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A staggering nation: More money more beer for the middle class

FINANCIAL STANDARD
By Dominic Omondi | Jan 4th 2022 | 7 min read
By Dominic Omondi | January 4th 2022
FINANCIAL STANDARD

Data shows Nairobi’s middle-class has been putting a lot of their money into beer than many other basic consumer products. [Courtesy]

“Nimelipwa Tuesday nimesave kidogo/ Pesa ingine nimetumia mukoro/ Pesa kiasi nimenunua stockoo/ Ile imebaki ni ya pombe na watoto.”

Popular rap artist Mejja, whose real name is Major Nameye Khadija, could as well be reciting the budget for a typical middle-class family with these words in the song “Chini Chini” in which he is featured by the group Matata. 

In the song, Mejja lists the consumer items that he gives priority to on payday - a list that is short on necessities but long on hedonism.

The first thing he does when he gets paid, says Mejja, is to save a fraction of the money - probably for rent, food and other necessities.

He then sends his mother some of the remaining cash for her upkeep before replenishing his stock. “The remaining cash,” he goes on, “is for alcohol and women.”

The rapper, whose signature style is carrying a tumbler of alcohol in virtually all his videos, has inadvertently helped spotlight a cult of inebriation.

The predominant theme of alcohol in Gengetone Music, which Mejja has helped popularise, has intensified as fast as wines and spirits shops have mushroomed at every street corner of the low middle-class estates in Nairobi.

Music, like any other work of art, is largely a mirror of society.

In the last ten years to 2020, when Gengetone took over the airwaves, the Kenya National Bureau of Statistics (KNBS) computed afresh the weights of items in a typical Kenyan household’s shopping basket - technically known as the Consumer Price Index (CPI).

The new CPI showed that the weight of beer in the shopping basket for a typical middle-income household in Nairobi had risen nearly 10 times for the lower middle class and over seven-fold for the upper-middle class.

Suffice to say that the lower-middle-income group comprises largely the new entrants into the high-spending middle-class, largely graduates who have just landed their first jobs and so have additional money to burn with very little responsibilities like paying school fees to restrain them.

Indeed, data from the national statistician shows that Nairobi’s middle-class, which comprises of individuals who earn a monthly income of between Sh46,355 and Sh185,395, unlike before, have been putting a lot of their money into beer than many other basic consumer products.

The only expenditure components that are heavier than beer in the middle-class’ shopping basket include hotel accommodation, mobile phone airtime and rent for a two-bedroom house, according to KNBS.  

Although the retail price of beer has increased sharply over the last decade — thanks in large part to increased sin taxes — the middle-class has been buying more bottles.

And brewers have added finer sweet beers to appease the younger generation.

For example, the retail price of a half litre (500ml) of Tusker Lager has increased by 194 per cent from an average of Sh62.6 in 2005 to Sh184 last year. The recommended retail price of 500ml Tusker Lager has since been raised to Sh220.

Not that beer consumers worry too much about the price tag.

Expenditure on beer by the middle-class has surged by a staggering 870 per cent and 668 per cent for the lower middle and upper-middle-class respectively in the review period, a clear indicator that this consumer group has not been spooked by the increase in the price of their favourite beverage.

This is not strange. As consumers get richer, the contents of their shopping basket change dramatically to include the finer things in life. They spend more on comfort and luxury items, having, like Mejja, already taken care of their basic needs, including food, housing and clothes.

This is truer of Kenya’s middle-class. For them, the extra cash has meant staying longer in pubs, imbibing rivers of beers despite steep prices. 

In the old Consumer Price Index (CPI), or shopping basket, for the middle class “Alcohol Beverages, Tobacco and Narcotics” had a weight of 1.40. However, this weight has since risen more than three times to 4.739 in the latest CPI that is based on the 2015/16 Kenya Integrated Household Budget Survey (KIHBS).

More than 10 years ago, a big chunk of the middle-class income went into housing, which took up 23.6 per cent of their income. Paying rent for a flat was the single costliest item in the middle-class’ shopping basket. It was followed by airtime, matatu fare, rent for house maisonette and petrol.

