Sitting at lunch we were reflecting on some of our company visits and what we would do different and who we would work with when the conversation quickly changed to, if you had to start a company between now and the end of summer what would it be and why. First we started with could you live in Kigali and my immediate answer was yes but I would need a big opportunity which I defined as growth potential and financial and social runway. My idea was a commercial banana beer company for the following reasons:
- Agriculture productivity
- Educational opportunities
- Bottom of the pyramid impact
- Local employment and reinvestment
- Domestic market demand
- Export with no import
Let’s do some back of the envelope math. Rwanda has roughly 10 million people, 50% of which are of drink, they have a disproportionately large number of youth which we learned from the minister of youth during our meeting with government officials and the Rwandan development bank. Of the 5 million of age drinkers, half are men who from my observation at road side stores and restaurants drink more than women so let’s assume half of them drink which is 1.25 million and only 25 percent of women drink banana beer which is .625 million in total making the market size 1.875 million. Let’s assume the average person drinks twice a week and on average consumes 2 beers so 4 beers a week times 52 weeks a year give us 208 beers a year per person. 208 beers a year times 1.875 million is just shy of 400,000,000 beers a year.
The most popular local beers such as Tuskers are priced at a range from less than a dollar to thre dollars which I am assuming is a retail marked up 20%. So if on average a beer costs $2 retail which is $1.6 wholesale and the average wholesale beer has a net income margin of 7% then I am assuming is profit of $0.12. However my business would not have the advantage of economies of scale so I am going to discount the net income margin by 60% which would give me profit of $0.07 per drink. If I multiply $0.07 times the annual beer consumption of 4 million then we have an annual net income of roughly 25 million all of which I would reinvest in the company, mostly the employees and capacity.
These numbers seem large so I am going to assume the beer drinking population and consumption is the most inaccurate number but even if it is ten percent of that number, $2 million dollars would be a substantial economic investment in the country and who doesn’t like banana beer!