In the first half of the 2023/24 financial year, East African Breweries has reported an 18 per cent increase in beer uptake, compared to an 11 per cent rise in the spirits category.
Beers had for the past five years been the punching bag for higher taxes, until 2023 when the government exempted the product.
EABL Group’s volumes increased by two per cent, lifted by resilient consumer demand as markets leveraged a strong and expanding portfolio.
This in turn saw the brewer report Sh66.5 billion in net sales in the review period representing a 16 percent growth.
The Group reported net sales growth across the three markets: Kenya at 10 per cent, Uganda at 31 at per cent and Tanzania at 9 percent. Additionally, beer and spirits categories grew at 18 percent and 13 percent respectively.
“We have grown across markets and categories, especially in beer. The growth in spirits was slower due to higher excise and inflation, which is reflected in our performance," said EABL Group chief financial officer Risper Ohaga.
According to EABL Uganda led in net sales, followed by Kenya and Tanzania, respectively.
The Group MD & CEO Jane Karuku, noted that from half year performance, beer was the most preferred drink among Kenyans.
According to the report, beer performance was up 18 per cent, aided by the beer recovery in Kenya, compared to spirits, malt, and others.
“EABL has delivered another set of consistently strong results across key metrics. These results reflect the high-performance culture we have created across the business, the rigorous execution of our strategy, the strength of our portfolio across categories and our agility in responding to emerging trends and insights,” said EABL Group CEO Jane Karuku.
However, EABL had to contend with other taxation measures and a tough operating environment that was occasioned by the depreciating Shilling and increased excise taxes on glass, sugar and high fuel costs.
In 2023 the government in its revenue mobilisation imposed a 10 percent rise in excise on glass, an additional 5 percent on sugar.
Despite the rise in beer and spirits uptake EABL profits dropped by 22 percent on account of increased imports of raw materials.
The firm says it is now importing close to 70 percent of ethanol that it uses as a raw material in production.
“We saw a stressed consumer, increasing costs are affecting consumer pockets and purchase trends. However, Kenya came out strongly with growth 10 percent, Uganda 31 percent, Tanzania grew plus 5,” added Karuku.
Going forward the brewer is now increasing its beer offering for the Kenyan market.
Karuku says EABL continued to invest behind its brands with advertising and promotions spend rising 16.5 percent to Kshs 6.1 billion. The company’s Kshs 1.2 billion microbrewery in Kenya started producing the first innovation brands during the half.
“Our priorities for the second half will remain consumer centric and execute brilliantly to keep up with the dynamism in the market, drive cost efficiencies to grow margins and invest smartly in our brands and business. Further, we will continue to deliver against our ESG commitments, whilst driving high performance culture and engagement of our people,” Karuku said.
Illicits
The latest developments come even as consumption of illicit alcohol remains a challenge to industry players, as it continues to eat into their marketshare.
This has hit earnings in the industry with the government missing out on potential revenue from the alcoholic and beverages industry, one of the main sources in the manufacturing sector.
According to the regional operator, illicit alcohol now constitutes up to 56 per cent of consumption in the market.
“The consumer's income has become more depressed leading to a rise in consumption of illicit alcohol, which now constitutes over 50 per cent of the market. The government needs to get tougher to protect the consumers.” Group CEO Jane Karuku said on Friday.
Revenue loss
Kenya is estimated to lose an average of Sh71 billion in taxes annually as a result of the proliferation of the sale of illicit alcohol in the country, a study by Euromonitor Consulting, released in June, indicates.
The survey was commissioned by the Alcoholic Beverages Association of Kenya (ABAK), on the impact of illicit alcohol on the Kenyan economy.
The report also reveals that the volume of illicit alcohol sales has recorded strong growth in value since 2020 to stand at Sh 67 billion, reflecting its wider distribution and increased preference, especially in low-income settlements.
The popularity of illicit alcoholic beverages which are often sold at a lower price than legal drinks, has been fuelled by the non-compliance with tax and excise regulations.
The low price of illicit drinks, high taxes, costly raw materials to produce safe alcohol, as well as easy accessibility through street vendors, licensed liquor shops, grocery retailers, bars, and other hospitality outlets, has been cited as one of the reasons why illicit alcohol has become more affordable.
The main target for counterfeiting is the mass-market, high-volume brands that comprise a mix of mid-market and premium spirit brands followed by high-quality cider and beer.
