Kenya: East African Breweries seeking to reduce reliance on barley

East African Breweries Limited (EABL) is seeking to contract more sorghum growers as it moves to reduce reliance on the more expensive barley, Business Daily Africa reported on February, 1.

The prevailing high cost of barley and malt has hurt the margins of the regional brewer, and the firm has been focusing on efforts to cut costs.

The brewer engaged farmers in various semi-arid areas around the country with a key focus in Eastern Province and yesterday announced plans to boost coverage of contract sorghum farming to Narok, Baringo and Nakuru.

The cheaper sorghum-based beer will also allow the company to capture a huge chunk of the bottom end of the market that has remained in the hands of illicit brewers, and this comes at a time when new alcohol law has legalised traditional liquors that will now be subject to health standard controls.

“This new sorghum growing initiative in semi-arid areas is expected to impact the livelihood of farmers while providing us with affordable raw material,” said Peter Ndegwa, the finance director at EABL.

EABL is looking at a wider raw material options since it has been relying heavily on volatile barley, whose prices are currently trading at a two year high as poor weather has cut supply from key source markets of Russia and Ukraine.

Locally, the brewer has not been exposed to the volatile international prices due to a bumper barley harvest in 2010 due to the good rains, but Mr Ndegwa said EABL was looking at the future.

“Barley is a commercial crop and in tends to be influenced by international market dynamics as opposed to sorghum which is more of a food crop,” added Mr Ndegwa.

The plan would substantially improve the economic wellbeing of millions of poor farmers in these regions as it offers them a ready market for their produce.

Lack of ready market has seen sorghum production in Kenya drop from 220 metric tonnes per year in 1980 to 130 metric tonnes in 2009, according to United States Department of Agriculture.

EABL uses sorghum to brew the low-cost Senator brand, which was launched in 2004 and delivers volumes but less value compared to flagship Tusker, White Cap and Pilsner brands.

EABL is keen to replicate the success of Senator brand by rolling out another low-cost brand making supply of sorghum critical.

Barley, the grain traditionally used to brew most beer brands, grows best in countries with cooler climate.

02 February, 2011