Back then, middle-class households, which by then were those with income bands of between Sh23,671 and Sh120,000, would spend more on milk, Pishori, electricity, gas, kerosene stove, bus fare to the countryside, than on beer.

However, as the middle-class families’ earnings improved, food and other necessities took up so little of their income, even as luxury spending dominated their shopping basket.

Even at Naivas Supermarket, founded on Christian values, its patriarch, Peter Mukuha Kago, initially forbade the sale of alcoholic drinks in his stores, but could not resist the lucrative market for beer and spirits.

“The decision to set up an alcoholic beverages shop in our outlets was driven by customer demand,” Willy Kimani, the Naivas chief commercial officer, was quoted by a local newspaper.

“The typical customer wants to meet all their basket requirements in a single location and to facilitate customers so that they do not feel they have to move elsewhere for these purchases, we took the decision to set up and run the shops ourselves,” he added.

Kimani noted that before making this decision, they carried research, tracking different product categories and alcoholic beverages were confirmed to be a necessary addition to their shelves.

Frank Mbogo, the chairman of Pubs, Entertainment and Restaurants Association of Kenya (PERAK) and the proprietor of Coco Jambo Gardens, agrees that there has been an upsurge in the intake of beer, with a lot of his patrons aged between 30 and 45.

He explains that unlike before when people would go to bars or clubs to watch football over the weekend, mostly Saturdays, while sipping on a bottle of soda, today they troop to the club for every game and they take a beer.

Customers have also been lured with discounts where pubs have been offering a five-bottle bucket at a price of Sh1,000, meaning that one beer is free. “I think even for us right now, our marketing strategy is to bring in more people,” says Mbogo, who has been in the business of selling alcohol for over 10 years.

It is not just the middle-class that have increased their intake of alcohol. The affluent have also seen spirits take up bigger space in their shopping basket.

The rich have also increased their intake of alcohol, just not beer. For the affluent who earn over Sh185,395 in a month, according to computation by KNBS, it is the weight of expensive spirits that has dramatically gone up by 162 per cent over the last 10 years.

Official data shows that there has been a substantial increase in imports of hard liquor (unlike beer, which is mostly brewed locally, most of the spirits brands are imported) in the last 10 years to 2020, pointing to a change in taste and preferences among Kenyan imbibers.

The leading source of hard liquor is the United Kingdom, the home of Scotch whiskey, where Kenya got more than a third of its spirits from in 2019, according to data from the Observatory of Economic Complexity (OEC), the visualisation tool for international trade data.

However, the prodigious intake of alcohol tells the story of Kenya’s burgeoning consumer class that has attracted huge malls, global brands, and foreign retail chains.

An expansive middle class is any business person’s wish. Their proclivity to extravagance is unmatched.

Mr Mbogo says the group that frequents his joint are mostly business people, with those who are employed coming in certain days of the week, especially on Fridays or at the end of the month.

Although the middle-class constitute 25.58 per cent of all the Nairobi households, their total expenditure is about 32.2 per cent of Nairobi expenditure.

This is unlike the poor who, although comprise 71 per cent of all the households in Nairobi, their total expenditure is only 56 per cent of Nairobi expenditure.

The common path for initiation into the consumer class is by taking a loan on the strength of your payslip.  Because of their creditworthiness, the middle-class have been able to easily access credit. 

“They take advantage of that fully, they borrow a lot. Many of them are in debt,” says Dr Joy Kiiru, an Economics lecturer at the University of Nairobi. 

A profile of a digital borrower in a 2018 study fit the typical middle-class, especially the lower-middle-class. The study by Financial Sector Deepening (FSD), KNBS and the Central Bank found that a majority of digital borrowers were young men aged between 26 and 35 years.

A 2018 study showed that early morning borrowers are most likely to repay on time, an indicator that these may be informal traders who stock up in the morning and turn over inventory quickly at high margins.

But, increasingly, there are borrowers who take out loans after business hours, especially between 1am and 2am.

These ones, the study found, are likely to default - indicating late-night consumption purposes.

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