Uganda Breweries revenue up 12%

New tax sees company’s sales for affordable brands drop by 30 percent

Kampala, Uganda | JULIUS BUSINGE | Beer maker, Uganda Breweries Limited, saw its revenue surge amidst a sharp decline in sales for affordable brands for the half year ended December 2018.

The company’s financial statements released on Feb. 12 shows that its revenue grew by 12% in the first half of 2018/2019 compared to 4% recorded in the same period in the previous year.

The UBL’s 12% growth in revenue helped the parent company, East African Breweries Limited (EABL), based in Nairobi, Kenya, to record a 13% growth in sales revenue from Ksh 36.8bn in 2017/18 to Ksh 41.6bn in 2018/19 for the three east African markets of Uganda, Kenya and Tanzania.

EABL registered an increase in net profit from Ksh5bn to Kshs6.6bn during the same period under review.

Across the region, Uganda and Kenya recorded 12% growth in net sales each while Tanzania registered the highest net sales of 26%.

This is higher than the 4% growth in net sales recorded in the previous year by Uganda and the Kenyan subsidiaries. Tanzania recorded a 28% growth in net sales in the previous year.

UBL Managing Director, Mark Ocitti, said the increase in revenue was driven by innovations– the same factor that appears to have played out across the three markets, basing on available group information.

According to the group results, innovations in Uganda contributed 10% to the total revenue for the group compared to 18% and 45% in Kenya and Tanzania respectively.

For instance, Uganda’s premium beer – Tusker Lite and Guinness delivered 21% growth which fed into the general performance of the company in Uganda and the EABL as a Group.

Another factor that supported growth in Uganda include, enhanced visibility strategy implemented through advertising and continued consumer engagement through the company’s distribution network.

Senator, Ngule sales drop

Ocitti said that whereas the Uganda business registered growth in revenue, the same level of success around their affordable beer brands like Ngule and the Senator family recorded a 30% drop in sales largely as a result of the newly introduced excise duty on low cost beer brands mid last year.

The introduction of the excise tax on the low cost beer brand led to the increase in the factory price by Shs200 to Shs2, 200, and ultimately leading to decline in demand.

Ocitti said the 30% decline in demand for these products was a danger to farmer’s income that depend on selling raw materials – sorghum and cassava – used in producing these brands.

“Any action affecting their volumes has a direct impact on the farmers that produce this raw material,” he said. “We urge the government to always consider input from stakeholders as they formulate government policy in order to avoid such occurrences.”

He added that sourcing raw materials locally comes with many opportunities including reduction in foreign exchange expenditure, strong and sustainable market for the local beer ingredients, increased tax remittances as a result of sales growth, poverty reduction and development of a sense of pride and ownership among Ugandans for beverages with home grown products.

Impact on the economy

During this financial year, Ocitti said that UBL embarked on a five year production capacity expansion project that will see their beer capacity grow by 47%  upon completion. This project started in January and is expected to improve interim packaging efficiency by 20%.

The expansion will cost approx.Shs135bn and will entail purchase of new state of the art technology and related infrastructure changes.

This investment is in addition to the expansion of the company’s spirits plant done last year, 2018, with the new Shs13bn glass packaging line.

This glass line now produces spirits at about four times the speed and volume of what the company used to produce with a capacity of 6, 000 bottles per hour, replacing the old line which had capacity to produce 1, 440 bottles per hour.

According to Ocitti, the company invests Shs20bn in agriculture and agri-business to enable it collect over 25,000 metric tons of raw material [cereals] from 17,000 farmers spread across the country.

The key raw materials for this production includes; sorghum, barley, corn starch (maize) and tapioca (cassava) from farming areas ofSebei, Kapchorwa, Acholi, Lango, Zombo, Teso, Rwenzoris, Kigezi and parts of central Uganda.

In terms of tax and jobs, the company has remitted around Shs190bn per annum over the last three years to the government and created 800 permanent and temporary staff in addition to 23, 000 jobs created indirectly.

Going forward, Ocitti said that over the next six months they will continue to drive their visibility, distribution and production innovation aggressively as they try to solve the problem of expensive beer.

“It is our hope that the kind of growth we registered in the first half continues throughout the whole year,” he said.

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