Diageo, the East African Breweries Limited (EABL)’s parent company, anticipates the Kenyan unit will record double-digit growth in the second half of this financial year ended June, driven mainly by the resurgence of Senator Keg.
John O’Keeffe, Diageo Plc’s president for Africa, last week told analysts and investors that he expects that the EABL business will “continue growing net sales at low double-digits”.
The multinational brewer, which owns 50.02 per cent of EABL, says the sales growth projections of between 10 and 15 per cent will mainly result from a resurgence in Senator Keg, whose excise tax element was reduced in May 2015.
“I would expect EABL overall to continue growing net sales at low double-digits, given that we expect Senator to continue strong performance into the second half,” said Mr O’Keeffe during the conference call on March 3.
The EABL’s net sales for the six months to December grew eight per cent to Sh37.5 billion, buoyed by low-cost beer Senator Keg whose volumes more than doubled in the period.
Sales of Senator Keg — a low-cost beer manufactured using sorghum — dipped sharply after the government introduced of a 50 per cent excise tax in October 2013.
The law was amended in May, setting the excise tax cut at 90 per cent for beers manufactured using at least 75 per cent locally-sourced sorghum, millet or cassava — handing farmers and EABL a much-needed lifeline.
In the full year to June 2015, the brewer posted a net profit of Sh9.57 billion, earnings that UK-based Diageo now expects to get a strong boost from Senator Keg sales.
Diageo in November launched Guinness African Special in Nigeria, a new version of Guinness made from “natural African extracts”.
The drink, which is lower priced and contains a lesser alcohol content than the normal brand, will in future unveiled in other markets across the continent, including Kenya.
Diageo still regards Kenya as a market with “huge room for growth” notwithstanding its significant market share with Mr O’Keeffe explaining that alcohol penetration still remains at 30 per cent.
A key element of Diageo’s plan to capture a bigger share of the market in Kenya is to roll out smaller format packaging so as to offer their emerging and mainstream drinks to customers who are price sensitive.
Late last year, EABL launch 300ml and 330ml bottles for its Tusker and Pilsner beer brands targeting consumers with a recommended retail price (RRP) of Sh90 per bottle.
The brewer has until now packaged its flagship Tusker and Pilsner beers in 500ml glass bottles.
“We are seeing the benefit of making our brand available in smaller pack sizes in order to hit a certain price point that certain consumers find very, very attractive,” said Mr O’Keeffe.