EABL finally severs ties with Castle Lager brewer

By John Njiraini

The turbulent relationship between beverage giants East Africa Breweries Limited (EABL) and SABMiller has officially come to an end.

After months of silence, EABL announced that it has agreed to buy SABMiller’s 20 per cent stake in Kenya Breweries Limited (KBL) at a cost of Sh19.5 billion.

With the buy-out, KBL has in effect terminated a brewing and distribution agreement with SABMiller, and will thus cease distributing SABMiller’s brands in the Kenyan market after a short transitional period.

"EABL today (yesterday) announces that its has agreed to purchase all of SABMiller Africa BV’s 20 per cent shareholding in KBL for cash consideration of dollar equivalent of Sh19,528,062,600, subject to disposal of its 20 per cent shareholding in Tanzania Breweries Limited (TBL) by way of public offer," EABL said in newspaper a statement signed by Company Secretary, Agnes Murgor.

The announcement marks the culmination of two turbulent years in the marriage of the two giants that commenced in 2002, and hit the rocks in 2009 when EABL announced plans to exit TBL and acquire a rival brewer Serengeti Breweries Limited in Tanzania.

Most importantly though, the exit of SABMiller from KBL now paves the way for a bruising battle for the control of the Kenyan beer market, which, for years, has been under the tight grip of EABL.

Come under attack

In recent years though, EABL has witnessed its control of the local market come under attack from increasing competition, and most recently, from a punitive law that seeks to regulate the consumption of alcoholic drinks.

Luckily, EABL has managed to secure a court order stopping the implementation of Alcoholic Drinks Control Act, popularly known as Muthutho Laws, until September when the case would be heard.

On its part, SABMiller has been laying the groundwork for a grand re-entry to the Kenyan beer market, after it acquired Crown Foods Limited, the distributor of Keringet mineral water in December, besides undertaking significant investments in neighbouring countries.

"SABMiller considers Kenya an important market and whatever is happening in neighbouring countries is meant to lay the foundation for an onslaught on Kenya," reported The Standard’s business pullout Financial Journal last month, quoting a PR consultant who has been engaged by SABMiller occasionally.

Until Monday, SABMiller controlled a 20 per cent stake in KBL according to an agreement entered in 2002 that saw the company close its Castle Breweries Ltd in Thika, and exit the Kenyan market.

The agreement, an outcome of a bitter rivalry between the two companies in the late 1990s, also saw EABL acquire a 20 per cent shareholding in TBL, which is majority owned by SABMiller.

Under the agreement, EABL would brew and distribute SABMiller products in the Kenyan market, while SABMiller would do the same in Tanzania.

But over the years, this relationship proved ineffective as both companies accused each other of failing to promote each other’s products in the respective territories.