East African Breweries aims to jumpstart growth in sales of bottled beer in Kenya, as its biggest market's economy recovers and the government looks set to hold off on tax increases, its chief executive has said.
The brewer, which is controlled by Britain's Diageo and is known for its Tusker beer, said sales of bottled beer were flat in the first half of the year to December after the government raised excise duty by 5.2%.
Kenya, which contributes 70% of annual revenue, has taxed beer and cigarettes heavily to boost government coffers
The government raised excise duty on beer by 43% at the end of 2015, hitting demand for EABL's beer.
CEO Andrew Cowan said he "... wouldn't expect to see the government doing unpredictable things. I don't see the government going back to that space."
Tax Rates
Kenya has one of the highest rates of tax on beer on the continent. Tusker has a recommended retail price of 150 shillings ($1.49) per bottle, with close to half going to the taxman.
Pretax profit at EABL surged by a third in its first half, driven by a 13% jump in net sales as sales of its low-priced Senator Keg beer in Kenya made a strong recovery after demand was depressed by election jitters in 2017.
Senator Keg beer, made from locally grown sorghum, is dispensed in mugs from barrels in bars.
Shares of EABL rose more than 10% on Friday after the results, which included a 25% increase to the interim dividend, were released late on Thursday.
EABL also reported double-digit growth in sales of high-end spirits, such as Ciroc Vodka, and its mid-priced Chrome vodka.
The brewer, which also operates in Tanzania and Uganda, is also relying on health-conscious consumers to move sales of bottled beer back into growth, Cowan said.
"We will be getting new consumers into beer who want lower sugar, lower calorie drinks," he said, citing the company's White Cap and Balozi beer brands.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
