Equity, KBL bank on sorghum for higher beer sales
Friday April 10 2009
Kenya’s beer industry is turning to sorghum in an effort to reduce its longstanding reliance on the more expensive barley.
Already, brewers have started substituting some of their imported raw materials in partnership with local sorghum farmers.
Leading producer East African Breweries Ltd (EABL) and Equity Bank, the country’s fastest growing bank, have joined hands to help farmers in arid regions grow sorghum for commercial purposes.
Under the partnership, the bank will provide credit to farmers while EABL will guarantee a market for the crop, which it will use to make non-malted beer.
James Mwangi, the bank’s chief executive officer, announced the establishment of a $145,000 (Ksh10 million) revolving fund for local farmers to facilitate the enterprise.
“They will get loans at 10 per cent interest to buy quality seeds and fertilisers to boost sorghum production,” he said in Kitui town while opening Equity’s local branch.
Mr Mwangi said local brewing firms have been reluctant to use sorghum — a hardy grain that yields considerably well in minimal rainfall and poor soils — because they were not sure that farmers could guarantee consistent supply.
The plan would substantially improve the economic wellbeing of millions of poor farmers in the country.
The prevailing high cost of agrobased raw materials, particularly barley and malt, contributed in slowing down the earnings of the brewers, who are now concentrating on cutting costs amid sluggish growth of beer consumption.
Barley, traditionally used to brew most beer, grows best in countries with cooler climates.
But its high price due to the strong global demand and high shipping costs has made beer making very expensive.
“Aggressive cost management will be our agenda in 2009, especially reduction of the cost of raw materials,” said Gerald Mahinda, EABL managing director, while unveiling the firm’s half-year results last month. In the six months to December 2008, the cost of barley and malt rose by 60 per cent.
With cereal prices expected to remain high on the international market, the brewer is now diversifying the raw materials to include sorghum.
Farmers are being asked to grow a certain white variety that experts say has a fine taste when brewed.
Speaking during the opening of Equity Bank’s Kitui branch, Vice President Kalonzo Musyoka assured the two companies that farmers would grow enough sorghum as long as a good market was guaranteed.
The VP presided over the launch, accompanied by 10 Members of Parliament from Ukambani region.
He said the project had high chances of success and would benefit farmers and Kenya’s economy.
The initiative was launched as local MPs sought ways of discouraging brewers from importing barley for beer production.
Kitui South MP Isaac Muoki said he would introduce legislation compelling the Government to impose heavy taxes on barley imports to promote sorghum growing.
“Why does the country import barley from Russia and Canada at high prices yet sorghum can be grown locally for the same purpose at great benefits to farmers?” he asked.