This archive report was first published on 30 July 2019.
On the back of a 52% jump in pretax profit, East African Breweries is banking on its low-priced Senator Keg beer and scotch whiskey to mitigate the effects of tax hikes. The brewer, controlled by Diageo, reported a strong performance in the year to June, with volumes growing 11% and sales surging 12%.
However, a planned 15% excise duty increase on spirits in September could cloud the company's outlook. East African Breweries' CEO, Andrew Cowan, has expressed concerns over the tax hike, stating, 'This is why we have got some time to try and have the debate with our stakeholders in government as to the wisdom of such a significant increase.'
The company is pinning its hopes on Senator Keg, a low-priced lager made from locally grown sorghum, which has seen sales rise by close to a third in the last financial year. A new Senator Keg plant in Kisumu is expected to double output to full capacity by year-end.
Additionally, growing demand for scotch whiskey like Johnny Walker and Singleton among consumers could also counter the potential headwinds for the business from the taxes. Cowan noted, 'There is a wonderment about scotch... consumers find it very aspirational and very cool to be seen to be drinking scotch.'
