The Kenyan unit of East African Breweries Limited (EABL) #ticker:EABL expects delayed long rains and rising inflation to depress alcohol consumption on reduced disposable income.
Kenya Breweries Limited Managing Director Jane Karuku said Wednesday in a press briefing that heightened inflationary pressures may depress sales to levels similar to those seen in 2017.
“In 2017, the bottom of the pyramid, which takes our value brands, was really hurt as menial jobs came down. This was reflected in our reduced performance,” said Ms Karuku.
“Our fear is that if it doesn’t rain and the disposable income is challenged, we will find the bottom of the pyramid hurting more because the wallet share is getting competition.”
Senator Keg, a value brand, targets the bottom of the pyramid and may be the most hit. It was introduced to win consumers from illicit brew and its gross sales recovered by 12 percent to Sh76.4 billion in the half year ended December last year.
EABL registered a 33 percent growth in half-year net earnings to hit Sh6.61 billion, driven by strong performance in mainstream spirits, bottled beer and Senator Keg. From Kenya, it posted Sh1.9 billion net sales from Senator Keg alone.
Lawrence Maina, the General Manager at East Africa Maltings, a subsidiary of EABL, said barley production may be affected. He said the company has set up a risk team to mitigate against drought.
“The big issue could be in the barley sector, which is very unique as it is grown in areas of high altitude and heavy rains,” said Mr Maina.