How Tanzania is becoming a booming market for the beverage industry with KHS
Better conditions and growing demand are generating incredible growth among regional beverage bottlers in Tanzania. This also applies to Watercom, a company that has invested in not one but two KHS lines for water, soft drinks and juices in a few years.
With consistently high annual growth rates of 5% to almost 8% since 2000, Tanzania is undoubtedly one of the most dynamic markets in sub-Saharan Africa. Since the state ceased to be among the poorest countries in the world a few years ago, it has been considered politically and socially stable, especially since the assumption of the presidency of Samia Suluhu Hassan in March 2021.
Unlike the rather authoritarian style of government of her predecessor, she follows a more liberal economic course, welcomes development aid and foreign investors, and has declared war on corruption. “The Royal Tour”, a documentary film and the brainchild of President Samia Suluhu Hassan, was filmed to publicize the country’s tourism and investment opportunities. The production has since boosted investment in Tanzania.
The population of this East African country is growing rapidly, as are the middle classes, especially in urban areas. This provides opportunities for the food and beverage industries in particular, which have been growing successfully for years now. A number of multinational companies are now beginning to establish themselves in Tanzania. However, the main beneficiaries of this development are the inland conglomerates which are (still) able to share the market widely. On the one hand, this is due to political regulation and reluctance to invest, which prevailed in the past. On the other hand, it is also because Tanzanian consumers are above all loyal to local products and brands.
An ambitious multinational
One of the major business associations is the Oilcom Group based in the former capital of Dar es Salaam, whose main success lies in the trading of petroleum products. Other business areas include transport logistics and food production. Since 2005, the family business has also invested in the booming activity of milk production and processing: its subsidiary Milkcom works on the entire value chain, from cattle breeding to bottle to the sale of finished dairy products, typical of the high degree of vertical integration in the Tanzanian food industry.
A few years ago, Oilcom added water to its portfolio in the form of the Afya brand. This market is also growing rapidly because, among various other strategies, the government has made it an express policy to encourage people to drink clean bottled water in order to prevent a risk to their health. In no other African country do people drink as much packaged water per capita as in Tanzania today. The philosophy of Oilcom’s subsidiary, Watercom, founded for this specific purpose, is to provide high quality. This refers to both the purity and mineralization of the product itself and its production process to common standards. Here, the use of the latest European high technology is seen as a unique selling point.
PET lines in demand
As a general rule, when it comes to technical equipment, Tanzanian multinationals prefer state of the art – something German engineering companies in particular are able to provide. “This country is an extremely important market for us,” explains Denise Schneider-Walimohamed, managing director of KHS East Africa. “Over the past two years, we have sold most of our machines in the East African sales region to Tanzania, both to large companies and to smaller suppliers, including more more are entering the market. PET lines are particularly in demand: plastic bottles are the most affordable for local consumers. As usual in Tanzania, beverage producers want a high level of independence by manufacturing not only the containers themselves, but also the preforms or caps, for example.
Watercom also places its trust in the reliability and performance of German machinery: in seeking high-quality technical plant engineering when adding the soft drinks segment to its line of business activities in 2017, KHS was part of it. The system supplier from Dortmund installed the first line for water and soft drinks. Up to 40,000 0.5 liter bottles can be filled there in one hour. The setup includes all components from the syrup room through a blower/filler and labeler to conditioners and palletizers. The latter are not so common in the African region because palletizing here – if done at all – is usually manual due to low personnel costs and smaller line outputs. As an additional service, the experts from the Bottles & Shapes program provided a distinctive bottle design for different formats that uses less material and contributes considerably to strengthening the brand image.
Focus on growth
“The cooperation, both in the planning stage and during the installation, until the final commissioning, has been excellent at all times,” says Salum Nahdi, Director and CEO of Watercom. “The performance of the line convinced us, as did the fact that our expectations in terms of efficiency, optimal use of resources and waste management were met.” So it wasn’t long before KHS was rewarded with a second contract for proving themselves to be a reliable partner. A second line virtually identical to the first was subsequently ordered in 2020.
However, in the meantime, Watercom’s portfolio has expanded further: its new fruit juice drinks need a second syrup room and a flash pasteurizer to increase shelf life. Another difference from the first line is that KHS stretch blow molding technology has further evolved since 2017: its latest generation InnoPET Blomax V-series is convincing with its intelligent process control, near-infrared (NIR) heating and its simple modular design. Numerous optimizations also reduce energy and supply air consumption by up to 40%. The two KHS sister lines sit side by side – with the added convenience that the blow molds for the different bottle formats can be easily swapped from line to line depending on the production plan.
In the shortest possible time, thanks to investments of around 100 million euros, the company established itself as one of the largest bottlers in the country. On his company grounds, which cover a total of 800 hectares, he now operates no less than three water pipelines and two CSD and juice pipelines – and can claim to be one of Tanzanian market leaders. The beverage producer’s future expansion plans go well beyond regional borders: another production site is planned in the neighboring state of Malawi, where KHS will bring a third line.
Regarding after-sales service, Nahdi particularly appreciates the fact that KHS engineers can be on site quickly when needed. This minimizes the time and cost of operational disruptions. His only wish is for spare parts to be available sooner. He would therefore be happy to hear that KHS is currently considering expanding its local involvement. “In addition to our site in Nairobi with its more than 40 engineers, thanks to the positive evolution of the market, we will soon create a new service center in Tanzania”, announces Schneider-Walimohamed. “In the future, we will therefore be able to offer our customers an even better after-sales service than what we already do today.”
The circular economy of the country with its population of around 60 million is still in its infancy and yet politicians have recognized that they need to rethink and act on ecology again. The recycling quota for all plastic waste in Tanzania is only 5%, and the value of PET is already at 20% – and growing. No deposit system is yet in place, but there are many collection points for used PET bottles that pay collectors by weight. The raw material is then sent for reuse to local recycling companies or, as is most often the case, to exporters.
Large food processors and beverage bottlers are now increasingly contributing to the collection and further use of their packaging materials. “The government has engaged in various recycling projects with the National Confederation of Tanzanian Industries and a number of private actors,” says Salum Nahdi. “We now have a market for recycled PET here, with plastic pallet and crate manufacturers as our main customers.”
“We largely buy our raw materials from regional sources,” explains Nahdi. “By purchasing milk, fruit for our juices or other basic ingredients for our products from local people, for example, we help secure their jobs and livelihoods.