E-Malt.com News article: Kenya: Excise duty on beer raised by KES11

The KES997 bln budget unveiled on June, 9 by Kenya’s finance minister, Uhuru Kenyatta, stipulates an increase in excise duty on beer, The New Vision reported on June, 10.

Excise duty on beer went up from KES45 to KES55 and that of malt beer up from KES54 to KES65.

East African Breweries Ltd has reacted to the news by announcing an increase in the prices of its products effective June 11, 2010, Agra-net.com reports.

"Due to the tax increase on our products, we have had to increase prices effective June 11, 2010," EABL said in a published statement over the weekend. According to the new prices, Tusker Lager (500ml) now retails for KES90, Tusker Malt KES95, Pilsner (500ml) KES90, Guinness (500ml) KES100 while the two white cap brands - lager and light, will retail at KES100.

According to an AllAfrica.com report, Keroche Breweries is projecting that a majority of low income earners might be locked out of the bottled beer cadre, as they seek cheaper options.

The increase has come at a time when the local beer market has been eroded by slowed economic growth and high cost of production.

In contrast though, depending on the location of the retailers mostly bars and restaurants, the prices vary from KES100 to KES250 for a 500ml bottle of beer. The increase in prices will therefore definitely trigger a ripple effect on prices enjoyed by the consumers countrywide, in similar patterns.

"We are still running some scenarios around the next tax increase, however, the increase of KES11 per litre is quite high, and we have been forced to adjust our retail prices," Mr Ken Kariuki, EABL's corporate affairs director said. "We have, however, begun reaching out to the government to see how best we can work on a solution that is mutually beneficial."

In his speech, the minister asserted that the increase is a moderate adjustment to factor inflation. Mrs Tabitha Karanja, chief executive officer of Keroche Breweries whose brands Summit Lager and Summit Malt have gone up by KES5, fears that sales might drop, as the move to increase excise duty will scare away potential drinkers.

"We are new in the beer business and what the government is doing is scaring away potential investors. With the prevailing hard economic times and now a price increase, beer is not going to be an option for many Kenyans who are struggling to make ends meet," Mrs Karanja said.

"The government should reduce the rate of taxation if it is to encourage more people to use these products. In the end, when more people drink, more revenue is generated and hence more money for the government, that's how I understand it," she added.

However, in what might further put more pressure on the beer market segment and push more consumers to cheap spirits, the minister deleted the provision that prohibited packing or selling of alcoholic beverages in containers of less than 250 ml. This provision was introduced in 2004 as a means to discourage packing in sachets, which was considered to encourage underage drinking.

1 USD = 77.29 KES


16 June, 2010