East African Breweries Ltd took a shock when Kenya closed hospitality businesses due to the pandemic | TOM COLLINS | For any business that relies on open venues to sell goods, Covid-19 has been particularly challenging. As Kenya responded to the pandemic by closing hospitality businesses and implementing a night-time curfew, East African Breweries Limited (EABL), the largest drinks company in the region, registered a huge decline in profits.
The brewer’s net profit was down 47.4% in the second half of last year, leading to management withdrawing the interim dividend to conserve cash for the first time in history. However, the drop was an improvement on the previous six months and therefore actually represented a slight recovery.
John Musunga, managing director of Kenya Breweries Limited (KBL), EABL’s subsidiary in the local market, says the growth is due to strategic pivots by the company.
“When Covid-19 hit, with all the closures taking place, our business took a bit of shock,” he says.
“But over that period, we have been looking for opportunities for growth. We have revamped what is called ‘off trade’, that is all the sales from supermarkets, cash and carries and e-commerce. We are in a better space now than we were two years ago and hopefully if everything goes back to normal, we will have a new segment that we didn’t have in the past.”
Changing customer habits
Not only have the venues for drinking alcoholic beverages changed, but customer habits and preferences have changed too. Bottled beers like Tusker and White Cap used to be some of EABL’s best-selling products.
But cans have replaced bottles as the drink of choice for customers who prefer to buy alcoholic drinks that they can transport either for weekend trips, to drink in parks or to friends’ houses. Spirits have also gained popularity for the same reason.
EABL, which is majority-owned by UK-based Diageo, one of the world’s largest alcoholic drinks manufacturers, produces well-known spirits like Johnnie Walker as well as local creations like Kenya Cane. The line of drinks most impacted was the lower-end Senator Keg brand, which is sold exclusively in bars and dropped 29% last year.
“Initially bars were closed for two or three months and that’s the only place where you can access that product, so it really took a hit,” says Musunga.
Value products were also impacted as job losses in the informal sector were widespread during the beginning of the pandemic. While […]