Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Keroche Industries Take on Market Giant EABL

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Kenya: Keroche Industries Take on Market Giant EABL

Tuesday, 12 August 2008

Keroche Industries have announced that they will enter the breweries market, taking on beer giant EABL. Undoubtedly good news for Kenyan beer consumers, but will the windfall be to the advertisers and marketers who, according to the Steadman Group-a market poll researcher-have lost over 21% of revenues from the beverage industry?
One thing is clear to analysts: Keroche faces a daunting task against sector leader, East Africa Breweries Limited (EABL). The new kid on the block will have to contend with one of the best organized distribution networks in the country and the powerful brand recognition from a company that has been operating in Kenya for over 80 years.

According to press reports, Keroche will start producing its beers by September 2008. Keroche have been in the alcohol business for over ten years now and, in the process, have faced some big challenges, including a major tax case against the Kenya Revenue Authority (KRA) for a KES1bn tax claim. Keroche Breweries won the case, but the KRA is appealing the decision at the Court of Appeal.
For EABL, the entry of Keroche is another irritant for the battle hardened brewery that is currently facing accusations from members of the Kenyan Parliament that its newest product in the market, non-alcoholic drink Alvaro, actually contains alcohol.

In an all-out advertising war, Keroche would struggle to match EABL, which reportedly has a war chest of over KES350m. But by aiming at the low end of the market, Keroche might just chip at EABL’s market share. However, EABL is not going to take it lying low and a bitter war, including massive co-operate espionage, is not far fetched.

With its marketing prowess, and having hounded out a much stronger competitor in SABMiller, EABL should be well placed to ward off major competition from Keroche. However, Keroche has turned out to be surprisingly resilient against its largest competitor and all indications show that it has done its research well and knows what it will do to compete against EABL. The plant it has set up in Naivasha – according to Keroche, a KES1bn investment is beyond doubt a formidable achievement by an indigenous Kenyan business.

Apart from Keroche, EABL also has to contend with competition from the Kenya Wine Agencies Ltd (KWAL) whose line of products, wines and spirits commands a strong market share. Viceroy, a brandy marketed by KWAL has been giving EABL’s Richot a run for its money and is preferred by many brandy drinkers in the Kenyan market. A public listed company, EABL has been trading at an average of KES183 at the Nairobi Stock Exchange.

What is clear, however, is that both consumers and advertisers will be having some good times with the entry of Keroche into the beer market.

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