TOP BREWER’S PROFITS FALL AS BUSINESS DYNAMICS CHANGE

TBL Group managing director Roberto Jarrin

In Summary

• ·         Consumers find the price of Sh2,500 for a 500-millilitre bottle of popular beer brands too high due to limited disposable income levels, thereby adversely affecting the sales volumes and profitability of beer makers.

•    TBL Group – which comprises TBL, Tanzania Distilleries Limited (TDL) and Darbrew – reported a seven per cent decline in revenues during the six months ending September 30, 2016.

Dar es Salaam. Beer drinkers are shifting to cheaper options as they align themselves with the new economic realities, sending brewers’ earnings down, Tanzania Breweries Limited (TBL) Group reported yesterday.

Consumers find the price of Sh2,500 for a 500-millilitre bottle of popular beer brands too high due to limited disposable income levels, thereby adversely affecting the sales volumes and profitability of beer makers.

TBL Group – which comprises TBL, Tanzania Distilleries Limited (TDL) and Darbrew – reported a seven per cent decline in revenues during the six months ending September 30, 2016.
Revenues dropped to Sh513.8 billion from Sh550.1 million registered in the six months ending September 30, 2015.

As a result, TBL Group’s gross profit dropped 12 per cent to Sh236.146 billion during the six months ending September 30, 2016 from Sh269.8 billion during the corresponding period last year.

The group’s operating profit also fell by 13 per cent from Sh159.3 billion to Sh138.5 billion.

TBL Group is Tanzania’s largest taxpayer, and a drop in profits translates into a proportionate fall in the amount of tax it pays to the government. The firm blamed the fall in revenues and profits to an exodus by consumers to cheaper products.

“…we have also seen a consumer shift towards more affordable products, resulting in increased pressure on our margins,” TBL Group managing director Roberto Jarrin said.

Popular beer brands brewed by TBL Group, which employes about 2,000 people, include Safari Lager, Kilimanjaro Premium Lager, Ndovu Special Malt, Castle Lager and Castle Lite. The group is also associated with Konyagi gin manufactured by TDL.

With limited disposable incomes, drinkers are shifting to affordable brands such as TBL’s Eagle brand, which retails for Sh1,000 per 500-millilitre serving, as well as TDL’s Konyagi and Zed gin brands. The list also includes products manufactured by rival firms such as Serengeti Breweries Limited’s Pilsner Lager and Kiroba Original gin produced by Arusha-based Mega Trade Investment Limited.

According to Mr Jarrin, the government’ decision to strictly enforce the rule on alcohol trading hours was also adversely affecting sales.

“TBL Group experienced challenging market and economic conditions during the six months ending 30 September…consumer confidence has been subdued and together with the impact of stricter enforcement of trading hours, our overall volumes were down,” he said.

Stock market reacts

The news might have jolted investors at the Dar es Salaam Stock Exchange (DSE), where the TBL counter had been the best performer so far this year.

The market was quick to react yesterday as the beer maker’s counter was inactive, with not a single share transacted.

This came at a time when the stock market was already reeling as investors decided to adopt a wait-and-see approach amid questions about the new government’s position on business in the current an illiquid environment.

Turnover at the DSE fell by 87.6 per cent during the first four days of this week compared to last week.

Between Monday and Thursday, last week, a total of Sh3.9 billion was realised as turnover, but the figure fell to only Sh485.47 million in the first four days of this week.

Source: The Citizen