Angola Food and Drink Report Q2 2012

BMI View: With one of the strongest economic growth outlooks in Sub-Saharan Africa we areunsurprisingly bullish on the prospects for food, beverage and mass grocery retail sales growth in thecountry over our forecast period. The continued expansion of the domestic oil industry will be the chiefdriver of this strong economic expansion, with investment in infrastructure (to support the development ofthe oil sector) also a major contributor. Oil and export-led economic growth will feed into a positiveoutlook for private consumption over our forecast period, which translates into bright prospects for theconsumer sector.

Key Forecasts:

Per capita food consumption to grow by an average of 13.9% annually to reach US$1,266 in 2016Beer production will increase by 15.9% in 2012. To 2016 we expect production growth to average 12.7%annually with the dynamic industry continued to expand amid continued investmentMass grocery retail sales will increase by 19.8% in 2012

Key Trends:

Organised Retailing: All Southern Africa markets lag regional leader South Africa in terms of thepresence of organised grocery retailing. Across the region, formalisation will be a key driver of massgrocery retail sales growth, as more and more shoppers trade up to organised retail channels. This will betrue, even for the region's more mature markets; however here, we would also expect the steadyintroduction of new store offerings, such as non-food products, to also help support growth. In Angola,we estimate that only around 6% of grocery retail sales are accounted for by the organised sector and thisprovides tremendous room for growth.

Beverage Sector Growth: We expect to see strong beverage sales growth throughout the region over theforecast period and well beyond. There is enormous potential in beer and soft drinks, specificallycarbonates at this stage of the region's development. Throughout the region the beer market is alreadykeenly contested and this level of competition will lead to significant new investment over our forecastperiod, thus driving strong sector growth. At an estimated 45 litres per annum, Angola already has a highbeer consumption level and a relatively well developed beer sector by regional standards.

Demographic Appeal: Demographics are a key component of the region's appeal, given the very lowbase from which most growth is occurring and the severe income inequalities that still persist. Angola'spopulation dynamics are a major plus point for investors. The country's already attractive 20.2mn-strongpopulation base will grow to 24.8mn by 2020 and by an enormous 109% over our entire forecast period tostand at 42.3mn in 2050. Most notable is the age profile of the population - in 2012, 57% of Angola'spopulation is under 20 and this provides immense long-term growth opportunities for regional investors.

Risk/Reward Ratings: Angola falls in an impressive 3rd place out of 16 regional markets that are rankedfor Sub-Saharan Africa within BMI's Food & Drink Risk/Reward Ratings. The country scores well abovethe regional average in terms of Rewards - an illustration of the massive growth opportunities available inthe region. However, it also scores well below average in terms of Risk, highlighting the challenge thatinvestors face in fully realising this potential opportunity. Overall, Angola ranks comfortably above theSSA average in our regional ratings.