sub-city, Kebele 11/12, House No. new, Rebecca bldg, 6th floor Room no. 603/604, or from the authorized sales agents/ representatives. For those subscribers from North America, please contact Hexa United Business & Investment LLC at 13036 Jingle Lane, Silver Spring, MD 20906, phone: 1 800 575 2810. The Prospectus is available in Amharic and English. Subscribers are advised to read the Prospectus, and, for any inquiry they may have, to seek clarification from the promoting Company or from their own professional advisers (lawyers, accountants, etc.). The offer is open from 18/10/09 until 08/04/10. An Application Form (Same for individual and for corporate applications) is attached at the end of this Prospectus. Subscribers may obtain the form from our office or our sales agents. Each share costs Birr 1,000, plus a service charge (premium) of Birr 60 per share (equivalent to 6%) to be collected from each subscriber. All subscribers should note that the service charge (premium) paid by them is not refundable under any circumstance. The payment can be made either partially or in full. Partial payment is in the form of 40% payment on subscription (Birr 400 per share, plus the full service charge (premium)), followed by 20% on or before (8/07/10), the next payment of 20% by (05/09/11) and the final payment of 20% by (05/09/12). Investors, who make the full payment, i.e. by settling 100% of the value of the shares subscribed for upon subscription, will be entitled to a 1% (Br 10) per share discount.

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Subscribers are kindly requested to deposit the amounts for the investment amount including Birr 60 (6%) per share as part of the service charge (premium). The total sum should be deposited in the Bank account maintained in the name of the Company with the Banks listed herein. Full details are on the application forms. Please present the filled application form in person to the promoting Companys head office or to our sales agents, together with the deposit slips from the bank; and check that the correct sales agent has completed on the lower part of the form. Any incomplete forms or forms without deposit slips may not be accepted. Payment for Subscription Upon submission of the application form, subscribers are expected to pay either 40% or 100% of the total value of shares they have subscribed for, plus the Birr 60 (6%) per share service charge (premium) either by cheques or in cash, with cleared funds to be received by Habesha Breweries S. Co. on or before 08/04/10. Payment can be made to the Companys closed account numbers. Please bring the bank slips to the promoting Com panys Head Office. The receipt voucher and/or the deposit slip should be kept with due care since they are evidence of the subscribers shareholding application until a formal share certificate is issued upon 80% or full payment for the total number of shares subscribed. For the convenience of prospective subscribers, the promoting Company has appointed a number of sales agents in Addis Ababa, outside Addis Ababa & in North America by duly signed and sealed contract. Any subscriber may acquire a copy of the Prospectus and an application form or obtain any basic assistance from these agents. Please note that the sales agents are not expected to handle cash. Therefore, all transactions are to be made by bank deposit at one of the Companys bank accounts (for details, see application forms).
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Share Certificates will be given only after the completion of payment for the total number of shares subscribed, with the certificate marked according to how much of the payment has been received. The minimum investment is for 4 shares, i.e. the amount of Birr 4240 including service charge (premium). The maximum investment per single applicant is for 122,500 shares, i.e. Birr 129,850,000 including service charges (premium). For any further clarification or assistance, please contact the promoting Company at the following address; Habesha Capital Services Plc. Yeka sub-City, Kebele 11/12, House No. new, Rebecca bldg, 6th floor Room no. 603/604, A.A Tel: 0116-622176/77 0912-053217

For foreign investors of non-Ethiopian origin


Minimum capital requirement for investment in partnership with domestic investors is USD 60,000. Maximum investment for foreign investors of Ethiopian and non-Ethiopian origin who will subscribe in foreign currency is 49% of the total equity. This investment in foreign currency will contribute significantly for the foreign currency need of the project. Investment Guarantees and Protections for Foreign Investors Ethiopia is a member of: Multilateral Investment Guarantee Agency (MIGA), which issues guarantees against non-commercial risks to enterprises that invest in signatory countries; International Center for Settlement of Investment Disputes between States and Nationals of other States (ICSID) In addition, the country has signed double taxation avoidance treaty with various countries. The company operates in accordance with the capital repatriation and remittance provisions of the investment proclamation which allows payment to be made in convertible currency.
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Profit Allocation to Founders/ Subscribers, Main Promoter, Advisors and Significant contributors.
10% (ten percent) of the net founders /subscribers, Main contributors of the company company started operation and profit after tax will be allocated to promoter, Advisors and significant for the first three years after the will be distributed as stated below.

