Ethiopian Business Review

Can Castel Emerge as a Top Wine Producer in Ethiopia?: What the French Company’s Presence in Ethiopia Means for the Local Wine Sector, Importers

Despite wine becoming more popular among some segments of Ethiopian society, the country still lags behind others with regards its per capita consumption of wine. Still, the Castel Group, a France-based international company, started producing wines locally here in Ethiopia. The Company plans to export roughly half of its products and sell the rest in local markets. But what will this mean for importers of wine – will their share of the marketplace dwindle or will they come out on top? EBR’s Yoseph Mekonnen spoke with wine importers to find out more.

Many Ethiopians use wine for special occasions, such as dates and special holidays. Though the first winery in Ethiopia has been in operation since the 1950s, the wine drinking habits of Ethiopians is infrequent. 

Statistics demonstrate that Ethiopia falls short with regard to wine consumption. World per capita wine consumption lists put Ethiopia among the countries that use a small amount of wine, below one litre per year. Experts close to the issue put the number between one and nine centilitres. The leading wine consuming countries, like the Vatican and Luxembourg, have a per capita wine consumption rates that fall between 54 to 70 litres per year. Even African countries like the Seychelles have a per capita consumption of 16 litres per year. 

But this reality is slowly changing, as wine has become more popular in recent years. The annual wine consumption in Ethiopia is expected to grow to more than 8.5 million litres per year. The country’s leading wine factory, Awash Wine, which was established in 1956, covers about 6.5 million litres of this amount. The newly established Castel winery’s production and imported wines are expected to fill the remaining demand.  

The Castel Group, which prides itself as the third-largest wine producer in the world and the second-largest beer and soft drinks business in Africa, has started producing wine in Ethiopia since March 2014. Castel has seven different types of products, two white wines and five red wines: Acacia Dry Red, Acacia Medium Sweet Red, Acacia Medium Sweet White and Rift Valley Merlot, Rift Valley Cabernet Sauvignon, Rift Valley Syrah and Rift Valley Chardonnay. The Company puts its production amount at 900,000 litres.  Castel has a plan to export roughly 50Pct of its product.

Castel, which was founded in Bordeaux, France in 1949 by a family of nine brothers and sisters, has been operating for more than 60 years. The idea of establishing a Castel winery in Ethiopia was born during a meeting between Ethiopia’s late prime minster, Meles Zenawi, and Mr. Pierre Castel, founder and President of the Castel Group, at Meles’s Palace in 2007. 

The winery started availing its products to the market eight months ago and seems to be enjoying wide public acceptance. Metik Tenker has worked in the wine market for more than 14 years. He currently runs Michael Liquor Store around the Bole Michael area. He states that his customers have fallen in love with Castels`s products. 

Tigist Gebregziabher, a saleswoman for Country Trading, a liquor importing company, agrees with Metik’s assessment. “In addition to [selling liquor] in our store, we also sell them door-to-door to supermarkets and other wholesalers. Before Castel [starting selling wine in Ethiopia], people wouldn’t hesitate to buy our imported wine, but now they prefer Castel wine instead of ours,” she says.

The reason for this popularity may be due, in part, to cost. The liquor store where Tigist works is located around Piazza in front of the Cathedral School.  When EBR visited the store, it was full of different imported liquors.  The two types of wine that were available were wines from France and Chile, named Grand Susan and Ale Vend, respectively. The selling price of this imported wines falls between ETB259 and ETB914. However, the locally produced Castel products are between ETB190 and ETB160, which were not included at Country’s liquor store. 

Tigist thinks that her customers have changed their preference towards Castel because Ethiopian customers want something new. “We started experiencing this sales downturn on our outdoor sales during the last three months,” Tigist says.  “I think once the people become familiar with [Castel wine] they will return to us. They are only leaving us for something new.”  As Tigist was saying this, Metik interrupted her and said “no, people are switching to Castel for its reasonable price.” He also states that a couple of months ago he would visit Tigist’s liquor store to buy wine and other liquor for his store, but now he has stopped buying wine and purchases takes other liquor.  

Though Castel is gaining acceptance among Ethiopians, both Tigist and Metik say that the locally produced wines have yet to gain traction among foreigners and more affluent Ethiopians. Speaking from experience, they both noted that those groups are more inclined to purchase imported wines from South Africa and France. 

But Tigist surmises that Castel may have a difficult time further penetrating the market, as they are currently only being sold in small stores and supermarkets. However, Castel says it has the courage to compete its products with imported wines and that the product will continue to do well. “We are confident about the quality of our products; we can say that our products can easily compete with those that are imported from abroad,” says Alem Bekele, sales and marketing manager at Castel. 

Still, wine aficionados in Ethiopia, those who have been drinking wine for years, say that Castel’s locally produced wines lack the strength of imported wines. Mitik also states that Ethiopians have their own way of drinking wine, one that isn’t common in other countries.  Many Ethiopian wine drinkers usually mix wine with Coca-Cola or other sodas to enhance or sweeten the flavor.  Consequently, this has resulted in a different wine palate  among the majority of Ethiopians, according Metik. 

However, data from the Ethiopian Revenue and Customs Authority (ERCA) shows that the import of wine is increasing immensely year after year. Some analysts say this doesn’t bode well for Castel, as they’re hoping to fill a void in the market, one they hope won’t be filled by importers.

Regardless of this fact, Castel claims that, even with the relatively small amount of wine bottles they’ve started with, they still have a 10Pct share of the Ethiopia’s wine market. The Company plans to expand its vineyard and increase production. According Alem, wines that are fruity, easy to drink and aromatic are preferred by Ethiopian consumers. Castel even exports its products to China, Australia and the USA.  

Still, Castel’s emergence and growth in Ethiopia hasn’t been perfect. The absence of packaging companies locally (for the labels, bottles etc.) is a big challenge for Castel.

Ethiopia’s oldest and leading wine producer, Awash Wine, was privatized a year ago and still dominates the country’s wine market. Both Awash and Castel have plans to quench the wine thirst of Ethiopians by expanding their production amount. Despite the growth in demand for wine, it remains to be seen who will come out on top, but analysts predict it may be interesting to see what happens.

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