Companies

EABL eyes savings in shift to canned beer for exports

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EABL Group managing director Charles Ireland. Photo/Salaton Njau

Summary

  • EABL says its exports to Rwanda, Burundi, South Sudan and Eastern DRC will now be transported in cans as opposed to glass bottles.
  • The company is hoping to reduce its selling and distribution costs.

Beer maker EABL has shifted to use of aluminium cans for packaging exports to cut on distribution expenses resulting from breakages and loss of returnable glass bottles.

The regional brewer says its exports to Rwanda, Burundi, South Sudan and Eastern DRC will now be transported in cans as opposed to glass bottles.

The company is hoping to reduce its selling and distribution costs, which in the six months to December jumped 20 per cent to Sh3 billion compared to Sh2.5 billion incurred in a similar period a year ago.

“Packaging products in cans is actually more expensive than in glass, but after a series of round trips, it makes more economic sense to transport the products in non-returnable cans,” said Charles Ireland, the EABL managing director.

A combination of new taxes and stringent alcohol-consumption regulations saw EABL recently announce the slowest first-half sales growth in four years and the brewer is keen to slash costs to protect its bottom line.

READ: EABL stops daily brewing as growth hits a four-year low

It has set a target of saving Sh800 million on its selling and distribution costs this year. “Cans (are) more cost-efficient when it comes to savings on breakages, losses on return rates of glass bottles as well as haulage costs,” said Mr Ireland.

EABL exports its products using its subsidiary EABL International (EABLi). The brewer also ships to far-flung markets of North America, Canada, Asia, Australia and the United Kingdom.

In these markets, cans are the preferred packaging, but it is still possible to find some products in glass bottles. In the trading model used in the export markets closer to Nairobi, alcohol products (which are packaged in glass bottles) are loaded onto trucks at the Ruaraka brewery and driven to their respective export destinations.

In 2011, the brewer awarded global logistics firm DHL the contract to transport its products to major distribution points. Once in their respective markets, truckers offload the products, collect the empty ones and then repeat the cycle. It is this cycle that EABL wants to make more economical.

The beer maker is also reviewing its supply chains in Tanzania and Uganda. EABL has already opened a depot in South Sudan to improve availability of its products.

Opening of depots will see EABL store more of its canned products in countries where it lacks a brewing presence, ensuring more reliable supply.

“As our business in these export markets grow, the investment and economic benefit of cans will pay off,” said Mr Ireland.

In mid-2012, EABL invested Sh1 billion in a new canning line at its Ruaraka brewery. The canning line came after passage of the Mututho Law which, through restrictive rules on bar operating hours, had severely hurt the industry resulting in reduced sales.

By packaging most of its products in cans, EABL was targeting drinkers who prefer to buy their drinks for home consumption.