EABL to lay off 100 staff at main Kenya subsidiary

Beer maker East African Breweries (EABL) is set to lay off 100 staff in a few weeks, marking the third such retrenchment for the company within five years.

The brewer said the redundancies will mainly affect employees of its key subsidiary, Kenya Breweries (KBL), who were notified on Thursday last week.

It said the layoffs would make the “company structure fit for the current operating environment.”

“The employees have been informed about the changes and how it will impact them,” said Eric Kiniti, the corporate relations director for KBL.

Sources at the Ruaraka-based brewer informed Business Daily that workers have now been given the option of taking early retirement, a move that could have a significant one-off inflation of the company’s administrative costs.

Last month, EABL reported a four per cent increase in sales for the six months to December, the second single-digit rise since 2010 when revenue grew by three per cent.

READ: EABL net profit rises to Sh3.95 billion

The brewer’s top line was heavily impacted by the introduction of a 50 per cent tax on the low-cost Senator Keg in October last year, nearly doubling its retail price and consequently pushing it out of reach of its target consumers.

This tax resulted in an 85 per cent dip in sales, weighing on the brewer’s net profit for the first half which grew by four per cent to Sh4.1 billion.

EABL is looking to quicken revenue growth by launching several new products this year and remodelling it distribution chain which it estimates will save it Sh800 million this year.

EABL, whose staff costs last year hit Sh5.3 billion having increased by 12.7 per cent, maintained that the latest restructuring process is not a cost-cutting measure.

“The restructuring will also result in some new roles being created and the impacted employees will be considered for the new roles,” said Mr Kiniti, adding that it was a “strategic re-organisation” that is “in line with the company’s performance ambition and overall business strategy.”

This is at least the third time that EABL has sent employees home in the past five years. Mid last year, EABL laid off employees after Diageo Plc — the brewer’s majority shareholder — picked Nairobi to manage its human resource functions for African operations beginning April.

Selection of Ruaraka-based African Business Service Centre (ABSC) to carry out this function saw some get reabsorbed from the EABL’s HR department and more were hired.

However, at least 20 more people lost their jobs.

In 2009, EABL retrenched about 200 people in a restructuring process that cost it about Sh558 million. That year, the brewer’s profits dipped 4.8 per cent to Sh7.1 billion on account of the half-a-billion shilling restructuring cost and a dip in sales.

The dip in revenue was caused by the introduction of a 250 per cent and 70 per cent tax on spirits and non-malt beer respectively.

EABL has not disclosed the exact cost of last year’s staff cuts.

The cost is included in administrative expenses which in the six months to December increased by 26 per cent to Sh4.5 billion from Sh3.5 billion in the same period in 2012.