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Beer lovers hand State Sh52 billion in excise taxes

BUSINESS
By Moses Michira | Jul 30th 2016 | 2 min read
By Moses Michira | July 30th 2016
BUSINESS

East African Breweries’ customers contributed a record Sh52 billion in excise taxes, in the sharpest rise that partly slowed consumption of premium beer brands.

A breakdown of the brewer’s operating results showed the levy charged on non-essential spending, or sin tax, soared by 41 per cent following amendments that came into force last December.

Charles Ireland told investors in his last briefing in Kenya that the sharp rise in taxes had delivered a huge impact on sales on premium brands like the flagship Tusker brand.

“It was significant for our sales in the second half,” Mr Ireland, said, before setting out on his new role in Ireland. He has been promoted to be general manager for UK, Ireland and France in Diageo-EABL’s parent company. Kenya has the steepest excise tax rate of the East African nations that the brewer has operations in. KRA reported earlier in the week that its excise tax collections were about Sh48 billion, implying that nearly all of it was collected from beer consumers.

Excise tax rate was enhanced from Sh35 per 500ml bottle, to Sh50, in the amendments that came to force early December. Some of the rate hike was passed on to the consumer in the eventual retail price. For a market that is the most price-sensitive in the World, according to Mr Ireland, any pricing changes have significant impact on demand.

Overall beer volumes sold by the brewer were up by a quarter, the biggest leap in the company’s history driven by soaring consumption of the low-value Senator brand.

Ireland said the sales from the Senator brand, which is sold as Keg beer, rose three-fold helping the firm retain revenues net of taxes flat at Sh64 billion. Andrew Cowan, the incoming managing director, told the Standard of his expectation to sustain the growth in volumes and profit.

“It has to be through more and increasingly better products,” Mr Cowan said, adding that newer variants of the regular spirits that are flavoured was helping recruit new consumers.

He takes over as EABL boss after an eventful year for the brewer where it sold major fixed assets including two parcels of land, its head office block and the glass manufacturing subsidiary. About Sh3 billion was realised from the twin disposals consisting Sh2.2 billion for the sale of Central Glass Industries, and over Sh700 million from the a 16-acre piece of land.

And just before the close of the financial year, the brewer announced that it had sold the Tusker House – the head office block and the five-acre parcel of land it sits on to the employees’ Sacco for Sh675 million.

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