BUSINESS ECONOMY

Why Keg Beer Prices Are Set to Rise

MARTIN SIELESep 9, 20221.9k

Keg beer, introduced in Kenya as an affordable, quality alternative to illicit brews, is becoming more expensive. [Photo/ Diageo]

Prices of Keg beer are set to rise across the country from next month – October 2022. This is after its biggest manufacturer in Kenya, Diageo-owned East Africa Breweries Limited (EABL), indicated that it would no longer absorb the annual excise tax adjustment for inflation.

The NSE-listed brewer has been absorbing the annual inflation adjustment since it was introduced in 2018. Now, however, it says it no longer has the capacity to take on the additional cost.

“We do see prices of everything changing particularly where taxes are involved. We will look at all different levers and get extra efficiencies but we also see passing this to consumers although we are still engaging government,” stated EABL chief financial officer Risper Genga.

Genga stated that unpredictability of the tax regime coupled with the influx of illicit products had forced them back to the drawing board.

“The market is facing a problem of illicit products flowing from neighbouring countries due to higher taxes locally. We are struggling as a country with the unpredictability of tax policies and it is something we need to solve,” she stated.

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In 2022, the adjustment was placed at 6.3 percent. It will from October 1 affect made on excisable goods including alcohol products, bottled water and cigarettes. Goods whose excise is charged as a percentage of price (ad valorem) are exempt from this adjustment as their tax rises with price changes anyway.

Beer is currently charged excise at the rate of Ksh134 per litre. Once the annual adjustment takes effect, this will rise to Ksh142.40.

The brewer is among manufacturers and lobby groups that have since 2020 been pushing for the taxman to pause the annual inflation adjustment tax, citing the burden on businesses reeling from the lingering impact of Covid.

Arguing that the annual inflation adjustment tax results in price instability and distorts the overall inflation, they have called for it to be reviewed.

EABL saw its net profit more than double in the year ended June to Ksh15.5 billion from Ksh6.96 billion the previous year. Growth was largely driven by the reopening of bars, pubs and other entertainment joints pushing sales.