3% (three percent) to the founders /subscribers of the company. 7% (seven percent) to the main promoter, Advisors and significant contributors of the company. The 7% allocated to the Main promoter, Advisors and significant contributors of the company. will be distributed as follow: 3% (three percent) to the Main promoter. 3% (three percent) to be shared equally among the advisors. The remaining 1% (one percent) is reserved for significant contributors who would play a significant role towards the realization of the project and whose effort and contribution is recognized by the Main promoter. To facilitate this, the main promoter will notify in writing to those individuals or companies how much they will be entitled to from the 1% allocated to this group. The starting date of operation is the date after the official completion of Commissioning of the plant. By applying for subscription of shares each applicant irrevocably agrees that ten percent (10%) of the net profit for the first three years of operations will be allocated to the Founders/ subscribers, Main promoter advisors and significant contributors of the company as stated above. SUPPLEMENTARY INFORMATION 1. Investment Environment and Considerations The business environment in Ethiopia is very favorable and the government gives special support to those who want to build breweries. The demand-supply gap for beer is big and there will be a significant unsatisfied demand for beer for years to come as the economy is expected to grow in double digits for the foreseeable future. Encouraged by these factors some investors have planned to enter the market and more are still planning to do so. Unfortunately, investing in brewery is a capital intensive undertaking and needs specialized knowledge and skills. These factors prohibit almost all
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individual investors interested to enter the beer market and we do not expect local investors to build large scale plants in the near future. Small scale breweries (pub breweries) wont pose a serious competition to large scale producers. Therefore we believe that the risk associated with this investment is very small. Highlighted below are a number of points which could serve as guide in considering an investment in the Company. 1.1. Beer making Literature review The process of making beer is known as brewing. A dedicated building for the making of beer is called a brewery, though beer can be made in the home and has been so for much of beer's history. A company which makes beer is called either a brewery or a brewing company. Beer made on a domestic scale for non-commercial reasons is classified as home brewing regardless of where it is made, though most home brewed beer is made in the home. Brewing beer is subject to legislation and taxation in developed countries, which from the late 19th Century, largely restricted brewing to a commercial operation only. Today, the brewing industry is a global business, consisting of several dominant multinational companies and many thousands of smaller producers ranging from brew pubs to regional breweries. More than 133 billion liters (35 billion gallons) are sold per year (the equivalent of a cube 510 meters on a side), producing total global revenues of $294.5 Billion ($147.7 billion) in 2006. The basics of brewing beer are shared across national and cultural boundaries and are commonly categorized in to two main types the globally popular pale lagers, and the regionally distinct ales which are further categorized into other varieties such as pale ales, stout and brown ale. The strength of beer is usually around 4% to 6% alcohol by volume (abv.) though may range from less than 1% abv. to over 20% abv. In rare cases beer forms part of the culture of various beerdrinking nations and has acquired various social traditions and
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associations, such as beer festivals and a rich pub culture involving activities such as pub crawling or pub games such as bar. The basic ingredients of beer are water, a starch source, such as malted barley, able to be fermented (converted into alcohol): a brewer's yeast to produce the fermentation; and a flavoring such as hops. A mixture of starch sources may be used, with a secondary starch source, such as maize (corn), rice of sugar, often being termed an adjunct, especially when used as a lower-cost substitute for malted barley. Less widely used starch sources include millet, sorghum and cassava root in Africa, potato in Brazil, and agaves in Mexico among others. The amount of each starch source in a beer recipe is collectively called the grain bill. The starch source in a beer provides the fermentable material and is a key determinant of the strength and flavor of the beer. The most common starch source used in beer making