E-Malt.com News article: Kenya: Battle between East Africa Breweries and Keroche Industries goes to court

The cold war in the alcohol industry pitting East Africa Breweries (EABL) and Keroche Industries found its way to court August 17. EABL and Keroche have been fighting it out for the lucrative lower end beer market for years now, Kenya Times posted August 18.

EABL has tailor-made the Senator brand for the lower income consumers, which Keroche dominates with its Vienna fortified wines. During this years Budget, Finance minister Amos Kimunya reduced excise duty on all unmalted beer, but increased excise duty on fortified wines. Keroche commenced August 17 a suit seeking to have a tax increase on its products increase waived.

Keroche Industries Limited says the excise tax increase pronounced by Finance Minister Amos Kimunya during this years Budget speech has affected its products gravely. The company, which manufactures fortified wines and spirits, says it has been adversely affected by the excise tax increase by 65 per cent.

In the budget speech for fiscal year 2006/2007, Kimunya abolished the excise tax on non-malt beer sold in keg. He, instead, increased the excise tax on fortified wines and spirits from 45 per cent to a hybrid rate of Sh 54 per litre or 65 per cent. Keroche says in the suit that it produces the low priced bottled beer to target the low-income market.

Kimunya stated in his budget speech that many Kenyans continue to drink illicit and dangerous alcohol, thereby becoming not only unproductive , but also imposing higher costs on our health care facilities.

He said everybody has seen the unfortunate incidents caused by the illicit brews. Said Kimunya ,” Therefore to make beer products affordable to the poor so that they can avoid the dangerous drink , I propose to remove the excise tax on non-malt beer sold in keg. I expect the industry to reduce the price of these beers by at least Sh 5 per 300millilitres. I also expect them to expand their production and distribution network so that more Kenyans can have access to good quality beer at the same price as sodas. I propose to increase the excise tax on wines from 45 per cent to a hybrid rate of KSh54 or 65 per cent whichever is higher.This measure will harmonize all wine products, including fortified wines.”

Keroche filed the suit under vacation rules through its lawyer James Orengo seeking to have the case heard during the current vacation. Orengo says that after the proposal by the minister, the duty has not been entrenched in the Finance Bill, which is yet to be tabled in Parliament.

The company says that the tax begun to be charged immediately and this has affected sales sharply. The sales have also remarkably reduced. Keroche says that it does not produce any illicit and /or dangerous alcohol. Instead, its product are now subjected to prerequisite quality controls to ensure their safety and fitness for consumption.

Keroche commenced its operations 1997 producing pineapple based fortified wines. Its initial production was 200 litres per month. The production level has since increased to 60 million litres per year. Its capital base now stands at Sh 500,000,000. The company has digitalised its plant to make it the second biggest brewer in Kenya.


18 August, 2006