LIQUOR BILL 2003

LIQUOR BILL 2003

PRESENTATION BY UNB

CAPE TOWN

13 MAY 2003

We have divided our presentation in following parts:We have divided our presentation in following parts:

1. Sorghum beer - History 1. Sorghum beer - History

2. Sorghum beer - Today2. Sorghum beer - Today

3. Current status - Distribution3. Current status - Distribution - Licencing- Licencing

4. Problems with current liquor bill4. Problems with current liquor bill

5. Our recommendations5. Our recommendations

- It has been the traditional drink of Southern Africa for hundreds of years.

-It is an integral part of South African cultural heritage and is a must at;

- Marriages

-Funerals

-- Reconciliations

-- Maturing to Adulthood ceremonies

-- Child Birth Functions

-- Thanksgivings

-- Unveiling of Tombstones, etc.

Sorghum Beer - Brief HistorySorghum Beer - Brief History

- Sorghum Beer enjoyed a position of pride in the society.

- The political environment suppressed Sorghum for many years

- Organised commercial Sorghum industry has been declining since then.

- Shebeens came into being to supplement survival for poor black families.

- Most are run by women .

- Since early days when government controlled distribution of Sorghum these Shebeens have been illegal and constantly harassed.

- Because of their inability to procure Sorghum Beer legally, they went for concoctions / alternatives

- Wrong! Yes, but they must earn bread to survive and know no other way to make a living.

- Sorghum Beer is unique to Africa

- Sustaining the future of Sorghum should be part of the African Renaissance

SORGHUM BEER – TODAYSORGHUM BEER – TODAY

SORGHUM BEERSORGHUM BEER

-Unique and traditional sub-Saharan beverage.-Unique and traditional sub-Saharan beverage.

-Brewed with malted Sorghum and Maize grits.-Brewed with malted Sorghum and Maize grits.

-Distributed,sold,transported,stored and consumed-Distributed,sold,transported,stored and consumed in actively fermenting stage.in actively fermenting stage.

-Shelf life - 4 to 6 days, after which it is unfit for-Shelf life - 4 to 6 days, after which it is unfit for consumptionconsumption.

- Opaque,viscous,sour and pinkish brown in color.- Opaque,viscous,sour and pinkish brown in color.

- Alcohol content <3.2%- Alcohol content <3.2%

- High nutritional value. Rich source of protein, - High nutritional value. Rich source of protein, carbohydrate,complex starch, Vitamins & Minerals.carbohydrate,complex starch, Vitamins & Minerals.

- Largely consumed in township, rural and informal - Largely consumed in township, rural and informal settlements.settlements.

- Though a delicate product, can easily be- Though a delicate product, can easily be made at homes/ Shebeens with easilymade at homes/ Shebeens with easily available ingredients like Malt,Mealie-meal,available ingredients like Malt,Mealie-meal, bread etc. in small quantities.bread etc. in small quantities.

- Industrially brewed Sorghum beer is more- Industrially brewed Sorghum beer is more hygienic and nutritious due to technology, properhygienic and nutritious due to technology, proper equipment and rigid quality control inequipment and rigid quality control in manufacturing and handling of beer.manufacturing and handling of beer.

SORGHUM BEER MARKET IN S.ASORGHUM BEER MARKET IN S.A

MIO LITRESMIO LITRES %%

- Total Sorghum beer sales/annum 1700 100- Total Sorghum beer sales/annum 1700 100 - Industrially brewed Sorghum beer 425 25 - Industrially brewed Sorghum beer 425 25 - Non- industrial Sorghum beer 1275 75- Non- industrial Sorghum beer 1275 75 - Sorghum Beer from malt (85,000T) 1145 67- Sorghum Beer from malt (85,000T) 1145 67

- Sorghum beer from beer powder - Sorghum beer from beer powder (22000T) (22000T) 130 8 130 8

- Sorghum beer market declining 5 - 6 % year on year.- Sorghum beer market declining 5 - 6 % year on year.