is malted grain. Nearly all beer includes barley malt as the majority of the starch. This is because of its fibrous husk which is important in the sparing stage of brewing and also as a rich source of sugar and digestive enzyme. Flavoring beer is the sole major commercial use of hops. The flower of the hop vine is used as a flavoring and preservative agent in nearly all beer made today. The flowers themselves are often called "hops." Beer is composed mostly of water. Water has different mineral components; as a result water in some places in originally better suited to making certain types of beer, thus giving them a regional character. Hard water is suitable for making stout (such Guinness) while soft water is suitable for making pale lager (such as pilsner). Yeast is the microorganism that is responsible for fermentation in beer. Yeast metabolizes the sugars extracted from grains which produces alcohol and carbon dioxides and thereby turns wort into beer. Yeast is also indicated to influence the character of flavors.
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The alcohol in beer comes primarily from the metabolism of sugars that are produced during fermentation. The quantity of fermentable sugars in the wort and the variety of yeast used to ferment the wort are the primary factors that determine the amount of alcohol in the final beer. Additional fermentable sugars are sometimes added to increase alcohol content, and enzymes are often added to the wort for certain styles of beer (primarily "light" beers) to convert more complex carbohydrates (starches) to fermentable sugars. Alcohol is a byproduct of yeast metabolism and is toxic to the yeast; typical brewing yeast cannot survive at alcohol concentrations above 12% by volume. Low temperatures and too little fermentation time decrease the effectiveness of yeasts and consequently decrease the alcohol content. Beer is categorized into two main types based on the temperature of the brewing which influences the behavior of yeast used during the brewing process. The two types are lager which is brewed at a low temperature and ales which are brewed at higher temperatures. 1.2. Global Growth trends in alcohol Studies indicate that beer is the world's oldest and most widely consumed alcohol beverage and the third most popular drink overall after water and tea. It is produced by the brewing and fermentation of starches, mainly derived from cereal grains the most common of which is malted barley. Although wheat, maize (corn), and rice are widely used most beer is flavored with hops, which add bitterness and act as a natura preservative, though other flavorings such as herbs or fruit may occasionally be included During the past five years, on a pure alcohol-equivalent basis, beer has increased its share of total alcohol consumption to 41.1%. In 2008 the trend slowed somewhat and beer's year-one-year share of total alcohol consumption remained flat. in emerging markets, beer has generally shown higher growth than other alcohol categories as
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consumers gradually switch from local, generally high-alcohol, subsistence products towards attractively packaged, higher-quality, commercially produced beer. In South and Central America, beer's share of total alcohol consumption is now 51.5% with increases in Colombia party offset by recent declines in Mexico and Brazil. In Eastern Europe, beer has been gaining share from spirits for some time and now accounts for 48.0% of alcohol consumption. The past five years have also seen consistent respectively, accessibility. Over the past five years, the beer industry has seen a trend towards consumers trading up to more expensive beers. As a result, premium beer now constitutes 17.9% of total beer sales. For mainstream beer consumers, particularly in emerging markets the most common trade-up proposition is to attract, local, premium brands. This trend of shifting towards expensive premium quality beer is also seen in Ethiopia. Bedel and Met breweries have begun selling premium beers which are relatively more expensive than normal beer. 1.3. Beer Consumption in Africa According to Beer in Africa Report (SABMiller), beer consumption has been experiencing impressive growth in Africa in recent years. The study further indicates that many of the world's major brewers have been increasing their operational activities in this fast emerging market, attracted to the vast long-term potential. These major brewers which are expanding their business activities and strategies are SABMiller, Heineken and East African Breweries three of the key players in this market. The study further notes that beer has been the fastest-growing alcoholic drink in terms of total volume in recent years, benefiting
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gains

