East African Breweries says tax-induced drop in beer demand only temporary

East African Breweries Ltd (EABL), controlled by Britain’s Diageo, blamed a jump in Kenyan tax on beer for its flat sales in the six months to Dec. 31 but expects a recovery in the next half-year period.

Chief Executive Andrew Cowan told Reuters on Friday that Kenya should adopt regular, predictable excise tax increases rather than big moves every few years, pointing to a drop in sales of leading brands such as Tusker after Kenya increased excise duty on beer by 43 percent at the end of 2015.

“The boom and bust approach — a 43 percent tax increase — has put the heartbeat of our business, that Tusker brand, under pressure,” Cowan said after a news conference on the previous day’s half-year results.

But he said that consumption is expected to pick up in the next six months as consumers adjust to the new prices in an economy that is growing at about 6 percent a year.

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