Harvard Case - Meta Abo Brewery: Creating a Sustainable Value Chain in Ethiopia
"Meta Abo Brewery: Creating a Sustainable Value Chain in Ethiopia" Harvard business case study is written by William E Youngdahl. It deals with the challenges in the field of Business & Government Relations. The case study is 6 page(s) long and it was first published on : Dec 1, 2016
At Fern Fort University, we recommend Meta Abo Brewery implement a multi-pronged strategy focused on sustainable growth, community engagement, and strategic partnerships. This approach will leverage Ethiopia's economic growth, address challenges in the brewing industry, and contribute to a more sustainable value chain.
2. Background
Meta Abo Brewery, established in 1997, is a leading brewery in Ethiopia. The company faces challenges including limited access to raw materials, intense competition, and government regulations. The case study explores the company's efforts to navigate these challenges and create a sustainable business model.
The main protagonists are the Meta Abo Brewery management team, led by the CEO, who are tasked with developing strategies for growth and sustainability. The case also highlights the role of the Ethiopian government, which plays a significant role in shaping the business environment through economic policies, trade regulations, and foreign investment policies.
3. Analysis of the Case Study
The case study can be analyzed using a Porter's Five Forces framework to understand the competitive landscape:
- Threat of new entrants: High, due to the relatively low barriers to entry in the brewing industry.
- Bargaining power of buyers: Moderate, as consumers have limited choices but are sensitive to price fluctuations.
- Bargaining power of suppliers: High, as the brewery relies on a limited number of suppliers for key raw materials.
- Threat of substitute products: Moderate, as consumers can choose alternative beverages, but beer remains a popular option.
- Competitive rivalry: High, as Meta Abo Brewery faces competition from both local and international players.
In addition to the competitive landscape, the case study highlights the importance of government policy and regulation. The Ethiopian government's economic policies and trade regulations impact the brewery's operations and its ability to access resources. The government's foreign investment policies also play a crucial role in attracting capital and technology.
4. Recommendations
Meta Abo Brewery should implement the following recommendations:
1. Sustainable Sourcing and Production:
- Invest in local sourcing: Partner with farmers to secure a reliable supply of barley and other raw materials. This will reduce reliance on imports, support local communities, and contribute to economic growth.
- Implement sustainable farming practices: Encourage farmers to adopt environmental sustainability practices, such as water conservation and responsible land management.
- Optimize production processes: Improve efficiency and reduce waste through innovation and technology adoption. This will contribute to environmental sustainability and cost reduction.
2. Strategic Partnerships and Market Expansion:
- Form strategic partnerships: Collaborate with other businesses in the value chain, such as logistics providers and distribution networks. This will enhance efficiency and market reach.
- Explore international markets: Leverage globalization and trade agreements to expand into new markets. This will diversify revenue streams and mitigate risks associated with the Ethiopian market.
- Develop new product offerings: Introduce new beer varieties and non-alcoholic beverages to cater to evolving consumer preferences and expand market share.
3. Community Engagement and Corporate Social Responsibility (CSR):
- Invest in community development: Support local initiatives focused on education, healthcare, and infrastructure development. This will enhance the company's reputation and foster positive business and government relations.
- Promote responsible consumption: Implement programs to raise awareness about responsible alcohol consumption and address potential social issues associated with the industry.
- Empower local communities: Create job opportunities and provide training programs to enhance skills and economic empowerment.
4. Government Relations and Policy Advocacy:
- Engage with government officials: Establish strong business and government relations to advocate for policies that support the brewing industry.
- Promote industry best practices: Collaborate with other stakeholders to develop industry standards and ensure regulatory compliance.
- Leverage government incentives: Explore opportunities for government subsidies, tax incentives, and government contracts to support growth and sustainability.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Meta Abo Brewery's commitment to sustainable growth and community development.
- External customers and internal clients: The recommendations address the needs of consumers, employees, and suppliers.
- Competitors: The recommendations aim to differentiate Meta Abo Brewery from competitors through innovation, sustainability, and community engagement.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability, market share, and brand reputation.
6. Conclusion
By implementing a comprehensive strategy focused on sustainable growth, community engagement, and strategic partnerships, Meta Abo Brewery can navigate the challenges of the Ethiopian brewing industry and contribute to a more sustainable value chain. This approach will leverage the country's economic growth, address social and environmental concerns, and enhance the company's long-term viability.
7. Discussion
Alternatives not selected:
- Focusing solely on cost reduction: While cost reduction is important, it could lead to a short-term focus that compromises long-term sustainability.
- Ignoring government regulations: This could lead to legal issues and reputational damage.
- Expanding too quickly: Rapid expansion could strain resources and lead to unsustainable growth.
Risks and key assumptions:
- Political instability: Political instability in Ethiopia could impact the business environment and investment climate.
- Economic downturn: A global economic downturn could affect consumer spending and demand for beer.
- Competition: The brewing industry is highly competitive, and new entrants could pose a threat.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resources required.
- Establish a dedicated team: This team will be responsible for overseeing the implementation of the recommendations.
- Monitor progress and make adjustments: Regularly assess the progress of the strategy and make necessary adjustments to ensure its effectiveness.
By taking these steps, Meta Abo Brewery can position itself for sustainable growth and success in the Ethiopian brewing industry.
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Case Description
When the Meta Abo Brewery Company, Ethiopia's second largest brewery based in Sebeta, Ethiopia, was purchased from the government by UK-based Diageo PLC in 2012, sustainability of raw material supply, especially barley, was a key concern. At the time of the acquisition, the Meta Abo Brewery was importing all its malt barley. Diageo wanted to push local raw material sourcing to 70 percent. In May 2012, Paul Walsh, Diageo's CEO, attended the Symposium on Global Agriculture and Food Security hosted by the Chicago Council on Global Affairs, in collaboration with the World Economic Forum. During the symposium, Walsh signed a pledge to support the launch of the G8's New Alliance for Food Security and Nutrition (see case Exhibit 2). In the same year, Walsh signed the letter of intent committing Diageo to invest US$1.5 million scalable value chain project to source barley for the Meta Abo Brewery from about 6,000 smallholder farmers with the potential to scale up to 20,000 metric tons per year by 2016. This would still not meet all demands for the malt barley required to produce the malt needed by the Meta Abo Brewery, but it was a step in the right direction in terms of increasing local content in a market computing for inputs. The goal was clear, but the implementation details had to be worked out. How would Diageo and Meta Abo Brewery implement this bold initiative to partner with 6,000 smallholder farmers to increase both quality and quantity of local sourced malt barley? They had experience working on development projects in Africa, but would those projects provide sufficient lessons learned for this challenge?
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