in

Africa to a

and

Asia

where

beer's on

share

of and

commercially produced alcohol now stands at 49.0% and 32.8% partly, greater emphasis quality

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from foreign investment and rising disposable incomes, a trend which it expects will continue in coming years. While in the past many people would drink home-brewed beer or other traditional drinks, they are now turning to commercially produced brews. This is due to a number of factors, including aggressive advertising campaigns by major brewers, rising urbanization and the growing prevalence of drinking as a social activity. Many of these African countries are experiencing very strong economic growth on the back of newly discovered hydrocarbon resources like Nigeria and Angola. Both countries have major beer industries which are forecast to experience impressive growth, driven by this surge in GDP. Along with economic expansion, it has also been the emergence of a burgeoning middle class that is driving growth in the alcoholic drinks sector, and it is the inspirational segment of this new middle class that many brewers have been targeting with their premium beer ranges. However, it is not just economic factors that are examined but there are a variety of other factors behind the growth of the beer sector. One of these is the changing role of women in society and the acceptance of their drinking beer, the role of Islam and the varying role this can play in alcohol consumption levels. In sum, there are a number of factors the make the African beer market very attractive to foreign investors. Essentially, the attraction is the massive size of the market, which is still unsaturated, paired with the rapidly rising GDP and a fast-emerging middle class. Ethiopia is experiencing economic growth, middle class emergence, and the changing attitude of women and beer drinkers and as result it is believed that there are grew opportunities for increased beer consumption.

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1.4. Beer Consumption in Ethiopia According is the Statistical Abstract of 2007 produced by CSA, breweries in Ethiopia produced 1.56 million hectoliter of beer during 2006 and this represented 37% of all beverage produced by commercial producers. It was second to soft drinks which produced 2 million hectoliter during the same period and this represented 48%. The rest included wine and other alcoholic spirits. There are hard facts that indicate that beer market in Ethiopia has been growing and the breweries are also making profits from their operations. Good instances are that Meta Beer factory and Harar Beer that have undertaken substantial expansion projects. It has also become a good source of revenue for the government from excise tax which believed makes the bulk of the selling price of beer. The Government breweries name Bedele, Meta, and Harar are also generating huge profits yearly. There may be some investment projects in the pipeline, though as the South Africa Brewing company (SABMiller) and the Ethiopian firm, International Beverage Corporative reported failed to raise adequate capital to solicit loans from local sources and as result which the investment projects have been shelved. In addition, a local firm, Star Business Group, which showed interest to build a brewery at Dukem also failed to continue with the project for different reasons. We also learned that Kangaroo business and other small firms are undertaking a study to establish a brewery. There are currently five breweries in Ethiopia namely BGI Group (Societe des Brassiere et Glaciers Internationale), Dashen, Harar, Meta and Bedele Factories. Harar Brewery Produces Stout beer named Hakim Stout and also Harar Soft, a nonalcoholic beer intended for the predominantly Muslim population of the area. Because of its proximity to Addis Ababa, 75%- 80% St. George Brewery is draft beer and uses kegs and barrels in addition to St.
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George beer, BGI Produces Bati and Castel, which was initially intended to export market.

1. Strength and opportunities of Habesha Breweries S.Co.


1.1 The Brewery which shall have a production capacity of 300,000 hecto litres (30 million litres) shall be erected in the vicinities of Debre Berhan and Menagesha towns, respectively, which are located within a short distance from Addis: 1.2 Water covers 85% of the input raw materials of beer and the right type of this natural ingredient is abundantly found in these areas. 1.3 As the plants shall be erected in locations near by Addis, sales and distributions shall be easily managed. 1.4 Further to the easy access of the Addis Ababa markets, distribution to northern and Eastern Ethiopia from the Debre Berhan plant and to Western and Southern Ethiopia from Menagesha; the sales and distribution activities to other Ethiopia towns shall be carried out efficiently. 1.5 One of the assumptions in considering the establishment of an industry is the achievement of the possible maximum profit with the minimum expense. One of the factors to achieve this motive is to be able to distribute at least 30 - 40% of the production within a radius of less than 100 km of the location of the plant and the proximity and availability of the direct and indirect inputs and services. 1.6 Trained manpower is decisive for any successful project and investigations reveal that this is available in the vicinity of the selected sites and professional experts can be attracted from Addis.

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Habesha Breweries S. Co.


