E-Malt.com News article: Kenya: East African Breweries Limited (EABL) used cross listing to improve the acceptability of its products across the region

The height of competition between Kenya Breweries Limited (KBL) and the South African brewing giant - Castle Breweries, the two companies engaged in one of the fiercest fights for the Kenyan market, The East African Standard posted August 22.

From the use of conventional and unconventional tactics, the two companies tried to woo consumers with an advertising campaign whose key selling point was that they were truly Kenyan brands and as such consumers were better off buying their kind of products.

However, while that fight might have ended, it managed to force KBL to go back to the drawing board after it realised that Kenya, and by extension the East African consumer, was dying to be associated with companies that are truly regional both in ownership and through their respective product portfolio.

That is the reason that KBL formed another company - East African Breweries Limited (EABL) to be used as a tool to penetrate the regional market.

That company has since bought majority stake in Uganda Breweries Limited while maintaining a sizable equity stake in Tanzania. The firm has gone a step further and listed across the East African Stock markets. While few Kenyans might have comprehended the full impact of cross listing, the value of EABL is a key indicator of the benefits that come with cross listing.

Mr Abdi Hassan, a senior market analyst with Old Mutual Asset Managers (OMAM), says that EABL is a classic case of the benefits that cross listing can bring to an economy. "This is one of the most positive reports coming from the region's efforts to forge a unified trading block," Hassan reckoned.

He said through cross listing, the Kenyan beer manufacturer has managed to penetrate the region's deeply divided, but highly suspicious consumer.

"EABL has used cross-listing to develop and protect its regional market share from South African competition," Hassan says, indicating that the future belong to companies that will take the regional route.

EABL is also a classic example of how cross listing can be used by companies to improve on acceptability of their products across the region because currently, EABL's products are consumed by a wider market in Kenya, Uganda and Tanzania.

And because the three countries have experienced an unprecedented economic growth pattern over the last five years, this has transformed into a higher turnover and the strengthening of the bottom-line for the Kenyan brewer.

Despite that, the benefits of cross listing are more than a handful and the earlier companies tapped into that potential the better for the region's stock market.

Hassan says the concept of cross listing can be used as a key for unlocking the full benefits of listing companies to a wider market.

"What we have seen is that companies that have gone the cross-listing route have transformed themselves into some of the most profitable entities not only in East Africa but the world over," Hassan said.

Hassan says the biggest winners in the cross-listing initiative have been the shareholders who have gone home with higher dividends and an increase in turnover. The benefits of cross listing can also be viewed from the fact that it improves on an equity's price discovery "because it is analysed by a wider number of investors and analysts and a bigger market."

However, while the concept of cross-listing has more benefits than anyone can write in one single article, there are fears that it is still stuck with issues that are yet to be sorted out especially in Africa.

"One of the grey areas is that it is still not easy to trade especially in countries that have introduced non-tariff barriers such as Tanzania and Uganda," Hassan says. "That is why we need to move faster in our efforts to integrate the regional economies so that the benefits of cross-listing become much more viable."

Hassan says for the concept to be acceptable, there is need to harmonise rules and regulations that govern the whole process among the three East African countries. "It only through this that we will see more Ugandan and Tanzanian companies being listed in Kenya and more Kenyan companies moving across the borders."

He says this is needed as a matter of urgency.


23 August, 2006