Agents push for a bigger share in EABL's beer pricing

East African Breweries Limited (EABL) is locked in a battle with a some of its distributors who want to be allowed to increase their profit margin three-fold.

Distributors are currently earning about four per cent in a pricing formula that is stipulated by the brewer. But the members of a lobby group called Beverage Distributors of Kenya want margins of between eight and 12 per cent of the recommended retail price.

EABL has expressed concerns over the higher profits as demanded, citing that the retail prices for its beverages could soar should the distributors have their way.

"Kenya Breweries Limited is concerned by the attempts of a select distributors and retailers who seek to control and raise consumer prices beyond the recommended retail price. Artificial price inflation is not good for the Kenyan consumer and economy,” explained Eric Kiniti, the brewer corporate affairs director.

Tens of distributors have been contracted to deliver beer and other alcoholic beverages in specified markets on behalf of the firm, majority owned by UK’s Diageo. In the distributorship agreements, the contracted companies are required to observe exclusivity, meaning they are barred from stocking products from rival firms.

But in the emerging fallout, the distributors are demanding to be allowed to stock other products alongside setting the selling price. The distributors are using an EABL certified information management system software to manage stocks, a platform that does not recognise products from rival companies. However, EABL and the lobby have clashed over the demands to be allowed to set their own margin, with the brewer unwilling to meet the distributors’ request for commission review.

The brewer is concerned about the likely price increments of alcoholic beverages that might be triggered by it caving in to the demands of the distributors. Retail prices will definitely rise if the distributors have their way.

“Distributors in a country like Uganda get a margin of up to eight per cent, but we only get four. We are also allowed to stock products from rival firms, but to do this we have to get a written consent from EABL, which we feel is unfair,” said Mary Wanjiku an official from the lobby told journalists after their meeting on Saturday.

She, however, admitted that distributors have been making good money from the current profit margin allowed by EABL, ‘although what we make is not as good as in other countries where EABL’s majority shareholder, Diageo operates.

The lobby representing a section of beer and spirit distributors, most of them working with Kenya Breweries Ltd (KBL), had put out a newspaper ad calling a meeting on last Saturday to push for the opening up of the distribution channels to end exclusive contracts in the industry.

Members were briefed about the anti-competition law by representatives from Okoth and Kiplagat advocates. The law firm was involved in the registration of the lobby in 2012.

The BDK said those who attended last Saturday’s meeting were drawn from Central, Mountain, Western, Rift Valley and Coast regions.