STRATEGY

EABL banks on home deliveries, off trade to stay afloat

Closure of bars has greatly affected EABL's sales

In Summary

•The brewer has  reported a 39 per cent decline on its net profit for the year ended June 30, 2020, which fell to ShSh7 billion from Sh11.5 billion.

•During the period under review, EABL net sales dropped 9.2 per cent to Sh74.9 billion from Sh82.5 in 2019.

East African Breweries Limited (EABL) is counting on deliveries and the off-trade market to sustain its business, as the ban on alcohol sale  by bars and restaurants hits its bottom line.

The brewer has so far reported a 39 per cent decline on its net profit for the year ended June 30, 2020, which fell to ShSh7 billion from Sh11.5 billion in the previous year, with shareholders missing out on final dividends.

During the period under review, EABL's net sales dropped 9.2 per cent to Sh74.9 billion from Sh82.5 in 2019, blamed on effects of Covid-19, mainly regulations to contain the spread of the virus, which led to closure of bars and limited operating time for outlets.

 

“Across the markets, we have tracked changes in consumer behaviour and repurposed our execution plans in trade to continue serving our consumers where safe and possible to do so,” EABL Group MD and CEO, Andrew Cowan, said yesterday.

President Uhuru Kenyatta on Monday announced there shall be no sale of alcohol in restaurants and eateries for the next 30 days, with all bars and night clubs remaining closed indefinitely.

"Licenses of bars will be withdrawn permanently if found operating," Uhuru said.

The entities are the biggest movers of alcoholic drinks, a cause of concern for brewers in the country

Cowan yesterday said the company is keen to retain its market share through an off-trade market strategy, an initiative that commenced in March when the nation-wide curfew and partial closure of the economy came into place.

“Consumer demand has increased off-trade so we have derived new channels to ensure supply of all our quality products,” Cowan said, noting the company has invested in easily deliverable products such as ensuring all its beers are in cans.

The off-trade market includes retail outlets like hypermarkets, supermarkets, convenience stores, mini markets and wines and spirits shops, which continue to sale alcohol.

 

Most of these outlets are allowed to sale alcoholic drinks but strictly on a take-away basis.

“We have online, distributors using boda boda’s to deliver, supermarkets and premises which have come up with packages for delivery. It is going to be a challenge but we continue innovating,” said Jane Karuku-EABL executive director and Kenya Breweries MD.

The company yesterday said it has stocked up raw material to ensure constant production and market supply, as borrowing to fund business pushed up short-term debt to Sh8.5 billion, up from Sh5.2 billion the previous year.

“We have managed our supply chain disruption by ensuring we stock up,” EABL group finance and strategy director Risper Ohaga said.

EABL’s worst month on sales was April, management said, which eased up in May, June and July as Kenyans adopted to measures put in place to contain the spread of Covid-19.

The unstable market and low sales have seen shareholders miss out on a final dividend.

“In recognition of the uncertainty in the external environment in the face of the Covid-19 pandemic and the need to conserve cash to support the business, the board of directors has not recommended a final dividend,” EABL notes in its financial statement.

Consequently, the interim dividend of Sh3 per share paid in April 2020 will be the full and final dividend for the year.