Beer maker EABL is set to reduce the usage of barley as a primary ingredient by up to 40 per cent in the next four years, in a cost-cutting push that analysts say could significantly slash the brewer’s cost of raw materials.
Researchers at Renaissance Capital disclosed the brewer’s plans in a research note sent to its clients last week.
The East African Breweries (EABL) director for corporate relations, Ms Brenda Mbathi, confirmed that the company has plans to significantly raise usage of alternative starches to cut raw material costs.
She said the cost of sorghum is now about 10 per cent cheaper than barley. “The company is also experimenting with cassava, which, alongside sorghum, is expected to constitute around 40 per cent of brewing raw materials by 2016,” said the RenCap report.
EABL and Diageo, the London-based brewer and majority shareholder in the firm, are also expected to experiment growing the alternative raw materials on a 13-acre piece of land.
EABL’s demand for sorghum rose sharply to 32,000 tonnes last year, nearly three times the 12,000 tonnes it used a year earlier. Only a third of last year’s supply was sourced from outgrowers.
“Both sorghum and cassava are being considered as they are both more drought-resistant than barley and hence can be grown across a wider range of environments within East Africa. This will secure supply of locally-grown cereals for its products,” said Ms Mbathi in a statement.
Sorghum and cassava are, however, only expected to supplement and not substitute barley as the main brewing ingredients to preserve the taste of the brewer’s mainstream brands.
“Each brand has its own taste which has to be consistent,” said Eric Musau, a research analyst at Standard Investment Bank.
Sorghum is already being grown in Ukambani and Siaya through partnerships between the brewer and Equity Bank. Farmers are given loans and inputs and EABL commits to buy at a given price that ensures a minimum return.