Kenya Breweries Ltd (KBL) #ticker:EABL has raised the output of a lower-taxed Senator Keg brand by 20 per cent to drive sales amid higher excise duty on mainstream brands.
The brewer installed new rackers — equipment used to fill kegs or containers with beers — in a Sh800 million upgrade of its Ruaraka plant.
KBL managing director Jane Karuku said the upgrade is among the stop-gap measures the brewer has put in place ahead of commissioning the Sh15 billion brewery in Kisumu within two years.
Mainstream beer sales have come under pressure from excise tax increases in recent years that has raised consumer prices.
“Demand for Senator has been growing faster than we expected in the past year as more consumers trade up from illicit brews,” said Ms Karuku.
“We have responded with the newly-commissioned rackers project meant to lift our production capacity. We hope to meet demand with this,” said Ms Karuku.
Beer volume driver
Senator Keg has emerged as beer volume driver for the regional brewer due to its lower purchase price.
The brewer plans to boost the output of its cheaper Senator Keg beer, which is taxed at a rate of Sh20 per litre, to offset the impact of the taxes on mainstream and premium beers.
Sales of Senator Keg, which is dispensed in mugs from barrels in bars, recovered last year, after the government rowed back on a 2013 decision to tax it at the same rate as mainstream beers such as Tusker.
Treasury last year lifted the excise tax by 43 per cent to Sh100 shillings per litre of beer, driving up retail prices by at least Sh20 per bottle.
Ms Karuku said the plans are on course to expand the Senator Keg distribution and retail network.
In long run, the Sh15 billion Kisumu plant will be key in driving sales. It is expected to be finished in the next two years.
East African Breweries net profit for the year through June rose 6 per cent to Sh8.5 billion, helped by reduced operating costs and a slight rise in sales.
Net sales in Kenya - which makes up about 70 per cent of its profits - were up 4 per cent despite higher excise duty and drought-induced inflation.
Sales in Uganda rose 7 per cent and shrunk 12 per cent in Tanzania.