Brewers' pain as shutdown of bars sees beer sales decline

Benjamin Kyalo (right) and David Masinde inspect bottles of WhiteCap Lager brand at the East African Breweries Ltd plant in Ruaraka, Nairobi. [David Gichuru, Standard]

The directive on social distancing to stop the spread of coronavirus disease, and the subsequent drop in the consumption of alcohol, has proved that drinking has little to do with access.

On the contrary, the ban on social gatherings means beer consumers are hardly drinking even though their favourite brands are still available through cheaper outlets, including liquor stores and supermarkets.

In such outlets, the retail prices are often those recommended by the manufacturers, meaning that buyers would avoid the hefty margins loaded on the drinks' prices in bars to cover for their entertainment and hospitality.

Bars were ordered closed in a March 22 directive that took effect immediately and with a near total compliance rate, with serious implications for brewers.

Naivasha-based Keroche Breweries has suspended the manufacturing of bottled beer while East African Breweries Ltd has shifted focus to the production of canned beverages.

“The brewery is open but due to the prevailing situation in the lockdown order on bars, there is no distribution being done,” said Keroche’s corporate affairs director John Nyongesa.

He added that beer production was “100 per cent down and the situation is ugly."

The firm has sent home hundreds of workers and opted to retain only essential staff who can be deployed in the manufacturing of other products such as spirits.

Nothing captured the scale of the disruption better than the plunge of EABL's shares on the Nairobi Securities Exchange, where the company was valued at Sh126 billion.

In just a week after the government announced that bars had to be shut, the brewer’s value had shrunk by a staggering Sh25 billion, as jittery investors took flight.

It might have been worse if EABL was not already a major producer and importer of wines and spirits, which can be easily accessed from liquor stores.

EABL Corporate Affairs Director Eric Kiniti said the brewer's focus had moved to packaging its products in cans instead of bottles.

"Beer production has been severely affected. The little that we manufacture is for sale in cans, with more focus on wines and spirits,” said Mr Kiniti.

He added that there were still huge beer inventories in the supply chain, which included the brewer's large network of distributors.

Senator Keg, EABL’s low-end but best selling beer in terms of volume, has been worst hit by the closure of bars.

The beer is delivered to outlets in barrels and dispensed to consumer in mugs and jugs.

With the lockdown, a few daring retailers are coming up with illegal ways to satisfy their clientele, including dispensing the drink as a takeaway from the safety of their homes.

Negligible sales

But even with this underground retail market, Senator Keg sales are still negligible.

Separately, Nairobi Health Executive Hitan Majevdia yesterday warned that the county government would revoke the licenses of restaurants, bars and food eateries found flouting the directive to shut down their operations to curb the spread of Covid-19.

This followed a public outcry that some establishments were disregarding the presidential directive to stop serving eat-in customers.

Mr Majevdia said he had received reports of eateries and pubs, especially in the estates, that were endangering the lives of residents by allowing them into their premises and locking the doors in a bid to fool the unsuspecting public that they were out of business.

"Our health teams have been deployed and are keenly monitoring the establishments that do not comply with the presidential decree. Those found culpable will be arrested for endangering the lives of others," he said. [Additional reporting by Josphat Thiong'o]