Centum to shun start-ups after selling struggling beer unit

Beer being poured into a glass. [Courtesy]

Centum Investment has sold the entire stake in its alcoholic drinks subsidiary, King Beverage, at a loss after five years of struggling to make the business profitable.

The firm yesterday said it had sold the company, which it started in 2014, to Danish Brewing Company for Sh130 million against the Sh500 million it had invested in the company, resulting in a Sh370 million loss.

King Beverage has since 2014 enjoyed exclusive rights to import and distribute such brands as Carlsberg and Tuborg beers, Teacher whisky and Jim Beam whiskeys.

It had expected to shift part of the business from import to local manufacturing, but Centum noted challenges in the alcoholic beverages industry made this untenable.

“The strategic intent by Centum was to grow volumes of the business, initially under an import model and later under local production. However, due to various industry challenges, including competition from gray products and parallel imports of similar products, it was evident that the business would not be able to scale up volumes to warrant the further investment by Centum into local production,” said Centum in a statement.

“Consequently, Centum made the decision to exit the business having deployed the internally approved investment amount of approximately Sh500 million into the business under the import model. Centum has received a total purchase consideration of approximately Sh130 million, which is a part-recovery of the amount invested. The approximate Sh370 million loss on investment represents 0.5 per cent of the total assets of Centum.”

The firm also added that it would in future avoid investing in new ventures or start-ups and instead go for more mature investments where returns are almost guaranteed.