E-Malt.com News article: Kenya: East Africa Breweries increases prices of most popular beers

Beer maker East Africa Breweries Limited (EABL) has increased the prices of Castle Lager and Redds brands, one month after it increased prices of its other products to cover for rising costs of raw materials and increase its revenue in the sluggish consumption market, Business Daily Africa reported on May, 17.

Retail prices of the 500ml Castle beer and 330ml Castle and Redds brands increased by between Sh7 and Sh15 to Sh105 for the Castle Lager and Sh95 for the Redds cans.

The increase means consumers will have to dig deeper into their pockets as bar owners are expected to increase their prices by between Sh10 – Sh50 especially in Nairobi where beer is sold at a premium above the recommended retail prices.

EABL produces the Castle brands under a distribution agreement with South African beer maker SABMiller signed in 2002. The contract is set to expire by end of this year.

Growth in beer sales has been sluggish since the introduction of the Alcoholic Drinks Control Law (Mututho Law) that limits the amount of time a bar is open.

Its time restrictions limit bars to serving alcohol between 5 p.m. and 11 p.m. compared to previous 24-hours operation.

“Drop in our distribution volumes has gone down by about 25 per cent since January this year although we do not think it will go any further down,” said Agens Mwareka, of Beverage Distributors Limited that operates in Nairobi and environs.

Research by investment bank Kestrel Capital released last month identified the Mututho law as “the biggest risk” to EABL’s business. The law came into effect in November 2010.

“The price increments are mainly meant to cushion against the drop in volumes brought about by the alcohol control Act,” said Wycliffe Masinde, an investment analyst at Kestrel Capital Limited said.

In effecting the earlier price increase for Tusker, White Cap and Guinness, analysts said EABL executives worked on the understanding that most consumers who are feeling the heat of Kenya’s soft economy have fallen off the company’s radar and that any cutback in consumption that may arise from the price adjustments is unlikely to affect sales.


17 May, 2011