EABL takes beer wars to SABMiller’s doorsteps

Tanzania has allowed East African Breweries Limited to buy a controlling stake in Serengeti Breweries, handing the Kenyan firm a key weapon in the ongoing battle for control of the neighbouring country’s beer market.

The green light by Fair Competition Commission (FCC) gives EABL a firm footing in the Tanzanian market where a protracted battle with South Africa’s SABMiller has been pulling back its operations.

Serengeti Breweries Limited (SBL) is Tanzania’s second largest brewer with at least 17 per cent of the country’s total beer market.

EABL announced the deal on Thursday but said it was subject to other regulatory conditions, which it did not specify.

“EABL is committed to growing SBL’s portfolio and footprint in Tanzania and beyond as well as make SBL an integral part of our operations in East Africa,” it said although it did not say how much it had paid for the 51 per cent stake.

People familiar with the matter said the FCC has barred the Kenyan brewer from closing the SBL plant in Tanzania – aiming to protect local jobs as the region moves into the Common Market platform.

“They are also required to retain SBL’s key brand Premium Serengeti Lager among other brands,” said a source.

The Acquisition is of strategic importance to EABL and British beer giant Diageo who have a controlling stake in the Kenyan brewer.

In the past four years, it has seen both sales volumes and profits drop in key Kenyan markets evens as cash continued to pile in its vaults.

Last year, Uganda Breweries, in which EABL has a 98.2 per cent stake, reported a two per cent drop in volumes and a 39 per cent fall in operating profit, a situation attributed to cost pressures.

In Tanzania, the Kenyan brewer found itself at the centre of a legal dispute with SABMiller’s subsidiary TBL over a seven-year marriage that was on the rocks.

EABL joined the TBL board in 2002 under an arrangement that gave the Kenyan brewer a 20 per cent stake in the SABMiller-owned operation. SABMiller gained a similar stake in EABL’s Kenya subsidiary in a deal that saw the South African brewer wind up its operations in Kenya.

The two firms also agreed to manufacture and distribute each other’s flagship brands but EABL argued that TBL had failed to keep its part of the deal.

The dispute saw EABL’s sales volumes in Tanzania decline by 14 per cent as the rivalry turned East Africa into battle zone between SABMiller and Diageo, which has a 50 per cent stake in EABL.