1.7 While the direct raw materials are malt (barley), hop and yeast, the brewing process is absolutely free from artificial chemicals; 1.8 The project sites being located on the roads leading to Djibouti port and South Sudan, the plan to export the product of the plant is feasible. 2. Decisive Assumptions as to the quality standard of Habesha Brewery products. It is appropriate, before erecting a plant, to conduct a wide and in depth feasibility study and answer such questions as what type of produce and the degree of quality. Cognizant of these elements, Habesha Brewery has conducted a careful research with respect to the decisive factors of the quality standard. 2.1 Regarding Production Machineries. The production machineries shall be carefully selected from the European counties with international reputation manufacturing of such machineries. 2.2 Regarding the Technological Process Among the countries of central Europe, Germany, Check Republic, Denmark, and Holland have the lead in the for the

brewery technology. However these countries may also minor differences to in their a processes. superior Due to

have this fact is by

Habesha Brewery has preferred the eclectic approach and prepared produce quality beer

implementing the most beneficial and appropriate processes from each country, thereby creating a hybrid 2.3 Regarding Trained Manpower Habesha Brewery is staffed with technical personnel who are highly competent professional trained locally and abroad,
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technology.

with long years of experience in the Ethiopian breweries in

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Habesha Breweries S. Co.


various positions such as quality controller, production supervisor, chief brewer and general manager. It is therefore expected that, under the strict control and these distinguished brewers, the quality of shall be superior. 2.4 Regarding the Standard of the Direct Raw Materials Direct Raw Materials are certainly decisive to the quality of the production and in this respect Habesha Brewery has been exploring as to the best source of these ingredients and has now identified its taste. Therefore the choice of these raw materials from leading suppliers, e.g. hops from Check 3. Republic, yeast from Denmark shall production highly reliable. Financial Considerations taken from the pre-feasibility study of Habesha Breweries Share Company
Draft beer/lit (in Birr.) Bottled beer/lit(in Birr.)

supervision Habesha

of beer

the make the

Revenue/lit Cost Ex. factory/lit Gross Income Less Adm/ Sales Exp. Income/lit @300,000 hl Income Total income Earning per share ROI

9.50 7.01 2.49 0.25 2.24 (10%) 30,000 hl 6,720,000 153,060,000 153,060,000 135,000,000 153,060,000 450,000,000

13.76 8.09 5.67 0.25 5.42 (90%) 270,000 hl 146,340,000

113.4% 34%

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Habesha Breweries S. Co.


Annual Production and Revenue Revenue (Birr) Year 1st (85%) 2nd (95%) 3rd (100%) Production (hl) 255,000 285,000 300,000 315,792,000 352,944,000 371,520,000 24,225,000 27,075,000 28,500,000 315,792,000 380,019,000 400,020,000 From bottle From draft Total

The estimated cost of machinery for a new brewery of 300,000 hl/annual capacity is about 25,000,000 Euro or Br. 450 million; Last three years data of the existing breweries, shows that the demand increase on an average of 11%; Current Beer production capacity is 3.35 million hectoliter; Current Production of Beer (consumption) is 2.9 million hectoliter; The demand increase of 11% per year entails that the current Production capacity should be doubled by the end of the 8th year; Current Ethiopias beer consumption per head is 4 liters/ year; For comparison purpose the beer consumption per head of few African countries: - Kenya - Nigeria ------------- 22 lit/ year ------------- 53 lit/ year - Cameroon------------- 25 lit/ year - South Africa----------- 58 lit/ year

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Habesha Breweries S. Co.


Project Assumption: Production capacity 300,000 hectoliter; Product mix of draft and Bottled Beer is 10% and 90%, respectively; The actual investment cost would be Br. 450 million; of which 30% (135 million birr) will be covered by share capital and the remaining 70% (315 million birr) will be secured from banks.
Demand Projection for the coming 10 Years at annual growth rate of 11%:

Years 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

Demand (thousands of hl) 2900 3219 3573 3966 4402 4887

Years 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

Demand (thousands of hl) 5424 6021 6683 7418 8234

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Habesha Breweries S. Co.


3 Risk Factors under consideration: Shortage of Foreign currency for importation of the machinery; Delays in availability of imported raw materials that could not be available locally may somehow affect the production process of the factory; Upcoming competition from existing and regional breweries; Shortage of power supply may be a cause not attain a production level at full capacity; Signed in Addis Ababa, on 18/10/2009.

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