BREWERY FLOURISHES IN DRC'S DIFFCULT CLIMATE

UNCLAS SECTION 01 OF 02 KINSHASA 001770

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD EINV ELTN EWWT ECON CG
SUBJECT: BREWERY FLOURISHES IN DRC'S DIFFCULT CLIMATE

REF: KINSHASA 1608


1. (U) Summary. One of the DRC's oldest businesses, Bralima
brewery, demonstrates a possible way forward for Congo's
beleaguered manufacturing sector. Bralima produces and
distributes Coca-Cola and Heineken brands throughout the DRC.
Even in an uncertain economic and political climate,
Bralima's sales are increasing and its operations expanding,
supported by an extensive distribution network. Other
businesses in the DRC may benefit from some of Bralima's
lessons, although Bralima's long roots and relatively strong
base of demand for its products may make its success
difficult to duplicate. End Summary.

Operating and Expanding in Adverse Business Environment
-------------- --------------


2. (SBU) EconOff and Econ TDYer met with the Bralima and
Coca-Cola managers in Kinshasa in late September, and EmbOffs
toured Bralima's Kinshasa facility in October. Bralima, one
of the DRC's longest continuously-functioning businesses
(opened in 1923),is now a subsidiary of the Dutch company
Heineken. Bralima's DRC headquarters are at its
well-maintained several-acre plant in Kinshasa, and its
products include both globally-known and domestic market
alcoholic and non-alcoholic beverages, such as Congo's Primus
beer. Coca-Cola contracts with Bralima to bottle and
distribute its products throughout the DRC, and its offices
are co-located within Bralima. Bralima's five main bottling
plants are in Kinshasa; Boma, Bas-Congo; Bukavu, South Kivu;
Lubumbashi, Katanga; and Kisangani, Orientale province. The
Kinshasa and Boma plants are responsible for 75 percent of
production.


3. (SBU) Despite some notable macroeconomic difficulties in
the DRC (reftel),the Coca-Cola and Heineken directors
reported 2006 has yielded their highest production volumes in
30 years, buoyed by overall strong national economic growth
since 2001. Sales are up 40 percent over 2005, with a 17
percent increase in Kinshasa and even higher growth in
eastern Congo. Kinshasa represents two-thirds of sales by
volume. Total sales are 60 percent beer products and 40
percent soft drink products. (Note: Coca-Cola's studies
indicate that nationwide, Congolese consume an average of
five to six soft drinks per year, but consume 28 per year in
Kinshasa. An average civil servant must earn two and a half
hours worth of government wages to buy a Coca-Cola. End
note.) As a result of the growing and currently unmet
demand, the company is installing a new bottling line at the
Kinshasa plant - an estimated USD 10 million investment.
Bralima's competitor, BraCongo, has recently announced in
local newspapers that it too is planning new brewery
investments in 2007.


4. (SBU) Coca-Cola and Heineken managers attribute several
factors to Bralima's success in the face of difficult
political and economic conditions: a strong community
presence, corporate self-reliance, hedges against insecurity,
flexibility and innovation in distribution and a strong
stance against corruption. The brewery maintains its
community presence via local employment and advertising. In
Kinshasa alone, Bralima has 600 to 800 direct employees and
hundreds of others who are indirectly dependent on its
bottling operations. Its company and product logos seem
omnipresent, via billboards, highly-visible signs at bars and
restaurants, and even on its own printed fabric. The beverage
managers say this community entrenchment protected them from
the catastrophic looting in 1991 and 1993 and would help
insulate them against any future unrest. Companies looking
to enter Congo now do not have this extensive support and
would not therefore be protected from unrest, they said.


5. (SBU) The brewery also attempts to hedge against political
and economic insecurity and to be completely self-reliant.
Almost all of the brewery's inputs, including water, imported
and domestic rice, bottles, and ice are produced
domestically, and the plants rely on their own generators for
their power supply. The brewery hedges itself in part
against inflation by buying "futures" of the concentrate,
securing the price in advance on later shipments.


6. (SBU) The Bralima manager also said his company takes a
strong stance against corruption, but he and the Coca-Cola
manager cautioned that a company must be large and
influential enough to be able to take drastic measures and
coordinate closely with other local businesses to fight
corruption. The Bralima manager said, for example, that
Bralima closed its brewery in Bukavu for two weeks to protest

KINSHASA 00001770 002 OF 002


what it believed to be a corruptly obtained judgment against
it. (Note: Other EconOff contacts said that the court in
Bukavu closed the factory. End note.) The judge was
reportedly replaced soon after the closure.

Distribution is the Key
--------------


7. (SBU) It is through its distribution network, however,
that Bralima demonstrates the innovation and flexibility
necessary for companies operating in business environments
like the DRC's. Nationwide, Bralima has 28,000 sales
outlets. In urban areas, trucks and hand carts are the
primary distribution modes. In Kinshasa, the brewery uses
both its own trucks and those of contractors for delivery,
and Bralima's manager says the company has compiled a
database of information on all its sales points. The
brewery's trucks are equipped with GPS to let brewery
managers know their exact location and routing and to send
messages if the drivers go off-route. The managers said
Kinshasa distributorships, half of which are female-run,
range in size from single pushcarts to a female-owned
business with USD 10 million annual revenue. Bralima pays
its largest distributors through a cellular banking service,
CelPay, but the limited banking infrastructure currently
limits expanding the use of this method.


8. (SBU) Rural distribution obviously presents greater
challenges, and in some places is a loss-leader maintained
only to promote brand recognition. Most distribution to its
many sale points throughout the country is accomplished via
the Congo's extensive river networks. Some rail and road
transport is possible, although theft and assault makes these
methods more risky, and dependence on government-operated
rail transport makes the company subject to strikes and other
factors.

Comment
--------------


9. (SBU) Bralima,s evident success shows that conducting
business is possible despite the fact that the DRC is one of
the most difficult business environments in the world.
However, its story also demonstrates that companies may need
deep roots and long years of on-the-ground experience to
achieve this success. Further, others should be wary not to
take too many lessons from this particular story, as the
beverage industry seems to stand nearly alone in many
post-conflict African countries as a successful manufacturing
sub-sector. End comment.
MEECE