Global brewers Diageo and SABMiller are struggling to grow their sales volumes in Africa in the face of rising competition, tough regulatory environments and constrained consumer spending.

Announcing its results last week, SABMiller, the parent firm of Tanzania Breweries Ltd (TBL), said its beer volumes in Africa grew at 6 per cent in the first six months of the year, against a target of 15 per cent.

“Beer volumes in Africa rose 6 per cent, less by a 9 per cent anticipated improvement, and South African lager sales slid 2 per cent amid a weaker economic environment,” said SABMiller in a statement.

“Political unrest in Mozambique and soft economic conditions in Uganda and Zimbabwe offset improvements in Tanzania, Zambia and Nigeria.”

Diageo said its sales in Africa grew by only 1.3 per cent in the quarter ending September, against a target of 13 per cent.

The two giant brewers dominate the formal alcohol business in the East African region through their subsidiaries and distribution arrangements in Kenya, Uganda, Tanzania, Burundi and Rwanda.

Diageo-controlled East African Breweries Ltd (EABL) recorded a 37.9 per cent drop in profit after tax for the full year ended June 2013, to Ksh6.9 billion ($79.3 million), reflecting increased debt repayments.

READ: After dip in profits, what recovery plans has giant brewer put in place?

The company borrowed Ksh19.5 billion ($224 million) in November 2011 to buy a 20 per cent shareholding in Kenya Breweries Ltd (KBL) from SAB Miller Africa B V, making KBL a wholly-owned subsidiary of EABL.

On Thursday last week, EABL launched a Ksh5.4 billion ($62 million) Commercial Paper — the country’s largest — a move analysts at Standard Investment Bank (SIB) say was driven by the need to cut financing costs.

“We think the brewer has opted for the CP in order to reduce the cost of its existing debt obligations,” said SIB.

Geoffrey Maina, a research analyst at Old Mutual Securities said this debt repayment plus the introduction of excise duty on Keg could impact on profits.

The low-end Keg is EABL’s largest beer brand by sales volumes, and was previously exempt from excise duty. The firm said sales dropped by 80 per cent following the new 50 per cent tax on the beer — translating into Ksh35 ($0.4) per litre, given that the Kenya Revenue Authority charges Ksh70 ($0.8) per litre excise duty on all beers.

This forced EABL to increase the price of a barrel of Keg Senator from Ksh3,146 ($36) to Ksh6,544 ($75.21).

READ: EABL to launch new beers for low-end market to fight off rivals

Analysts at Old Mutual Securities said with beer consumption growing at a lower rate in Europe and America, international alcohol brands are now increasing their presence on the African continent as they seek to tap into the demand from an emerging middle-class.

According to data from WHO, the world’s per capita alcohol consumption is 6.13 litres per year with Africa’s standing at 6.15 litres. This is lower than Europe and the Americas, which consume 12.18 litres and 8.67 litres respectively.

Global players are looking at the low consumption as an opportunity to grow their earnings. Consequently, new players — SABMiller, Heineken and independent spirits importers — have entered the market.

Traditional brewers too have entered the market, following a change in the law that allows them to commercialise their brews, as is the case in Kenya.

But the entry of new players plus a mix of regulatory decisions have put SABMiller and its main rival Diageo under pressure, according to analysts.

“The market is changing very fast for EABL. It has a new competitor in SABMiller following the latter’s re-entry into the market… other players like Keroche are becoming ever more aggressive,” said Mr Maina.

Keroche has announced a Ksh2.5 billion ($28.7 million) expansion plan that will see it raise its production by tenfold to 100 million litres annually, an output that executives at the company believe will be equal to 20 per cent of EABL’s and that could help it get a 20 per cent market share. The plan is expected to be commissioned next year.

TBL, the Dar es Salaam Stock Exchange-listed firm, reported a 7.9 per cent increase in profit after tax to Tsh86.75 billion ($53.8 million) in the six months ended September 2013, from Tsh80.37 billion ($43.7 million) over a similar period in 2012.