Diageo to Boost Spirits Business in Kenya as Tax Cuts Beer Sales

  • EABL grew sales of distilled drinks by 26% in first half
  • State raised excise on bottle beer 4 times in past 5 years

East African Breweries Ltd. plans to boost its spirits business in Kenya and neighboring countries as higher duties reduce revenue from its bottled-beer business, Managing Director Andrew Cowan said.

The company is investing about $9 million in a new line of spirits that will serve countries including Rwanda, Uganda and Tanzania, Cowan said in an interview Friday in the capital, Nairobi. The unit of Diageo Plc, which owns a 50.02 percent stake, earlier reported a 28 percent drop in first-half income after an increase in Kenyan duties contributed to a 6.1 percent drop in revenue.

“Our focus right now is we can see growth in whisky,” Cowan said. “We are the largest whisky producer in the world, we can see growth in overall spirits.”

EABL, East Africa’s largest brewer and Kenya’s second-biggest company by market value, grew sales of spirits including Smirnoff vodka and Kenya Cane by 26 percent in the first-half, according to a statement published by Diageo, the world’s No. 1 distiller, on Thursday.

Kenya has raised excise duties on bottled beer four times in the past five years, including a 43 percent increase that took effect in December 2015 that was the biggest on the continent, according to EABL. The taxes in the East African nation are “overheated” and contributed to a 15 percent drop in sales of Tusker beer, the company’s top brand in Kenya, Cowan said.

“Beer has become unaffordable” in Kenya, he said. “An excise increase in the foreseeable future would compound the issue.”

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