Kenya: Diageo builds new US$140m sorghum brewery

East African Breweries (EABL), a Kenya-based holding company and since 2000 majority owned by Guinness maker Diageo, has announced to set up a new Sh15 billion (US$140m) brewery in Kisumu, near Lake Victoria about 350 km northwest of the state’s capital Nairobi.

Kenya’s President Uhuru Kenyatta announced on Wednesday during a meeting with Diageo Global chief executive Ivan Menezes that the new plant will significantly lift the demand for sorghum, which will be met by thousands of small-scale sorghum farmers in the region and in turn will create a source of livelihood for ”at least 110,000 Kenyans.”  “According to projections, this plant alone will lead to increased utilization of sorghum from the current 20,000 metric tons to around 40,000 in the next five years. Increased demand for sorghum will see the number of contracted farmers grow from 30,000 to around 45,000. As a result, gross additional farmer earnings are expected to reach over Sh6 billion [US$60m] annually over the next decade,” said President Kenyatta.

In order to fight illicit brews and provide the Kenyan population with a cheap alternative to more expensive beers like Diageo's local brand Tusker, EABL introduced in 2004 the brand Senator Keg, which is a beer brewed mainly from Sorghum thus reducing the need to import costly barley malt. Since its launch, Senator Keg has proved an enormous success and had gained 40% of the Kenyan beer market until 2012.

However, in order to fight state deficit, Kenya introduced a 50% excise tax in October 2013, which led to a doubling of prices on bottled beer.  As a result sales of Senator Keg dipped sharply and thousands of Senator Keg outlets shut down. EABL accumulated 13,000 tons of sorghum from contracts with farmers and which it said was enough to sustain Senator Keg production for three years. Therefore EABL announced not to renew contracts with sorghum farmers.

In order to help the situation, President Uhuru Kenyatta signed in May 2017 a bill to cut excise tax (remission) to 90% from the current 50% for beers manufactured using at least 75% locally-sourced sorghum, millet or cassava. This move helped to reverse the negative effect of the prior taxation and paved way for the new brewery in Kisumu

Works on the Kisumu plant will start on July 16 and are projected to take 18 months to complete. Production is expected to start in early 2019.

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