E-Malt.com News article: Kenya: New Alcoholic Drinks Control Bill legislation reduces revenues of Kenyan brewers

Kenya's brewing industry says it has already suffered a sharp drop in revenue following the implementation of new laws governing the production, sale and consumption of alcohol, Reuters reported on January, 6.

Passed in September, ahead of the drinks industry's busiest period of the year around Christmas, the Alcoholic Drinks Control Bill legislation reduces the number of hours bars can operate and legalises traditional, often cheap liquors that were previously banned.

Drinks firms say they have registered a sharp drop in sales since the bill's implementation, despite a strong rebound in the economy which expanded by 6.1 percent year-on-year in the third quarter of 2010.

"We have compared our sales for 2009 and 2010 and we have seen a 50 percent drop ... the bill was rushed ... they (government) needed to consult us," Tabitha Karanja, managing director of Keroche Breweries is quoted as saying.

Rwathia Distributors, a dealer for market leader East African Breweries, said sales were down more than a third after selling only 92,000 beer cases in December 2010, down from 150,000 in 2009. Nor will the beginning of 2011 offer much cheer for the industry.

"We projected selling 160,000 cases in December but we are now thinking of retrenching to break even ... January and February are the driest months," said Stephen Njuguna, an accountant at Rwathia.

"The timing of the implementation of the law during the peak season was not optimal," said Brenda Mbathi, corporate relations director at EABL, a subsidiary of Diageo which produces leading local brands including Tusker and Pilsner.

Against expectations, EABL's share price maintained an upwards trend after Kenya's president signed the law, climbing from 195 shillings per share in mid September to a 2010-high of 225 shillings on November 11 as the bourse enjoyed an eight-week rally. EABL opened the trading on January, 6 at 213 shillings.

But analysts expect the company's share price to fall once financial results reveal the bill's full impact and the cost of acquiring a stake in Tanzania's Serengeti Breweries last year filters through to the firm's bottom line.

"This is an inefficient market that does not react to such information," said Samuel Wachira, general manager of Drummond Investment Bank.

"Given the fundamentals, (the) acquisition of Serengeti and the alcohol bill, it will translate to reduced profits and dividend yields," said Wachira.

The new alcohol bill does, however, legalise traditional liquors that will now be subject to health standard controls, a move the industry applauds.

Hundreds of Kenyans have been killed drinking illicit brews laced with dangerous chemicals such as methanol, battery acid and bleach to increase potency.

But industry players are opposed to the strict new time restrictions which limit bars to serving alcohol between 5 p.m. and 11 p.m.. Previously bars could open 24 hours a day.

"It's ridiculous to restrict people from having drinks with their lunch. It is an extreme measure," said Allan Murungi, managing director at Sierra Brewery.


06 January, 2011