Second round of beer distribution wars as trader spurs with EABL in court

Beer bottles roll on a conveyor belt at the East African Breweries Ruaraka factory in Nairobi. The beer distribution business is hanging on the balance after Bia Tosha signed rival beer makers to set up a major dispute with EABL- the biggest brewer. (PHOTO: FILE/ STANDARD)

For more than two decades, Peter Burugu built a beer distribution empire delivering millions of crates of beer to consumers and earning a fortune in the process.

Today, his firm called Bia Tosha is facing the biggest test in exactly the same circumstances as in 1995 when he left employment at East African Breweries to become its main delivery service provider.

Mr Burugu is fighting to retain his distribution contract which he earned after the termination of former Cabinet Minister the late Njenga Karume’s Nararashi Distributors. After starting out as an accounts trainee, Mr Burugu rose to senior positions in the logistics department where he understood beer distribution well – a skill that would be critical in the making of his empire that is undeniably the envy of many other businesses.

Between July 2014 and June last year, Bia Tosha generated close to Sh5.2 billion in sales, estimated to have earned the businessman who supplies close to eight percent of the brewer’s tipples to the Kenyan market a gross profit of Sh800 million.

But today, the beer distribution business is hanging on the balance after Bia Tosha signed rival beer makers to set up a major dispute with EABL- the biggest brewer.

EABL declined to respond to enquiries about the same but those in the know say the brewer is not happy with Burugu and Bia Tosha, which handle about 12 per cent of the brewer’s volumes.

Until 1995, Mr Burugu, 70, was an employee of EABL. His ticket out of employment rolled after the brewer severed its relationship with Mr Karume’s Nararashi which lost the lucrative beer-distribution business after signing up with South-Africa-based SABMiller, whose flagship brand in Kenya was Castle.

Karume helped SAB Miller in its foiled entry that marked the first round of beer wars, before Castle was repulsed in a complex settlement that involved ceding of territories. EABL would in the end agree to distributes the SA firm’s products in Kenya, in a similar agreement in Tanzania.

Nararashi unsuccessfully petitioned the Courts to block the termination of the distribution agreement, and would be ordered to pay Kenya Breweries Limited cost of the suit.

Court of Appeal

After the exit of Nararashi, Burugu found the opportunity to venture into the beer distribution business after being handed a hefty retirement package that would propel the venture.

It is easy to point out the similarity of his success and that of the late Karume in the distribution business and the beer wars of the 1990s and the current one, pitting EABL against Keroche and several European brewers who are importing their products.

This disagreement led to the collapse of Bia Tosha’s beer distribution agreement with EABL early this month, potentially opening up another opportunity for other distributors to take over some 22 routes spread across Central Kenya and Nairobi.

Bia Tosha had filed a petition claiming that EABL had threatened to terminate its distribution contracts for the 22 routes. It also holds it paid over Sh38 million in goodwill for the distribution contracts for the routes.

A three judge bench of the Court of Appeal granted EABL reprieve last week allowing it to work with any other distributors, alongside Bia Tosha, pending the determination of the petition.

“In the interim as the parties having been trading and have a special relationship, we order that the status quo obtaining as at today be maintained pending the hearing and determination of the case,” stated the order delivered by appellate judges Martha Koome, Festus Azangalala and Fatuma Sichale.

Some of the lucrative distribution routes Bia Tosha is fighting to retain include exclusive delivery rights to Kawangware, Dagoretti, Ngong Road, Athi River, South B, Nairobi West, Kenyatta and Lang’ata routes among others.