Should Members of Parliament have their way, alcohol dealers will have to make a major shift in packaging of beer, wines and spirits whose minimum volumes will be adjusted to 750 mililtres from the current 250ml.
The legislation will sound like the last nail on the coffin of an industry that has over the years faced various uncertainties around tax and regulations and whose year has been full of staggering disruptions by the Covid-19 pandemic.
Brewers contend it may be the end of the formal alcohol market because the 250ml, commonly known as ‘ka-quarter’ moves close to 90 percent of sales volumes for spirits according to the Alcoholic Beverage Association of Kenya (ABAK).
ABAK Chairperson Gordon Mutugi told Smart Business that while the increase in minimum volume will only make alcohol more expensive, the shift to informal alcohol drinks and reduced sales volumes will also hit the government hard in reduced tax collections.
Read: Yearly tax will increase illicit drinks, warn beer makers
"This is one among the many ways in which regulations have been slowly pushing out the formal alcohol market. We are yet to fully absorb the periodic inflation adjustment and the increase in minimum volume will only ensure that one will have to spend Sh400 to taste alcohol from the formal market," Mr Mutugi said.
"Many cannot afford that and they will not stop drinking. They will go for the unregulated products with dire health and revenue consequences."
The proposed law is only among the many sobering realities the industry has faced this year.
Just before coronavirus began disrupting the economy, a Business Law Amendment Act passed in April, adding a 25 percent excise tax on imported bottles.
Absorb extra cost
The move is said to have targeted to promote local bottle manufacturers but it resulted into an unintended consequence with beverage manufactures being forced to absorb the extra cost given the economic situation as the pandemic period was kicking in.A united push by the glass users comprising the Kenya Breweries Limited (KBL), Coca-Cola beverages Africa, UDV Kenya Limited, Kenya Wines Agency Limited (Kwal) and Trufoods Limited, to have the excise duty removed for being counterproductive was unsuccessful."The local manufacturers lack modern glass technology which prevents them from switching from one type of glass to the next efficiently and the protection of glass manufacturing companies in Kenya violates the principle of equity and fairness in taxation of excisable goods," the manufacturers argued.Read: Beer distributors without excise […]
