Diageo’s EABL to start producing spirits locally as demand in Nigeria, Kenya grows

Kenya-based East African Breweries Limited (EABL), a subsidiary of Diageo Plc has announced plans to start producing spirits in its local market as demand for its products surge in Kenya and Nigeria.

The company which is known for its Tusker Lager said it will invest $13.88 million (approx. 1.4bn Kenyan shillings) to fund a 20,000 bottles per hour spirits line, which will double its production capacity at a plant in the outskirts of Nairobi.

The firm said it will start producing Captain Morgan locally to cut costs and make high-end offerings more widely accessible to both domestic consumers and for export.

The Kenyan version of the spirit known as Captain Morgan Gold, will retail for between 800 – 900 Kenyan shillings per 750 ml bottle – half the price of the imported bottles. Production is set to begin by May, the company said.

“The liquid is loved. What we are doing is to make sure we democratise it to make it more widely accessible,” said Andrew Kilonzo, EABL’s head of premium spirits sales.

The company will also produce other Diageo spirits brands locally, he said without elaborating.

Sales of EABL’s spirits grew 20% in Kenya in 2017, marking a shift in the country where beer, including EABL’s Tusker has long reigned supreme.

“We have more and more people interested in whisky as a category and we also have more and more affluence,” said Anne Joy Michira-Muhoro, EABL’s head of spirits, at the Nairobi plant where Tusker beer is also produced.

EABL is hoping that strong spirits sales will lift its earnings that have been near flat or growing in single digits in recent years, impacted by the 2017 Kenyan elections. Beer accounts for 70% of the company’s revenue.

However, EABL faces stiff competition in spirits from the likes of Pernod Ricard which imports Jameson Irish Whisky and from domestic producer Africa spirits.

The company said its Chrome vodka is growing at more than 20% a year and it is forecasting that spirits will make up half of the company’s ales within the next five years, up from 30% in 2017.

Owners of bars in Nairobi say that social media and television are influencing young drinkers to make the switch from beer to spirits.

Daniel Mettyear, an analyst at London-based IWSR, said that the strong growth in spirits from vodka to gin and rum is partly driven by a growing middle class income in Kenya.

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