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Charles Muchene: The highs and lows of chairing EABL board

Outgoing EABL Chairman, Charles Muchene (left) congratulates incoming Chairman Martin Oduor-Otieno after the company's announcement on Tuesday.

The idea of chairing the board of East Africa Breweries Ltd (EABL), a big, publicly-listed company with larger-than-life directors, intimidated Charles Muchene.  

But even bigger challenges awaited the accountant who currently chairs the board of Absa Kenya, having at some point chaired the boards of both companies.

Mr Muchene, who cut his teeth at PWC, an accounting firm, sat down with the Financial Standard in a virtual interview, taking us through the treacherous thickets of running a business that has been in the alcohol business for close to 100 years.

He joined the company at a time when EABL and SAB Miller were going through a bitter divorce, 10 years after they inked a manufacturing and distribution agreement that ended the infamous “beer wars.”

The company was at the same time just coming to terms with the far-reaching Alcoholic Drinks Control Act, popularly known as the Mututho Laws, which took effect at the end of 2010 and tore apart the rule-book on alcohol production and consumption. 

But the biggest challenge for the 11 years he was chairman — and indeed for the 100 years that EABL had existed — was the need to constantly remind society that theirs was a noble purpose of helping people celebrate life and not to harm people’s health and destroy families.

“Yes, these products have an effect on an individual’s body. They have the capacity to intoxicate and could even damage people’s health. But what is the purpose of the business?”

His answer: “EABL is there to help people celebrate life everywhere. I found this purpose there, and it continues because it is long-lasting.” Of course, this is just a brand proposition: a promise of value that can either be real or implied.

It is not different from soft drink manufacturer Coca-Cola’s promise of happiness, though the negative effects of its products are also well documented. 

At the heart of this strategy — and perhaps that of EABL for the 100 years that the brewer has been in existence — is a serious stakeholder engagement with its consumers, communities and government.

Various battles

Similarly, there is an ethical spin to this messaging of celebration where consumers are urged to take EABL’s products responsibly. “There is all raft of activities and education about how to take the products responsibly,” said Mr Muchene. 

By the time Mr Muchene, an accountant by training and profession, was joining the board in 2011, EABL had been around for 89 years.

Started in 1922 by two white settle brothers, George and Charles Hurst, the company had survived various battles, including a widespread perception that it was foreign after British brewer Diageo acquired a controlling stake in the listed company. 

EABL was not only among the first companies to list on the Nairobi Securities Exchange (NSE) in 1954, but was also at the forefront of offering managerial opportunities to locals as the country went through a wave of Africanisation in the early 1970s and 1980s.

Upon being appointed to chair the board of EABL, Mr Muchene looked at its composition, especially the chairperson he was replacing, and he could not help feeling “small.”

The outgoing chair, Jeremiah Kiereini, was a well-known senior government official since independence, who had risen to be the Head of Civil Service. And when he retired from Public Service, he joined EABL as its chief executive and chairman.

Mr Kiereini would occupy this powerful position until the rules changed, and he remained only as an executive chairman. This was a man with “a big profile and a big presence,” remembers Mr Muchene.

These developments made him doubt whether he was going to meet the expectations of the business. 

As part of the company’s engagement strategy, the brewer has a separate work stream that engages the government in what Mr Muchene says is aimed to achieve a win-win for the manufacturer, consumer and government.

Given that alcoholic drinks are “one of the pet subjects of the National Treasury when they are thinking about taxes,” this team tries to understand where the government is coming from, and what their issues are and offer support.

A good example is the introduction of Senator Keg after consumers in Mukuru Kayaba slums died after consuming an illicit drink known as Kumi Kumi.

The two parties agreed that Senator Keg, a hygienically produced alcohol for people at the bottom of the pyramid, would not attract excise taxes to make it affordable.

Fifteen years later, the government, enticed by the huge volumes of Senator Keg, slapped it with excise duty.

With a price-sensitive consumer base, the effect was immediate. Sales in the first month of its implementation tanked to like 10 per cent of the previous monthly sales, remembers Mr Muchene.

And this launched yet another round of engagement with the government.

Bottled beer

So, for 18 months, the board and management of EABL engaged the government intending to find what he described as a “sweet spot,” where taxes would not kill the product even as the government also gets its pound of flesh.

“There could also have been displaced thoughts that Senator was cannibalising some of the bottled beer,” reckons Mr Muchene, insisting he is just speculating.  

He reckons that for a high-performing company like EABL, there has to be a culture that facilitates open communication. There should not be cards under the table. “Everything should be on the table,” says Mr Muchene.

For people to put their cards on the table, there has to be a trusting relationship.

“Because if you are around people that you trust, then you can afford to be vulnerable. And if you are vulnerable, then you can have authentic conversations. And when you have authentic conversations, you deal with the matter than needs to be dealt with until you find a solution,” he says.

Empowered employees, Mr Muchene says, are a key ingredient of a high-performing company. 

“Give them (employees) the right to make decisions, knowing just too well that there will be mistakes. So you have got to provide safety nets. You have to build room for mistakes.”

Organisational culture to him has to start with values such as integrity.

“Once these values are inculcated in people and reinforced, then they inform their behaviours and mindsets. When behaviours are consistently applied, they become the culture of the organisation. “They become second nature,” adds Mr Muchene

The mindset, he says, also drives your actions.

“If you think that you shouldn’t do something, then you are not going to do it. And inaction can be quite bad,” says Mr Muchene, adding that he prefers distributed leadership where the board only does what it is supposed to do. 

A proper governance structure is important so that if things are not happening right, they flow to the top then you deal with them, he explains. 

In 2000, British beer-making giant Diageo, acquired majority control of EABL, thus making it its subsidiary. That has left EABL with the tag of a foreign company.

But that is not how Mr Muchene sees it. He reckons that by the time he joined EABL, it was a global company. It had global networks, but it also had strong local roots.

Through that relationship, he says, EABL has got access to the best-in-class production methodology; international distribution systems, practices, and access to some of Diageo’s premium products, including high-end whiskeys.

“At the same time, it was very local. It is deeply rooted in the communities that it serves in Kenya, Uganda and Tanzania,” says Mr Muchene, giving the example of Senator Keg, which is made from sorghum.  

“By being part of the global network, it is able to deploy its East African talent onto the global spaces for their own development and also bring in other talents from the group so that there is learning across the entire group.”

A good example is Safaricom Chief Executive Peter Ndegwa, who until his appointment in 2019, had been General Manager of Diageo’s business in Western and Eastern Europe, including Russia.

Mr Ndegwa had earlier served as the Managing Director of Guineas Ghana Breweries Ltd before heading Guineas Nigeria. 

There was also Stanley Njoroge, who went to Indonesia and then Ethiopia.

Some of the household names of the first indigenous leaders of EABL include the late politician Kenneth Matiba, Micheal Karanja and Peter Githua.

EABL, like most fast-moving consumer goods (FMCG) manufacturers, relies on strong networks.

“And those distribution networks have for a long time been owned by indigenous people,” notes Mr Muchene.

One of the oldest beer distributors for EABL is Rwathia Beer Distributors, which was formed in 1964.

As a multinational, EABL has also had expatriates. The company’s recurring theme as it marks 100 years, Muchene says, is deepening its roots in the communities where its consumers live.

That is true of any business that wants to live long. Because the needs of consumers are ever-changing.

“The tastes and preferences for products are ever-changing. So having the ear close to the ground and knowing what the needs are really important.”

But even critical is the ability to respond to those needs.