Executives also plan to list Kegna Beverages on the fledgling capital market once it stabilises operations, believing this could open new doors for financing further expansions. They also plan a second phase to expand production lines to include water, juice, energy drinks, and sparkling water, contingent on initial market success.

A crucial linchpin in the company's operations is barley. Though it imports more than 300 types of inputs, such as chemicals, it relies heavily on local farms for barley, the essential ingredient for the brewery industry, which the Dutch Heineken Ethiopia dominates.

The industry traces its origins to 1922, when Emperor Haile Selassie launched St. George Beer. Today, five leading breweries operate 13 plants nationwide, collectively producing at least 20 distinct brands. Heineken leads with nine brands, and BGI Ethiopia follows with six. Together with Dashen and Habesha breweries, the industry produces 15.15 million hectolitres of beer annually.

Afework believes having farmland nearby will help reduce transportation costs and secure a reliable supply. Kegna Beverages has already forged agreements with growers and the Assela Malt Factory, which has operated for four decades and can process 360,000Qtls of barley annually.

However, demand across the breweries surpassed two million quintals; competition for quality grain is fierce.

“It's been difficult for factories,” said Assela Malt’s Supply Chain Manager, Mekonnen Abera.

Barley prices spiked by 30pc in recent months, climbing to 9,000 Br a quintal, making it increasingly difficult to meet daily requirements of 1,500Qtls, often falling short by as much as 500Qtls. Kegna Beverage's executives hope that ramping up production will serve their needs and expand barley farmers' opportunities, creating a reciprocal relationship that could stabilise supply and pricing over time.

Farmers, however, face their own problems.

Girma Kebede, 50, a barley farmer in Arsi, Bokoji Woreda, harvested 200Qtls a hectare on his four hectares last year. Steep hikes in input costs forced him to raise prices. Improved seeds quadrupled to 8,000 Br while fertiliser nearly doubled to 9,500 Br.

“We had no choice but to increase the prices,” Girma told Fortune.

He now sells barley for 8,000 Br a quintal, up from 5,500 Br, and worries that many farmers are switching to wheat in search of better returns.

Experts have raised concerns about substantial supply chain integration challenges compromising quality and volume. Authorities maintain that adequate supply exists, as eight zones, including Arsi, Western Arsi, Bale, and Northern Shoa, represent a major barley production area. Over half a million hectares have been cultivated this fiscal year, yielding 19.1 million quintals of barley.

Moustefa Housen, crop development director at the Oromia Agricultural Bureau, acknowledged that despite robust production figures, the market has failed to meet heightened consumption demands. He noted the troubling trend of barley, traditionally a staple for beer production, being diverted for human consumption, as many farmers stockpile for food. He attributed this to a lack of guarantees from factories to farmers through contract agreements.

“Farmers are becoming victims,” he said.

Agricultural economist Assefa Tilahun contended that disjointed distribution chains result in up to 40pc of supplies being lost before reaching factories, thereby inflating costs and reducing quality.

“Volume and quality have been compromised,” he said, stating that shortages affect producers and consumers.

Assefa recommends supporting commercial farming practices and introducing modern storage and grading systems to lower waste. These adjustments could help barley farmers secure more predictable incomes while giving brewers like Kegna Beverages the reliable inputs they need.

Investment consultant Million Kibret echoed these sentiments, arguing that Ethiopia’s per capita beer consumption remains low, offering a window for newcomers to seize market share.

“There is still a market opportunity despite the investment challenges,” he said. “Ethiopia’s brewery industry could use new ideas.”

He urged companies to forge stronger ties with local producers and develop flexible supply arrangements that address security concerns in farming regions.

PUBLISHED ON Mar 09, 2025 [ VOL 25 , NO 1297]