SABMiller's Nile Breweries: Creating Value with the Base of the Pyramid in Uganda

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The price of alcohol was beyond the reach of these consumers because of the high cost of ingredients like barley, which were mostly imported, and because of the heavy excise duty levied on alcoholic beverages. Thus, Nile decided to launch beer made of local ingredients. It found sorghum, with its high starch content, suitable for making beer. Nile then decided on the recipe and the brewing process using sorghum. To procure the raw material, it entered into an agreement with local subsistence farmers and gave them a fixed price for the crop. Association with Nile made a difference to the people living in impoverished rural areas, and also laid the foundation for the economic uplift and social transformation of the communities among which the company operated.

The initiative provided 8,000 farmers in the country with 70% of their total income. Nile also negotiated with the government citing its involvement with the local farmers and the fact that it procured local ingredients, to bring about a reduction in the excise duty on its product. This helped to further reduce the cost of the product. The company thus not only provided low-income consumers with a safe product but also encouraged responsible alcohol consumption, investment in local communities, and agricultural development. At the same time, the company also benefited, as it was able to attract several consumers into its fold and Eagle went on to account for half of the company's total sales in Uganda by 2010. Analysts were of the view that SAB could integrate BoP into its value chain in a profitable way and that it had set an example in inclusive business models. Zahid Torres-Rahman, director at the ethical consultancy Inspiris, which specialized in poverty alleviation, said "Eagle Lager demonstrates that business can have a large, positive impact on poverty reduction by doing good business. This sort of responsible business model is far more impactful, sustainable, and scalable than pure philanthropy could ever be."⁷

Buoyed by Eagle's success in Uganda, SAB introduced the product successfully in Zambia. Replicating the model followed in Uganda in several other African countries, SAB entered into partnerships with small farmers to procure ingredients used to make beverages. In Tanzania, SAB partnered with farmers to assure itself of a regular supply of barley and maize. It also experimented with different locally available ingredients and commercially launched beer made out of cassava. SAB extended the model of partnering with farmers to Asia, and partnered with farmers in India to grow barley.

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7] "SABMiller Brews up a Sorghum-Beer Partnership with African Farmers," http:/news.independent.co.uk, March 29, 2007.

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