Diageo’s African beer subsidiary, East African Breweries, has survived a consumer shift towards lower-priced beers to report higher net sales in its fiscal half-year.
East African Breweries (EABL) said yesterday (17 February) that net sales in the six months to the end of December increased by 10% to KHS20.46bn (US$250m). Volume sales increased quicker, by around 12% on the same period of the previous year, as consumers traded down to cheaper beers following duty tax rises in the region.
Local brands such as Senator in Kenya and Tusker in Uganda reported double-digit sales increases for the six months. Guinness also increased net sales by 6%, although volumes have been held back in the last year due to price increases.
Higher tax charges led the Diageo-controlled brewer to report a reverse in profits for the half-year. Net profits slipped by 1.7% to KHS4.15bn, although operating profits increased by 14.5% to KHS6.1bn.
Despite the pressure on net profits, EABL and Diageo have been in expansive mood.
The brewer’s cashflow sank during the six-month period after it used cash reserves to buy a 51% stake in Tanzania’s Serengeti Breweries for KHS4.9bn. Serengeti is the second largest brewer in Tanzania, behind SABMiller-controlled Tanzania Breweries, but has been rapidly increasing its market share.
Separately, just-drinks understands that Diageo’s EABL is seeking to increase its presence in Southern Sudan, which last month gained independence. The group is considering building a production base in the country.
A Diageo spokesperson declined to comment specifically on the plans, but added: “Southern Sudan is an important market for us. We constantly analyse and assess the effectiveness of our routes to market in light of the competitive environment wherever we do business. Southern Sudan is no different.”
Last year, SABMiller said that it would double beer production and increase soft drinks capacity by more than five times at its own brewery in Southern Sudan.