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Desert Lager turns to international partners, amid zero local funding appetite

February 18, 2022
Desert Lager turns to international partners, amid zero local funding appetite

Local brewer ,Desert Lager is set to partner with two international companies to set up production plants in Namibia and Lesotho, The Brief has established.

“We were approached by an international company from Malta that wants to do business with us in southern Africa, on-condition we build a local plant here in Namibia, so that we can produce our brand and their brands and introduce them in the region,” said Desert Lager co-founder, Homateni Kapewangolo.

“There are also strategic partners that want us to build a brewery together in Lesotho. Those discussions are still on-going. We spoke to the Minister of Trade in that country. We are coming in as technical partners with our brand. We are looking at putting up a facility in Maseru.”

“They have an already existing distribution network, which we can use and we come with our technical expertise. This also gives us legs in terms of being an SME, it gives us access to the market. If we have the Namibian leg and the Lesotho leg, then in terms of volumes, you stand a better position when competing for market space. That is the current position, but that is as far as I can share on the Lesotho part. I can’t disclose so much information.”

Desert Lager said the decision to engage the two international partners comes after it has struggled to secure local funding to set up its own production facility.

“There is zero appetite locally for funding for our project. The challenge for us young entrepreneurs wanting to compete in that space is really the lack of resources and interest coming from our local funding institutions.  They are not tailor made for the needs of young entrepreneurs. For example, to put up a small plant will cost us around N$30 million, but to secure that N$30 million is a big problem. This is what most entrepreneurs are going through when it comes to trying to find funding,” he said.

“The timelines for the proposed projects will depend on what we are doing in our private capacity to raise capital. Currently that is our current model, where we are raising funds from other projects such as property. The pace at which this project will grow, will largely depend on what we are doing in other sectors.”

Kapewangolo said there has been a market interest in the brewer’s products since its formation in 2018, and local production of its beer brand will enhance its competitive advantage.

“The market and demand is there for the brand, fortunately for us, because of the industry experience, we need a local facility so that our cost of production can be reasonable, so that we are competitive on the shelf. Using international routes, where we are making it through our international partners in South Africa, it impacts on your profit margins, landing cost of the product, which make it more expensive to compete with a locally produced product,” he said.

On its legal tussle with Namibia Breweries amid allegations the company had copied the Tafel Lite recipe, the Desert Lager co-founder said, “The brand was performing well then, until the issue with NBL came. There was really no issue there because we had done nothing wrong. Until this day, they have not come back to us. We are a small company and are not looking to put our money into legal battles with large corporations, so we decided to focus on the main mission, which was to introduce our brand, which we did. By doing so, we managed to gain market equity.”

Like most companies, he said the business had been hard hit by the negative impact of COVID-19, especially government alcohol regulations.

“Then in March 2020 that’s when the lock down came in and based on our business model in terms of distribution and promotions, the lock down affected us heavily. Remember for us to penetrate the market, we needed to do promotions. Limited human interactions due to the lockdown, we downscaled a bit. With the alcohol ban, we then decided to use that time to look at investors that can put money for us to grow our infrastructure,” he said.

Namibia’s alcohol market is dominated by Namibian Breweries, the brewers of Windhoek Lager and Tafel Lager.

Heineken NV has made an offer to increase its stake in Namibian Breweries Limited (NBL), as the Dutch brewer seeks to consolidate its footprint in Africa.

Heineken NV has offered to buy Ohlthaver & List Group of Companies (O&L)'s 50.01% stake in NBL Investment Holdings (Proprietary) Limited (NBLIH), the controlling shareholder with a 59.4% shareholding in Namibian Breweries Limited (NBL).

Heineken already owns a 49.99% interest in NBLIH and will become the majority shareholder of the brewer on completion of the transaction this year.

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Last modified on Tuesday, 22 February 2022 18:06
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