The volume of alcohol sold in Kenya is on the decline with sales data from the East African Breweries Limited (EABL) showing a four percent dip owing to inflationary pressures and a higher tax regime that has pushed up retail prices.

Persistent geopolitical tensions fueled inflation-driven cost escalation, posing ongoing challenges to our manufacturing operations, said Dr. Martin Oduor-Otieno, EABL Chairman.

EABL says excise tax escalation negatively impacted its price-sensitive mainstream segment in the trading period 2023. Renewed crackdown on bars in the counties also negatively affected the company's sales which closed at Kes110 billion for the full year ended June 30, 2023, a similar revenue performance compared to the prior year.

According to Group CEO Jane Karuku, the decline in consumer income has resulted in an increase in the consumption of illicit alcohol, which now dominates more than half of the market. To safeguard consumers, the government must strengthen its measures, she noted.

Highest excise tax ever

"There has been a lot of stress in the economy. At the regulatory level, we experienced the highest excise tax ever, and the compounding effect of this led to a turbulent FY2023," said Jane Karuku.

In the year under focus, Kenya's economy has been grappling with a weakening shilling and a steady rise in fuel prices that have led to a rise in costs. Stanbic Bank's May PMI data showed an unprecedented rise in input prices across the Kenyan private sector midway through the three months to June.

In the quarter, depreciation of the shilling and rising fuel prices led to a record increase in purchase costs over the month. Retail prices subsequently rose at a faster rate, placing additional pressure on customer demand which fell for the fourth month in a row.

Overall, EABL Group saw its net profit decline by 21 percent to Kes12 billion, as rising input costs, multiple excise tax increases and the depreciation of regional currencies failed to offset increased prices and costs.

In the trading period, EABL consumers were forced to shoulder a compounded annual excise tax increase of 23 percent for beer and 34 percent for spirits.

Based on the Group's financial disclosures, Uganda demonstrated a remarkable half-year growth of 17 percent, benefiting from favorable pricing and modest volume expansion.

Meanwhile, Tanzania experienced more modest growth of 1 percent due to the market adapting to earlier price increases implemented during the year.

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