Strategic investments pay off for Kenya's largest brewer: East African Breweries Limited (EABL) is reaping the rewards of its decision to invest in key assets, as its managing director and CEO explains to Tom Collins.

Author:Cowan, Andrew
Position:Interview - Interview

For almost 100 years, drinking a beer in the East African region has routinely meant picking up a cold Tusker lager--the flagship product of Nairobi-based East African Breweries Limited (EABL).

The beer was named in honour of George Hurst, the co-founder of EABL's predecessor company, Kenya Breweries Ltd (KBL), who was killed by an elephant soon after the establishment of the firm in 1922. In 1935, KBL acquired Tanganyika Breweries and the companies merged to become EABL the following year. At the turn of this century, Diageo, the world's largest beverage company, acquired a majority stake in the firm.

Since then it has introduced a suite of local products to the market as well as leveraging UK-based Diageo's global brands such as Johnnie Walker and Guinness.

As the second biggest company in the market after telecommunications firm Safaricom, EABL contributes approximately 1% of Kenya's GDP and its products have retained a reputation as some of Kenya's favourite brands. Growth in key products such as Senator Keg, a lower end lager, pushed EABL's net earnings up by 33% in the half-year to end-December 2018.

Andrew Cowan, group CEO, who joined in 2016 after leading Diageo's UK office for five years, says that somewhat risky investments in key assets during a period of weak economic growth are beginning to pay off and have contributed to the gains.

"The critical thing we did when the business was soft in 2018, was to bite the bullet on some investment decisions we wanted to make," he says. "So when many capex-intense businesses across Kenya and even East Africa were tightening the belt on investment, we stuck with two of our big strategic investments.

"We invested $iom in a spirits expansion factory down here in Nairobi and then the poster child of our big $150m investment is our Kisumu brewery. While that felt difficult at the time, because the state of the business didn't warrant the investment, when the economy bounced we really benefited."

When complete, the Kisumu brewery, which is already producing Senator Keg beer, will create jobs for more than 100,000 people across the supply chain, says the company. The investment in low-end, low-margin beer, together with investment in high-end, high-margin spirits, reflects EABL's will to dominate its home markets and to stay relevant to a wide range of consumers.

More than just profit

Cowan believes that EABL's positioning as a "household name" gives the company a responsibility to work towards...

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