Battle for EA alcohol market shifts to spirits, low-end brands

Wednesday August 09 2017

The sales of EABL signature beer brands like Tusker Lager and Serengeti Lager have declined in recent years. PHOTO FILE | NATION


Brewers and alcohol distributors in East Africa are battling for control of the spirits market — currently the most lucrative — in the face of an onslaught from imports and counterfeits, plus a combination of other factors.

Industry players say an increase in taxes, competition, drought, economic growth that does not trickle down, political instability, regulatory headwinds and millennials-led dynamics are altering the alcohol industry in favour of spirits and low-end beer brands.

Despite impressive economic growth in East Africa averaging six per cent in recent years, the trickledown effect has been minimal, which has impacted disposable incomes and slowed down bottled beer consumption in favour of spirits.

Companies like East Africa Breweries Ltd (EABL) and Kenya Wines Agency Ltd (Kwal) have recorded significant growth in the spirits market, a trend largely attributed to easily available raw spirits and a growing low-end brands market.

EABL’s mainstream spirits market for example posted a 29 per cent growth while reserve and premium spirits increased by 11 per cent in the past financial year.

The firm posted a 13 per cent rise in low-end beer brands mainly Senator and Balozi. Traditionally, the beer maker’s growth was driven by its signature mainstream beer brands like Tusker Lager and Serengeti Lager whose sales have declined in recent years.


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Kenya has in the past five years raised excise duty on bottled beer four times including a 43 per cent increase that took effect in December 2015 — the highest on the continent — which has also eroded the growth of bottled beer market.

In the just concluded financial year for example, EABL bottled beer market recorded a seven per cent decline for both premium and mainstream brands.

“Although our beer market declined, it was mitigated by growth of Senator and spirits,” said EABL group managing director Andrew Cowan.

In this year’s budget Kenya increased excise tax on spirits to $1.8 per litre from $1.6 per litre.

Kwal has also recorded a steady growth in its spirits business to 20 per cent, from single digits, and has decided to shoulder the increase in excise duty instead of passing the burden to consumers, corporate affairs manager Gordon Mutungi said.

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For EABL, challenging regional markets have also played a part in the company’s move to explore alternative brands.

The firm, whose profit after tax increased marginally by six per cent to $80.4 million in 2017 from $75.7 million in 2016, has subsidiaries in Uganda and Tanzania and export markets in Rwanda, Burundi and South Sudan.

That EABL is feeling the pressure of a tough regional market is evident from the fact that in Kenya, a market that accounts for 75 per cent of its business, posted a four per cent growth in net sales for the financial year ending June 2017.

In Uganda, which accounts for 16 per cent, the company net sales increased by seven per cent, while in Tanzania that accounts for nine per cent, sales decreased by 13 per cent.

In Burundi and South Sudan, political instability has eroded the markets while Rwanda remains a small export market.

“We have a clear strategy anchored on incremental investments to unlock growth in areas such as spirits and value beer,” said Mr Cowan.

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