Kenya: Outgoing East Africa Breweries Ltd managing director describes Kenyans as the most price-sensitive beer consumers in the world
Outgoing East Africa Breweries Ltd managing director Charles Ireland has described Kenyans as the most price-sensitive beer consumers in the world, The Standard reported on June 21.
Ireland, who will be replaced by fellow Briton Andrew Cowan at the end of next month, said price offers meant a major spike in beer sales. And in contrast, any price increases translated to significant dips in consumption.
“I have never encountered a market as price-sensitive as this in the countries I have worked in, and they are many,” Mr Ireland, who has been at the helm of EABL for three years, said in an interview.
Since his arrival in 2013, the Kenyan beer market has undergone major changes including hefty taxes that at one time nearly drove Senator Keg, the brewer’s most selling brand, out of the market.
Excise duty was slapped on the cheap beer three years ago, raising the prices by a quarter and resulted in a sharp dip in consumption. EABL nearly withdrew the product from the market, while the dozens of second generation spirits entered the market with fatal results.
Consumption of cheap beer jumped in the last financial year to drive revenues and profits for the firm. It was also in Mr Ireland’s term that excise duty on regular beer rose to Sh100 per litre, the highest level ever, as the State seeks to raise resources to fund an ever-growing national budget.
Beer consumers were this year spared additional taxes in a rare reprieve in the Budget unveiled by National Treasury Cabinet Secretary Henry Rotich two weeks ago. A clause allowing the Kenya Revenue Authority to tie excise taxes to inflation might, however, mean additional levies on beer, moving forward.
EABL is locked in a fresh tussle with its distributors who are demanding to have a say in determining the selling prices for beer by fixing their own profit margins. It is feared that the measure could translate to higher beer prices and possibly a dip in consumption owing to the price sensitivity as observed by Mr Ireland.
The distributors have since moved to court citing that it was restrictive. But the Competition Authority of Kenya has also cited that it would be illegal for the distributors to meet and decide on the pricing as it would be price fixing.
Mr Cowan, who takes over on July 28, is betting on the rapid population growth in Kenya and the region to sustain the growth momentum set by his predecessor.
He arrives at a time when several European brewers are making a beeline for the Kenyan market, where the rapid population growth is providing a huge market of millions entering the legal drinking age every year.
21 June, 2016
