Since the early 1990s, the African beer market has
become more competitive. East Africa, in particular, is the territory
that one businessman recently described as "the mother of all beer
wars".
East African Breweries Limited, or EABL, is doing battle with the
ambitious South African Breweries, or SAB. Competition has prompted
massive change at the incumbent and there is proof that, at least
for shareholders, the upheaval has paid off.
Profits at EABL were up 12 per cent to 1.9 billion Schillings for
the year to June, profits which are on a par with the top banks. Our
Africa Editor Mark Ashurst spoke to Robert Bunyi who follows the company
for Equity stockbrokers in Nairobi:
"Increases in profit year on year in the last half of the 90s have
largely been delivered through cost-cutting and restructuring programs,
in local companies.
"The most interesting thing about the breweries case is the only
increase in turnover in sales was in Tanzania. Their Kenyan and Ugandan
operations did not have significant increases in turnover at all,
so what it means is that the profit came largely from cutting costs.
"In many instances the adjustments have been quite heavy. In the case
of breweries they have had to reduce staff levels from about 4,000
to 1,000. We had to walk through the plant and it was amazing how
there were very few people on the factory floor.
"There is a massive re-engineering of their business that in the future,
coupled with IT technologies from Sun Systems, should improve their
profitability and efficiency."
Massive re-engineering of their business coupled together
with IT technologies should improve their profitability and
efficiency.
Robert
Bunyi
Mark Ashurst asked Mr Bunyi how these changes in the last few years
had affected the consumer; was the beer any different?
"Well the Kenyan beer has remained at the same quality levels.
It is actually a very high quality product, but what has happened
is that East African Breweries has managed not to increase the retail
cost of a bottle of beer largely due to the benefits they have earned
through cost savings."
Were the new entrants, the South Africans, finding it a tough
market? asked Mark Ashurst.
"Yes I believe so. Current estimates indicate that South African Breweries
in Kenya only have less than 10 per cent of market share, meaning
that East African Breweries was no pushover."
Current estimates indicate that South African Breweries in
Kenya only have less than 10 per cent of market share, meaning
that East African Breweries was no pushover.
Robert
Bunyi
Despite EABL’s gain in Tanzania, it is a different story there.
SAB bought into Tanzanian Breweries when they were privatisatised,
and their joint venture with the government now claims a market share
of 80 per cent.
But East African Breweries are active too through their subsidiary
Kibo Breweries, and the battle between the two giants has ended up
in court.
At issue is an ongoing feud over trademarks. In its home market
of South Africa, SAB claims the right to use an elephant tusk as a
registered logo in its home market of South Africa, a rule which bars
EABL from using it, but in Tanzania, EABL has launched its own Kibo
brand, a premium lager, whose logo is the peaks of the Kilimanjaro
mountain range. Mark Ashurst spoke to Justice Donovan, chief executive of Tanzania
Breweries, in Dar Es Salaam:
"If we look at the South African market, the Elephant Tusk is the
registered trade mark that belongs to South African breweries and,
as such, I think that is one of those things that has got to be respected.
It is a registered trade mark, it is legal. It is like anywhere if
you have got a registered trade mark you have got to respect that.
"
If we look at the South African market, the Elephant Tusk
is the registered trade mark that belongs to South African Breweries.
Justice
Donovan
"In Tanzania yes, there has been a dispute. There was an urgent interdict
that we actually applied for to stop them from using the peaks of
Kilimanjaro because we felt it is a national icon, it cannot be a
registered trade mark. The judge felt it has taken so long that there
was no urgency attached to it but I believe there is still an ongoing
court case between us and Kibo Breweries on the use of that as a trademark."
And meanwhile you are both using the mountain on your bottles?
asked Mark Ashurst.
Yes, well we have registered the name and we have got the name Kilimanjaro
premium lager and that was used long before Kibo came onto the market."
We have never registered the peak or the mountain as a trademark,
we have just registered the brand, as in the name, as a trademark.
Justice
Donovan
