E-Malt.com News article: Kenya: Beer prices increase following introduction of new excise tax

Kenya’s retailers have increased beer prices by between Sh10 and Sh15 a bottle to reflect the new uniform tax for all brands, Business Daily Africa reported on June, 15.

A casual survey in some bars within the CBD revealed East African Breweries Ltd’s (EABL) non-malt Allsops and Citizen consumed by low-income groups have increased by around Sh10 to retail at about Sh90 and Sh80 respectively. Pilsner, the only non-malt upmarket brand has gone up by Sh15 to an average of Sh170.

Last week Finance minister Uhuru Kenyatta imposed a fixed excise tax of Sh70 or 40 per cent a litre, raising malted beer tax by Sh5 (or Sh2.50 a bottle) from previous Sh65 and that for non-malt beer by Sh15 from Sh55.

Kenya’s top beer maker EABL immediately warned of an inevitable “dramatic” increase in the prices of beer.

“We would have preferred a lower rate of harmonisation as this amounts to a dramatic increase in prices of beer, including the non-malted brands such as Pilsner, Allsops and Citizen,” EABL head of corporate relations Brenda Mbathi said.
The company’s revisions came barely two months after it made increases of between Sh5 and Sh10 per bottle for Guinness, Tusker and Tusker Malt citing rising costs of production.

It then replicated these increments on Castle Lager and Redds brands but their apparent policy of leaving beer brands targeting low-income earners has now been tested by the new tax measures.

Even though the beer manufacturers have not yet made public the new recommended retail prices of their products, beer distributors and bar owners across the country have increased prices as the taxes became effective from June, 9.

Keroche Breweries Limited, which only produces malted beer, has reflected the new tax regime by increasing the recommended retail prices (RRP) by Sh5. “The new recommended retail price for Summit Lager is Sh90 while that of Summit Malt is Sh95,” Keroche’s managing director Tabitha Karanja said.

EABL is yet to release recommended retail price but distributors hinted on the changes.

“Our wholesale prices have gone up by Sh115 and Sh230 per crate of Tusker and Pilsner respectively which translates to between Sh5 and Sh10 per bottle for the two brands,” said Mr Lawrence Mbocha, a beer distributor with Premier Distributors. “We are expecting the new price list before the end of the week which will give the clear price,” he added.

Mr Peter Waweru, who operates a bar in Githurai 44, says that they are now selling Pilsner at Sh120 up from Shh105 while a Sh10 increase on Tusker has brought the price to Sh120 per bottle.

Players in the industry warn the new tax risks pushing more consumers towards illicit and cheap drinks.

Mrs Karanja said that denying the lower segment of the consumers’ access to affordable and quality drinks will only push them towards less safe alternatives.

“It is quite unfortunate that this increase coincides with the effecting of the higher licensing fees imposed on the industry by the alcohol bill which will be shouldered by consumers,” she said.

Since beer is regarded as a luxury, the government seems to be concentrating too much on making money and are blind to the negative effects this repeated tax increases will have,” Mr Sam Ikwaye, the chief executive of Pubs Entertainment and Restaurants Association of Kenya (PERAK) said.

“Other than pushing consumers towards illicit drinks, high taxation may make the country unfavorable for doing business,” Mr Ikwaye added.

The alcohol industry in the county – whose value is estimated at around Sh42 billion - has over the years been a perennial target of Treasury in its attempts to raise revenue.

This latest increment comes at a time when the industry is coming to terms with the Alcoholic Drinks Control Act that has resulted in sale volume dropping.


15 June, 2011