Political uncertainty in Kenya heavily affected East African Breweries’ performance last year, according to parent company, Diageo, which says net sales in the country were flat.
East Africa is Diageo’s biggest market in the continent and the British alcoholic drinks giant says there was a decline in Senator Keg sales, a significant indicator as the brand is popular among low income earners.
This means that there was heavily reduced consumption especially in December, which is one of the best performing months, as prolonged electioneering and political fallout from the August 8 presidential election undermined Kenyans’ purchasing power.
Over a similar period last year, Senator Keg sales were up 16% though those of bottled beer declined by a similar margin but were similarity mitigated by a strong performance in spirits.
Based on expected demand, Kenya Breweries Ltd, EABL’s local subsidiary, last September, unveiled newly-installed rackers in its Ruaraka plant following a Ksh 800 million project that was expected to increase its Senator production by 20%.
This means EABL’s earnings will be in the region of Ksh 35.2 billion after taking into consideration exchange rates. Diageo’s reporting currency is the British Sterling Pound.
Overall, the London Stock Exchange-listed brewer says Africa net sales increased by a paltry 2% for the 2017/2018 half year period.
“Performance was mixed as double digit growth in Nigeria was partially offset by weakness in Africa Regional Markets and South Africa. In East Africa, our biggest market in the region, net sales were flat as performance was impacted by the uncertainty following the presidential election in Kenya. Across Africa, beer net sales were up 5%, as weakness in Kenya was offset by strong growth of Dubic in Nigeria and the successful launch of Serengeti Lite in Tanzania,” according to interim half year results for the six months to December released Thursday.
According to the results, Guinness and Malta Guinness also delivered good growth with net sales up 3% and 9% respectively. Mainstream spirits continued to deliver strong double digit growth driven by solid performance in East Africa and Nigeria.
“Scotch net sales declined 7% largely driven by challenges within the third party distributor network in Cameroon. Operating margin declined by 79bps driven by adverse price-mix, partially offset by productivity savings in supply, lower indirect spend as well as organisational effectiveness benefits,” Diageo says.