No Matter How Bad Things Turn Out: Cheers!

Published 8 years ago
No Matter How Bad Things Turn Out: Cheers!

As the summer heated up in the heart of Soweto, Johannesburg’s largest township, businessmen Ndumiso Madlala and Josef Schmid, brewed 12,000 liters of beer for the Christmas rush. All seemed busy with the whiff of malt and hops. Brewmaster Madlala shared his brew with the FORBES AFRICA crew. The slightly sweet, lingering finish washed agreeably over the palate of this avid beer imbiber.

It is their first Christmas; they want to double their production; enough to get the whole of Soweto drunk until the New Year. But it has not been smooth-sailing for the duo; an in-house beer festival in October was postponed following a yard inspection by the health authorities. They wanted an oil tank to be covered at the brewery. A hiccup in the frothy beer business.

“With this venture alone we foresee a good R55 million ($5 million) per annum, and we are also planning to open another four establishments in other townships in the country. Our model is exclusively township. As I was traveling Europe when I was a student, I saw every little town had its own beer. Here townships are big neighborhoods, I see it necessary they have their own local beers,” says Madlala.

Schmid joined forces with Madlala with a vision and a passion.

“In South Africa microbrewing was very elitist and white dominated, prior to Soweto Gold. But with the great emerging and growing middle class in the townships we saw a niche market. So, we see ourselves as pioneers,” says Schmid.

The two are as different as cold beer and warm tea. Thirty-five-year-old Madlala grew up in Elandskop, a village 35 kilometers outside Pietermaritzburg in KwaZulu-Natal. He obtained a Master’s degree in science in the Netherlands and then worked for Africa’s biggest brewer, SABMiller, for nine years. Schmid, 44, the son of an Austrian butcher, was born to the Swedish middle class. He is a hospitality and tourism executive who came to South Africa to work.

They met through a friend in early 2012. In October, they registered the business under MadMead Brewing Co. After a two-year wait for a full license, they turned out their first batch of Soweto Gold in July. This start-up company cost investors $800,000. The Industrial Development Corporation, a government entity, also loaned the company $320,000.

“We estimated that we will brew for about seven months until we reach capacity and in that time we accumulate funds to do an expansion but there was such a demand for the beer that Ndumiso started brewing in July and we reached capacity in August. The reality is that we have hit the production peak in the first month of production. Coming from nowhere, we are the second-best selling craft beer in the country,” says Schmid.

“As an entrepreneur you are always a dreamer and it is that dream that makes you so sure that everything is going to work out. No matter how bad things turn out, the vision carries you forward,” says Madlala.

It’s been a long and winding road. Schmid and Madlala traveled to China searching for the best machinery and shipped it to South Africa, in late March.

“Ndumiso is an expert in processing; he modified their designs to work in our space and our flow and what we want to do,” says Schmid.

MadMead Brewing Co is based in Ubuntu Kraal, an entertainment venue with a restaurant, in Orlando West, Soweto. In a few months, they’ve channeled the beer through 25 restaurants, pubs and taverns around Johannesburg, including affluent Sandton, Rivonia and Fourways. They employ more than 60 people.

As the company senses demand, the names are born: Apple Ale, Cherry Ale, Orlando Stout and Weiss Gold.  In this, Ndumiso has not forgotten his roots.

“For next year we are also conceptualizing a sorghum malt maize beer which brings our traditional ways of brewing together with the Western ways of brewing… We want to put sorghum beer back in its premium space, so we want to see if we can flavor the traditional beer with pineapple. But this will be on the non-commercial scale for the guests to enjoy in-house,” says Madlala.

Soweto Gold is enjoying popularity at craft beer festivals.

“The best ego boost for us is to go to a beer festival and you get people saying this was the best beer on the market. We outsell people on price because we are a quality beer,” says Schmid.

“We have hit capacity without even tapping into Cape Town or Durban; we are only in Johannesburg for now. We are now venturing into canned beer because it is easier to package and we are modelling ourselves after American micro-brewers,” says Madlala.

He says canning of their beer will help in shipping to markets in Africa and overseas, but their first attempt was difficult.

“We had cans already out in the market but we pulled them back because we could not control the quality. The canning was done by a third party. As soon as we started our own canning line we were sold out. This has enabled us to pasteurize our product and it can stand on the shelves for at least three months and therefore makes a viable retail product,” says Madlala.

Cans could be a good move in a market that rates them above brown bottles, according to Apiwe Nxusani, a general manager and master brewer at Brewhogs Brewers, one of craft beer pioneers in South Africa.

“I personally believe there’s a market for brands like Soweto Gold to grow and compete with the commercial beers. It depends at which segment of the market they are specifically targeting as the price at which craft beer is sold at could never compete with your 750ml of Black Label, for example, as sold at the shebeens,” says Nxusani.

“The market would be the upmarket, classy and BEE guys in Sandton who want to make a statement.”

Christopher Gilmour, an investment analyst at Absa Bank, agrees that craft beer has its place.

“Craft beer, or real ale as it is known in Britain, is a small but rapidly growing industry in South Africa. Until seven years ago, there were fewer than 20 brewers, the largest being Bavaria and Mitchell’s,” says Gilmour.

He says the rest of the world is catching up.

“These beers have a loyal and knowledgeable following, quite different to that of premium beers. Pricing is often significantly higher than premium beers and reflects the lower volumes brewed and higher input costs and lower economies of scale compared to mainstream and premium beers,” says Gilmour.

Whatever the volume, Soweto is heading for a golden Christmas. Don’t let the gentle sounding name of Soweto Lady Gold fool you. This lady has a kick like a mule.