Lobby wants spirits, beer distribution sector opened up

A lobby representing a section of beer and spirit distributors in the country is pushing for opening up of distribution channels to end exclusive contracts in the industry.

The distributors largely working with Kenya Breweries Ltd (KBL) who say they are drawn from Central, Mountain, Western, Rift Valley and Coast regions under the Beverage Distributors of Kenya said they are seeking to “streamline the structure, operations and proper regulation in the beverage logistics trade.”

They said in a statement that they will embark on aligning distributor contracts with the Competition Act, which was effective from August 1, 2010, to stamp out price fixing by beverage producers and to allow “a truly open trading platform for all beverage distributors.”

The Act addresses distribution fairness issues in article 24.

“This will help equalise all beverage manufacturers and eliminate monopolistic practices which have frustrated market penetration by new and upcoming beverage manufacturers. In the end the association aims to convert beverage distribution into a formal logistics trade complete with standards, rules and institutional framework,” a statement signed by Maina Waweru, who is associated with Nairobi-based firm Veew Distributors Ltd, states.

KBL, a subsidiary of UK Diageo’s East African Breweries Ltd, is the largest and oldest producer of beer in the country.

The listed firm is followed by the Naivasha-based Keroche Breweries. Essentially, if the resellers bid succeeds distributors will not be tied to particular producers which has been the tradition for years.

They added: “The opening of the beverage trade will also greatly enhance the profitability of beverage distributors and bring in efficiency through sheer economies of scale under this statutory framework,” the statement said.

As we went to press EABL had not commented on the push by the association despite our several requests.

The association was registered in 2012. The directors of the group include George Irungu Wachira, Raphael Wamiti Gachoka, Reuben Mukuna, Maina Waweru, Patrick Michuki, Mary Wairimu Chege and Reuben Kioko.

“The association will be the umbrella grouping under which beverage distributors will hence forth use to bargain and establish trading and commercial standards in the country,” said the statement.

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The distributors said they will push for effective alcohol regulation in order to promote responsible consumption, combat drunk driving, reduce illicit alcohol and work to eliminate underage drinking.

“While trading conditions remain challenging in all parts of the country, the association is optimistic that with its formation beverage traders stand to greatly benefit from improved terms of trading and open trading practices under the new Competition Act,” they said.

Beer and spirits producers traditionally rely on large distributors who often supply certain zones. Apart from Keroche and EABL’s UDV, there are a few other important players in the spirits market too.

A 2010 study by the Competition Authority of Kenya (CAK) noted that Kenya suffers from a relatively high degree of concentration in its alcohol industry and identified a number of anti-competition practices.