Kenya’s Taste For Local Beer Brands on The Upsurge

Kenya’s beer market continues to thrive and improvements to the country’s local brands have turned them into the more favoured tastes.    “Generally we’re seeing one major player, that’s East African Breweries. The second largest player, Keroche Breweries, is actually increasing capacity and by the end of this year they’re going to have about a million hectoliters in capacity. That’s going to be about 10 per cent of the market, but a very significant step from where they’re coming from,” Eric Musau, research analyst at Standard Investment Bank, told CNBC Africa.

He then added, “Then you have on the other end the informal brewers, [and] they account 30 to 40 per cent of the market. The figures are not really very clear, but they’re not very well regulated, and their sophistication is still low but it’s a segment that could potentially become something depending on how things pan out.”

Musau added that most of the competition in Kenya’s beer industry has been in the top end of the market. Companies such as East African Breweries, alongside their wide range of products and covering almost every price point, have made it difficult for other major players to enter the market.

Furthermore, he explained, “If you are looking at it in this context, you’re really looking at SAB Miller, which has a very strong presence in Tanzania, Uganda as well as South Sudan.”   Musau also pointed out, “We think they are still very interested in the Kenyan market, but they want to come in in a way that is going to be sustainable for them in terms of gaining sufficient market share, and in a way that would not cause instabilities in the market at least in terms of maintaining profitability.”

Despite the new dynamics that international brands add when entering the country’s beer industry, Kenya is making strides in regulating its unregulated beer market. Government in particular has encouraged the segment to move into the formal beer market, particularly in terms of packaging and paying taxes.

The Illicit beer trade in Kenya has also reduced in the past five to 10 years due to the introduction of local high quality and affordable products.  Local brand Senator Keg played a significant role in the illicit beer trade elimination upon its introduction to the market, and has 100 per cent duty remissions, making it considerably affordable for the lower end of the market.

Musau also concluded, “The illicit beer market has generally been covering the lower end of the market, but we think with better regulation, we could see better quality products coming in and probably the margins of regional brewers [increasing], so we think this is something that could potentially change, but it’s been very slow in coming.”

Source: CNBC Africa