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EABL introduces smaller Keg to beat new tax charge
EABL group managing director and CEO Charles Ireland at his Ruaraka office. He says the business environment has mandated the firm to think more aggressively on how to expand. Photo/FILE
East African Breweries Limited (EABL) has introduced a smaller Senator Keg to reduce losses brought by the dip in sales of the low-cost beer after a fresh tax charge.
The new Keg christened Senator Dark Extra that has higher alcohol content will be sold in 200ml containers at Sh25 compared to Sh35 for the mainstream product that comes in 300ml containers.
A tax charge of 50 per cent that started on October 1 has seen the price of Senator Keg increase from Sh30, a raise that EABL reckons has cut sales by nearly 80 per cent.
“The business environment, including Senator’s recent tax charge, requires us to think more aggressively on how to expand our business now that we have been selling less volume,” said Charles Ireland, EABL group managing director.
“Innovation stimulates consumer interest and demand. We expect that the consumption of the two brands will finally settle at a ratio of 50:50 once consumers come back to Senator Keg upon getting used to higher prices.”
Senator Dark Extra, which was launched early this month and is retailing in 2,000 outlets, has an alcohol content at 7.5 per cent compared to Senator Keg’s 5.8 per cent.
It is the second product to be introduced in the market by the regional brewer to stave off the impact of the new tax on sales.
EABL is testing a low-cost spirit dubbed Jebel Gold in about 300 outlets across the country whose 30ml tot will be sold at between Sh10 and Sh15.
The spirit will be served from a keg and into glasses, hence side stepping expenses associated with bottling beverages and transferring the benefits to the consumers.
EABL reckons that it will step up product launches to defend and grow market share.
“EABL’s innovation pipeline is more robust now than ever and we are set to launch several new products by the first half of the next calendar year compared to one or two per year in the past,” said Mr Ireland.
Senator Keg was launched by Kenya Breweries Limited with the support of the government in November 2004 after a spate of fatalities from bootleg drinks.
It is specifically targeted at the low-income consumer who has given positive indications of a need for a hygienic, affordable and bona-fide beer.
In the year to June 2008, Senator had overtaken EABL’s jewel Tusker lager on the volumes front. But Tusker retained its position as the top contributor to the brewer’s revenue given the low pricing of Senator Keg.
The pricing advantage was the product of innovation since the firm broke with brewing tradition by unveiling a beer made entirely from barley instead of a mix of barley and malt.
Mr Ireland said that Senator Keg accounted for more than 10 per cent of EABL volumes before the introduction of the tax charge.
EABL says the new Senator Keg tax will not only hurt sales, but will make it difficult for the government to raise the targeted Sh6.2 billion from Keg to fund its ambitious budget.
