Markets & Finance

Low-end drinkers lift Kenya’s spirits uptake to 12.7m litres


A section of a bar stocked with alcoholic beverages. PHOTO | FILE

Kenyans gulped a total of 12.7 million litres of spirits in 2014 thanks to increased uptake by the low-income and lower-middle income consumers, a new study shows.

The 12 per cent growth came as patrons increasingly turn to spirits such as brandy, gin and vodka due to their affordability and availability in smaller packs, according to market research firm Euromonitor International.

This makes spirits one of Kenya’s fastest growing alcoholic beverages category compared to beer, whisky and wines, a factor that has touched of rabid competition by industry players for consumers’ throats.

“The growing young population in Kenya will also provide an opportunity for strong growth,” said the London-based business intelligence firm.

Gin has registered a mean annual growth rate of 35.4 per cent over the last five years to make the drink the fastest growing in the category even though it only accounts for a third of total consumption according to Euromonitor.

Vodka makes up 60 per cent of total spirit sales to make the distilled drink the most popular. Brandy’s share is 12 per cent.

Kenya Cane, manufactured by Diageo-owned United Distillers Vintners Kenya, is the leading sprit brand in Kenya, according to data from Euromonitor.

Jebel, a low-end market spirit launched in November 2013, is ranked second. The Jebel brand, sold for Sh10 per 30ml a tot, helped power earnings of East African Breweries Ltd last year.

Kenyans’ consumption of Scotch whisky grew six per cent to reach Sh568 million in 2015, attributable to a growing middle class, according to Scotch Whisky Association, an industry lobby.

READ: Kenya’s middle class drowns Sh568m worth of Scotch whisky

This makes the 12 per cent year-on-year growth in spirits sales higher than that of Scottish whisky.

Keroche, maker of ready to drink vodkas such as Crescent vodka and Vienna Ice, says sales of the drinks targeted at the low-end market are up 50 per cent on the back of President Uhuru Kenyatta’s renewed fight against illegal brews.

“The proliferation of bars, restaurants and hotels is also expected to spur growth in alcohol consumption in Kenya,” said analysts at Euromonitor.

The sustained growth in uptake of spirits has led to tax experts calling for a review of taxes to make the product more affordable to those at the base of the pyramid.

Excise tax on spirits is charged at the rate of Sh175 per litre, Wines, including fortified ones (Sh150 per litre), and Sh100 per litre is levied on beer, cider and other fermented and spirituous beverages whose alcoholic strength is below 10 per cent, according to the Excise Duty Act, 2015.

“Lower excise duties (are needed) in order to widen the compliance net,” said Kairo Thuo, tax expert at Viva Africa Consulting. The consulting firm says about 30 per cent of the spirits market in Kenya is controlled by illegitimate players who avoid the tax system as well as hygiene and food safety standards.

A study by Viva Africa Consulting shows that the standard cost of producing 250ml of brandy is approximately Sh93.34, which includes 16 per cent VAT and Sh43.75 in excise tax.

The selling price shoots to between Sh150 and Sh200, factoring in other costs such as advertising, labour cost and a profit margin.