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Hangover mars KBL celebrations.

It has been celebration time at Kenya Breweries recently: the brewers celebrated 75 years in the business and won a clutch of international gold medals for their products. But a giant hangover, in the form of South African Breweries, is waiting to happen.

Kenya Breweries Limited, the giant bottlers controlling 95% of the beer business in Kenya, is in an upbeat mood as it celebrates two important milestones: 75 years of operation in Kenya, and six gold and two silver medals won by its products at the 1997 International Monde Selection Awards in Brussels in August.

Kenya Breweries entered eight brands in the competition: Tusker Lager, Pilsner, Tusker Export (large), Tusker Premium, Tusker Malt Lager, White Cap, Kenbrew and Citizen Lager (a malt free beer). The last two won silver medals but the others ran away with gold.

In addition to the medals, Tusker Malt Lager and White Cap won the International High Quality Trophy. Tusker Malt Lager, which has won the gold since it was launched in 1987, won the Grand Gold Medal.

The Monde Selection is an international institute that strives to establish the highest international quality for consumer products, and their role is to bear witness to the quality of the products presented before them. To qualify for the selection, the product must comply with stringent laboratory analysis and then be examined and tasted by a panel of international specialists and informed consumers. For Kenya Breweries the awards once again reassert that Kenyan beers are among the best in the world.

Over the last 20 years, Kenya Breweries products have won 120 medals, 97 of them gold. Not surprisingly, Kenya Breweries is not hiding its light under a bushel. "Your favourite beers are backed by 75 years of Kenyan brewing heritage. No other Kenyan beers can claim this heritage. So every sip of your favourite Kenyan beer is a taste of gold," proclaim the company.

Despite this success, the giant brewers are undergoing a great deal of pressure from both South African Breweries who have started to build a bottling plant at Thika near Nairobi, and Kuguru Foods who have been challenging them for market share.

Kuguru Foods recently launched a beer called Mwananchi (a Swahili word that translates into Citizen in English) and Kenya Breweries have not only protested that the name infringed their Citizen label trademark but have threatened to go to court to seek legal redress.

Kuguru Foods have dismissed the protests as nonsense. "Citizen is Citizen and Mwananchi is Mwananchi. The two are not interchangeable and we don't understand why an old established brewing giant like Kenya Breweries wishes to play the cry baby all the time. Why don't they want to compete? This is a liberalised economy and the days of absolute and state protected monopoly are gone," a sales executive at Kuguru Foods said.

The most worrying competition is from South African Breweries who already have two bottling lines in Mwanza and Dar es Salaam in Tanzania, and who have decided to bring the battle to Kenya Breweries on their. own turf by putting up a bottling plant at Thika. They have joined forces with local business interests for the purpose.

The company building the plant is Sportent which owns 51% of the Shs2.5bn investment. Politician and powerful business tycoon, Mr James Njenga Karume, through Donyo Sabuk Limited, holds 30% of Sportent, while a Dutch company, FMO holds 15%. The rest of the minority 4% shareholding is scattered among other local investors.

Because of his interests in Sportent, Mr Karume's beer distribution franchises have been cancelled by the KBL management. Bid Yetu Agencies have taken over the Kiambaa distribution from Mr Karume's Kiambu General Trades, while Natex Distributors have replaced his Kabete Distributors.

Another distributor, the Kenya Distributors, have replaced his Umoja Distributors, leaving him with the giant Nararashi Distributors in the city centre - but reports from KBL indicate that even that is poised to be taken over by another distributor.

Mr Karume has, however, promised Kenya Breweries a long fight in the courts for breach of contract and loss of revenue but KBL sources said there was absolutely no way he could be involved in Sportent Limited, a big rival of the KBL and still expect to distribute KBL products.

But it appears that there is no stopping SAB's entry into the Kenyan market. Many have welcomed its arrival saying it would create more than 19,000 direct jobs and thousands more indirectly, and support hundreds of families.

SAB has already established itself within the focus area of sub-Saharan Africa and currently accounts for more than half of the beer produced and sold in the continent through its network of breweries located in Swaziland, Lesotho, Botswana, Zimbabwe, Mozambique, Zambia, Tanzania and South Africa.

"We believe that the current beer consumption levels in Kenya are less than half what they should be. There exists substantial room for growth through the benefits of healthy competition, a broader choice of products, advertising, promotions and improved levels of customer service," said Mr Andrew Parker, the SAB managing director, during a visit to Kenya earlier this year.

He observed that the Kenyan beer market had historically reached higher sales and there was, therefore, more than enough business potential to allow competing brewers to operate profitably. SAB had initially considered tapping the Kenyan market through exports from breweries in the neighbouring countries but decided to commit itself fully to the people of Kenya by investing directly, he added.

Major new brewery

The brewery is being built at a greenfield site in Thika and has a capacity of 800,000 hectolitres per annum. It is expected to go into production by the end of 1998. "We believe the economic prospects for Kenya are excellent and we look forward to contributing towards and sharing in the country's increasing prosperity," Mr Parker said.

To meet this challenge, KBL has commissioned a Shs750m ultra-modern bottling machinery from Krones AG of Germany which, with installation, will cost Shs1bn. Another Shs200m was invested in the improvement and modernisation of the existing facilities which together with the new machinery makes the brewery one of the most modern in Africa.

Mr Peter Githua, the KBL general manager, said the new plant is expected to improve production capacity in readiness for the impending local and foreign challenge. He said the new machinery will reduce production costs and replace two 20 year old machines whose capacities have been considerably reduced. They had been capable of producing 12,500 crates of beer per hour per line but now only produce 5,000 crates per line per hour (a crate has 25 bottles). The new line has an incredible capacity of 80,000 bottles of beer per hour and requires nine operators per shift while the old machines required 37 operators.

The plant was purchased through a Shs1bn five-year debenture stock arranged by Citibank Corp, through Algemene Bank Nederlands (ABN), Amro Bank, the Cooperative Bank of Kenya, East African Building Society, Stanbic Kenya Limited, the Barclaystrust Investments Services, Commercial Bank of Africa, Standard Chartered Bank Limited, City Trust Limited, East African Mercantile Banking Company Limited, the Madison Insurance Company, and the Lion of Kenya Insurance Company Limited.

Kenya Breweries is owned 21% by Guinness, (beside 26,302 shareholders and other institutional investors). It brews several brands including the company's flagship Tusker Lager (Kshs45). Latest brands include Guinness (500ml) which retails at Kshs70 at non-VAT outlets, Citizen Special (500ml) which costs Kshs39, Citizen (500ml.) Kshs32. Others are Tusker Export (300ml), Kshs33; Tusker Premium, (300ml), Kshs40; White Cap (500ml), Kshs45; Guinness Stout (300ml), Kshs48; Tusker Export (500ml), Kshs46; Pilsner (500ml), Kshs46; Kenbrew (500ml), Kshs49; Tusker Malt Lager (355ml), Kshs65.

Also available are Tusker Keg and Tusker Premium Keg offering draught beer facilities and found mostly in high class hotels and tourist joints.
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Title Annotation:Kenya Breweries Ltd.
Author:Otieno, Barrack
Publication:African Business
Date:Oct 1, 1997
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