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Ethiopia’s bottled water business is feeling the pinch of the hard currency shortage and an imbalance between a growing number of bottlers and lack of needed ‘inputs’ for the bottled water.
Bottled water companies have cut production and working hour shifts and consumers have noticed a shortage of bottled water in the capital city recently.
Distributers Capital interviewed reported a shortage of bottled water over the last week.
“In the last few days I have finished the entire distribution between 8 and 10 am. Normally it would take me the entire day to finish distributing the water,” a sales person told Capital. The product is usually delivered on medium sized pickup trucks.
Shemeles Ajema, Sales Manager at Abebe Dinku Water & Non-Alcoholic Industry, producer of Top Water, said that in recent years the bottled water market grew by 13 percent but this year the bottled water industry has grown by 38 percent.
“In the past three quarters of the budget year nine new water bottlers joined the market and some of the existing factories have expanded their capacity and seven additional new companies are expected to begin operating in the next four months,” the water sector expert, who consult several new water bottlers, said.
He said that the growing demand for bottled water has encouraged more investors. Now there are 67 water bottling companies in the country, with most of them focused on central Ethiopia.
By the next Ethiopian new year expectations are that number will increase to 74 bottled water companies. Not only are there more new companies but existing producers are significantly expanding their production capacity and installing new lines, according to experts in the business.
“Even though the number of bottlers have increased significantly, product scarcity has been observed in the market,” an expert said.
Shemeles argued that currently the limited number of input producers and the hard currency shortage has forced factories to use 46 percent of their capacity on average.
He said that a label or polysheet scarcity in the market would force the bottlers to suspend their production.
Water bottlers say some factories have been forced to limit the types of products they offer for example producing only a half litter or one litter bottle because they have limited access to inputs.
The capacity of input suppliers is not enough to cover the demand of the existing bottlers and at the same time new producers are also looking for more inputs.
Some of those who are involved in the sector are also claiming that some of the input suppliers are also hording the inputs due to frequent price increases of raw material.
“Producers are not growing as much as the bottlers. Maybe the number of input producers has increased by only two or three,” experts said.
Experts added that in the past few months the price of inputs has significantly increased. “In the past couple of months the price of inputs has increased by up to 80 percent”.
Since the prices keep rising the suppliers have become more cautions and are hoarding products and evaluating the market, according to experts. The input price increase has been observed on the international market as well. Locally the increase in prices has been attributed to the devaluation of the birr.
“This is likely the reason for the decrease in production in the water industry,” Shemeles said.
The current situation has also frustrated the water bottlers, as they have not raised water prices despite the rising prices of inputs.
“About one birr increased on the price of a raw single bottle but bottlers have increased only a penny on their single bottled water,” the expert said.
In the past two months the water bottlers have revised their price on the packed product, while experts argue that it is incomparable with the increase in input prices.
Experts said that the sector has created at least 20,000 jobs, but they argue that the government considers it a luxury business.
“Since the government does not considered it a priority industry the sector is not getting adequate attention in relation to hard currency allocation and controlling the hoarding,” experts added.
Experts argue that the bottlers have to work jointly to convince the government and secure benefits that they give to others sectors.
Shemeles said that some of the bottlers are now working to form an association to represent the sector.