Beer drinkers are giving up their brews as inflation bites
Many beer drinkers in Kenya are giving up their brews due to high prices attributable to intermittent increases in taxes as well as the rise in the cost of living.
The latest trade data from East African Brewers Ltd (EABL) for the six months to December 2022 shows the company’s net sales in Kenya, its largest market, contracted by one percent on account of a steep rise in taxes on beer and spirits.
The company said beer volumes were down 13 percent amid an onslaught from increased trade in illicit alcohol, which accounts for roughly half of all liquor sold in the country of 53 million people.
In contrast, the brewer’s net sales in Uganda increased by 19 percent even as Tanzania posted an 11 percent jump in sales.
In the Kenya market, the company sustained a compounded annual excise tax increase of 23 percent for beer and 34 percent for spirits, a factor that hugely eroded the purchasing power of consumers resulting in a 13 percent drop in the volume of beer sold.
“As a business, we have had to pass on that to the consumer,” Group CEO Jane Karuku said adding that the tax adjustments “significantly affected the consumption of our brands.”
Kenya’s excise tax for beer and spirits increased by 10 percent and 20 percent respectively in July last year.
Two months later, beer and spirits consumers were forced to shoulder a further 6.3 percent excise tax as part of the taxman’s annual inflationary adjustment.
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Kenya’s inflation dipped to 9.1 percent in December, down from 9.5 percent a month earlier. Inflation peaked at 9.6 percent in October, the highest level since May 2017. At the same time, the shilling dropped in value by over 9 percent in 2022 against the US Dollar.
Across Africa, EABL parent Diageo said beer net sales grew by two percent, primarily driven by Guinness and Malta Guinness which grew by seven percent and five percent respectively but this “growth was offset by a slowdown in Kenya following price and duty increases.”
In the half under review, EABL’s net profit was flat at Kes8.7 billion. The Board has, however, recommended the payment of an interim dividend at Kes3.75 per share, the same as a similar period last year.
“We are also staying close to our consumers, taking advantage of our commercial capabilities and digital tools to enable us rapidly understand trends and execute with precision,” Ms Karuku noted.
The company invested Kes6.7 billion in its Environmental, Social and Governance (ESG) initiative leading to a transition to renewable energy use in six sites across East Africa.