Brewers bring beer fight to East Africa
Posted Saturday, January 12 2013 at 17:01
- EABL executives held a meeting in mid-December to raise their concerns over the heightened activity on the part of their competitors on certain segments of their business.
- Brewers are betting on the region’s beer consumption increasing to that of the current global average. This increased consumption will be driven by rising incomes and the region’s economies posting growth rates of above five per cent.
Top executives will have to become more innovative as the East African beer industry becomes even more competitive.
Already, executives at East African Breweries Ltd (EABL), which currently controls about 85 per cent of Kenya’s formal alcohol market are a worried lot.
According to Standard Investment Bank, EABL executives held a meeting in mid-December to raise their concerns over the heightened activity on the part of their competitors on certain segments of their business.
While sales are growing in some of EABL’s units within the region, others are not.
In Kenya — the brewer’s main market — the spirits segment is the fastest growing.
However, according to Standard Investment Bank analysts EABL executives are concerned that the brewer may record lower beer volumes. In Tanzania, beer volumes were improving despite a tax hike in June 2012.
A slowdown in the Ugandan economy has dampened consumer demand, resulting in reduced spending on beverages like beer.
“EABL faced capacity constraints in the Ugandan market. However, the just completed and fully operational mash filter in Uganda, will result in lower imports from Kenya because of increased capacity, which will improve profit margins for the future,” said Standard Investment Bank in a note to investors.
Brewers are betting on the region’s beer consumption increasing to that of the current global average. This increased consumption will be driven by rising incomes and the region’s economies posting growth rates of above five per cent.
A recently released report by global investment bank UBS showed that on average an East African consumes well below the global average of about 35 litres per annum. According to the report, an average East African drinker consumes about nine litres of beer.
Kenya’s alcohol sector has experienced major realignments with the entry of new players — SABMiller, Heineken and independent spirits importers.
Keroche Industries’ ambitious expansion plans have forced EABL to launch new brands. Two months ago Keroche Industries — Kenya’s second biggest brewer — announced plans to upgrade its bottling plant at a cost of $29 million, which it aims to complete by the need of the year.
The plant should see the brewer increase its capacity from 60,000 bottles a day to about 600,000.
“The plant should help us push our market share from the current three to 20 per cent by 2014,” said Tabitha Karanja, the chief executive officer of Keroche Industries. The plant will enable the brewer to launch two new beer brands.