In 1998 I was a 16 year old just starting to drink alcohol in Nairobi. I remember clearly the arrival of South African beers (Castle lager) in the bars as an alternative to Tusker, the king of Kenyan beer. Castle came in cans, and until then it had all been glass Tusker bottles. Tusker soon started to can their beer to keep up, which I always nostalgically thought was a pity.
What I didn’t understand was the turbulent backdrop to these shiny cans and bottles sitting on the shelves in all the pubs. A corporate war was started when SA Breweries landed in Nairobi and invested in a plant in Thika. SAB entered East Africa’s largest economy through a business partnership with local brewer East Africa Breweries Ltd, maker of Tusker.
Lucrative markets and very similar products meant that it was a race to the bottom for both parties to keep or gain market share. After much drama (accusations of sabotage, protectionism, underhanded tactics by both parties), a price war benefiting consumers and a huge influx of different brands of beer into the market, the deal soon fell apart, forcing SABMiller to shut down its Thika plant and exit Kenya in 2002.
So what? Why does this matter? To me this is an important example of the SA vs Kenya dynamic. Synergies and opportunities are spotted, but what could have been an opportunity for strengthened bonds and cultures turned into a one-on-one brawl. Perhaps this is due to the nature of the product itself. Highly commoditized, all that was left was grabbing market share by any means. Prices dropped, tactics by all accounts got dirtier.
If South Africa and Kenya are to trade successfully, then perhaps the product traded needs to contain a little more differentiation, a little more art. It must demonstrate clearly its addition and novelty to the local market. Ideally there is no local equivalent to protect, because neither country wants to let the other one in if they feel the market already exists. Both are proud of their status as African giants. As an example, South Africa won’t allow Tusker to be sold in SA. A trademark technicality has kept it out for decades.
Recently SABMiller is back in the Kenya market but is only importing beers into the market. A more cautious approach is probably wise considering the first foray.
If I was going to trade goods into Kenya, I would try to find something that is just not available yet, and introduce it carefully with local partners. This was done with cell phones, pay tv and many other goods which didn’t trigger a price war. I’m sure there will be more to come.
Anyways. Happy Sunday chimps!