Vasari Global is continuing a drive into Ethiopian fast-moving consumer goods with plans for a new $150m biscuit and pasta plant. The key to this market, according to Vasari chairman Vivian Imerman, is to create local mainstream quality brands.
UK-based Vasari is privately owned by South Africa's Imerman family, who are not exactly strangers to the African food and drink business. Back in 1988 they bought the South African interests of RJR Nabisco from KKR, which had just acquired them in the world's largest leveraged buyout.
Other notable family acquisitions have included Del Monte Foods International and Whyte & Mackay whisky, which were both subsequently sold. While Vasari itself was only founded in 2008, Mr Imerman says the family's fast-moving consumer goods interests embrace "close to 100" different companies, mainly in the emerging and frontier markets of Africa and south-east Asia.
"We are industrialists," says Mr Imerman. "We operate the businesses we own and seek to grow the top as well as the bottom line. And while we are very entrepreneurial, we also have a disciplined corporate approach, adhering to multinational corporation practices and ethics."
Vasari was attracted to Ethiopia by its new era of political stability, coupled with a strong rule of law. Mr Imerman notes that the state was recently able to raise $1bn with its debut international sovereign bond. As Africa's second most populated country after Nigeria, Ethiopia has considerable market potential.
"There has been quite a bit of change in the past three or four years, and the government is very keen to promote FDI," says Mr Imerman. "Among the 90 million population, we expect consumer growth at local mainstream level, rather than through premium international brands."
The biscuit and pasta factory will be Vasari's third investment in Ethiopia. The first, which was the largest private equity investment in Ethiopia to date, was in the existing Dashen Brewery, with co-investors DEG and Duet Capital. The second was in the Rorank spirits distilling and blending business. In all, Vasari is involved with about $300m-worth of Ethiopian projects, including its partners' contributions.
The vehicle for the biscuit and pasta venture is Ahadukes Food Products. The 49.9% joint-venture partner is local tea producer Ahadu, owned by entrepreneur Solomon Wondimneh. In the first phase of the project, which is costing $36m, the plant will produce biscuits only, though it will be expanded later to include noodles and pasta. The products will be marketed under the Ahadu brand. Some 90% of the raw materials are sourced locally, with the balance mainly packaging, and the project includes the construction of a sophisticated new flourmill to raise product quality.
The facility, says Mr Imerman, is "world class", with top-of-the-range western European equipment rather than cheaper alternatives. “Quality is quintessential to our business," he says. "We couldn't come in with a me-too product. Our offering is quality that is significantly ahead of local standards [with] a price point that is marginally higher."
The business currently employs 600 people, though this will increase in later phases to 3000, directly and indirectly. While Vasari benefits from a three-year tax holiday, Mr Imerman says the company’s business model is not based on incentives, due to their temporary nature.
He anticipates good growth over the next five years, pointing out that prospects in the food and drink business are similarly attractive in other parts of Africa. That includes South Africa, Mozambique, Angola, Nigeria, Cameroon, Ghana and Kenya. "There will be 1 billion middle-class consumers in Africa by 2025," says Mr Imerman. "And whether they are rich or poor, they will want to know they are getting quality and reliability, and are not being cheated in any way."