News Column

Low Senator Keg Sales Slow EABL Growth

August 8, 2014

Margaret Wahito

East African Breweries Limited (EABL) has recorded marginal rise in its net profit of 5 percent for the full year ending June 2014 to Sh6.8billion from Sh6.5 billion in the previous year.

EABL attributes the slow growth to a huge drop in Senator Keg brand, by over 75percent following the introduction of excise duty on the product last year by the government.

The company's Managing Director Charles Ireland is now calling on the government to review the move saying it makes the product 'unsustainable'.

"We are not doing away with Senator Keg, but I would say the current position is unsustainable. I hope the government will roll back on the tax on Senator Keg and this will make this drink more popular with consumers in that segment," Ireland said during a media briefing on Thursday evening.

At the moment the drink is going for Sh30 from the previous price of Sh25 a margin that has been enough to push down its sales.

Ireland says target consumers of the drink are very sensitive with prices which has led to the company dropping the price twice.

"As you can see, Senator Keg isn't really doing anything for anybody at the moment. The sales are very low, the distributors' revenue is very low, they are struggling and it creates a lot of complications for us in our route market and our business overall," Ireland said.

"If it continues at that level, we will have to look very hard at it. But for now, I think this is initially a management review, and we have not taken anything to the board," Ireland said answering queries whether the firm plans to do away with the drink or not.

Other challenges during the year under review included the flat growth in Tanzania and political instability experienced in South Sudan.

Meanwhile, Tusker retained its market leadership and grew by 17percent above last year while Guinness grew by 20 percent supported by a new packaging launch and price increase.

Bell, in Uganda, grew by 14 percent as a result of stringer communications activations and prices increases and access to local raw material concessions.

In Tanzania, Serengeti Premium Lager grew by 16 percent through the Fiesta Music Tour and route to consumer changes.

"Selling and distribution costs rose by 13percent as we continue to invest ahead in our brands. Administrative expenses increased by 8 percent," the Group's Finance Director Tracey Barnes said.

The company also spent Sh1.2billion relating to reorganisation costs which saw a number of employee go home.

Despite the slow growth, the company's shareholders will take home a final dividend of Sh5.50.

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Source: AllAfrica

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