- 12 operating breweries and about 20 microbreweries.- 12 operating breweries and about 20 microbreweries.

- Also brewed in about 100,000 shebeens / homes.- Also brewed in about 100,000 shebeens / homes.

- Consumers - Predominantly black, LSM 1- 4- Consumers - Predominantly black, LSM 1- 4

CHALLENGES - DISTRIBUTONCHALLENGES - DISTRIBUTON

- 4 - 6 Days Shelf life- 4 - 6 Days Shelf life

-Lack of infrastructure in informal marketLack of infrastructure in informal market

-Lack of access to banking channels & poor Lack of access to banking channels & poor creditcredit rating of most players rating of most players -Security concernsSecurity concerns

-Lack of entrepreneurshipLack of entrepreneurship

-Low marginLow margin

RETAILERS

CONSUMERS

TYPICAL DISTRIBUTION CHANNEL

SORGHUM BREWERY

DRIVER

SALESMEN

DEPOTS

DISTRIBUTORS

SORGHUM BEER TRADE

MARKETS & OUTLETS

%

MARKET SHARE

%

NOT LICENCED

INFORMAL

SPAZAS

SHEBEENS

ZOZOS

75 99

FORMAL

BOTTLE STORES

EATING HOUSES

GENERAL DEALERS

25 10

INFORMAL TRADESHEBEENS; SPAZAS; ZOZOS

MONTHLY R500 R 3000

TURNOVER

LITERACY LEVEL/

EDUCATION NEGLIGIBLE

OUTLAY OF INFORMAL

OUTLAY SECTION OF RESIDENCE

SMALL EXTENSION [ZOZO]

DISTRIBUTION PATTERNUNB QUANTITY VOLUME

(MILLION)

AVE PER MONTH

%

OWN DEPOTS / PRIVATISED DEPOTS

60 34,0 100

DISTRIBUTORS 2500 19,5 57

CALL & COLLECT

4000 3,0 9

DRIVER SALESMAN

190 11,5 34

RETAILERS 100 000 34,0 100

TOTAL SORGHUM BEER

RETAILER (TOTAL

250 000 142,0 0

UNB’S DISTRIBUTION INFRASTRUCTURE

- UNB has a fleet of around 500 vehicles, delivering about 90% of the total product to depots / distributors/retailers

- UNB has about 60 depots

- UNB employs 190 Driver Salesman

- UNB continuously develops and provides financial support to small entrepreneurs

-Trade will come to standstill, if these facilities are withdrawn. Consumer will have no option but to switch to Homebrew, which as explained earlier is far less hygienic and at times dangerous.

TREATING SORGHUM BEER AS ANY OTHER LIQUOR PRODUCT INSPITE OF FOLLOWING BASIC ISSUES:

Short shelf life

Current status of Sorghum traders

Unlicensable premises

Poor financial status

Past prosecutions

Complicated & expensive licensing process

BASIC PROBLEM

PROVISIONS THAT CANNOT BE FOLLOWED

1 Separation of distribution from manufacturing

(3 Tier)

Due to,

Short Shelf Life

Long Chain

Need of Fleet

Finance

2. Licensing Requirements:

Western Cape Govt. had acknowledged these facts and provided separate provisions in Green Paper.

Gauteng / E. Cape still proceeding treating Sorghum Beer as other Liquor product.

Other provinces may do so in absence of proper guidance in the matter in the National Bill.

RECOMMENDATION:

Treat Sorghum Beer separately in the bill for:

a) Licensing – Use simple permit system for distributor / retailers for next 10 years.

b) Distribution - Do not prohibit manufacturer from distribution in view of shelf life and trading environment. Manufacturer should be allowed to distribute and condition of pre-invoicing be waved in view of its impracticability.

c) MICRO MANUFACTURER – Define qualifying volume.

If qualifying volume is more than 100,000 lit. per annum,

other Sorghum manufacturer should not be prohibited from

operating Micro Manufacturing unit and licensing /

registration should be required under National Bill.