Kgalagadi Breweries Limited (KBL) Managing Director Johan de Kok says the liquor regulations and ever increasing alcohol levy continue to hit the company hard, as opaque beer sales have dwindled while profits have declined.
Briefing members of the media and analysts on the company’s financial results last week, de Kok said the additional five percent increase to the alcohol levy, which now stands at 55 percent, has now resulted in the levy being higher that the excise cost. So far, KBL has paid government P183.3 million in alcohol levy and the figure is bound to go higher as the brewer anticipates another increase during the current financial year. However, De Kock believes on-going consultation will bring the desired results.
“Consultation and engagement with government is on-going,” he said.
The decline in sales and profitability has led to loss of jobs as KBL closed some of its opaque beer operations in the country. Traditional beer declined by 4.3 percent due to impact of traditional beer regulations and discontinuance of exports to South Africa.
“On the Chibuku side, downsizing is inevitable and the levy will have impact on employment,” he said.
Despite the hostile operating environment, the brewer recorded an increase in its bulk offerings at the expense of cans and non returnable beverages. Total volumes for the year went up 4.9 percent on prior year. Continued innovation and cost cutting resulted in Sechaba’s costs going down while operating profit reduced by 3.6 percent to P201.7million. Sechaba’s profit after tax went down by 2.9 percent to P186.1 million and the total comprehensive income reduced by 0.05 percent to P190.3 million.
A look into the performance of alcoholic beverages shows that total volumes of clear beer went up 4.8 percent, buoyed by the sterling performance of Carling Black Label. The brand’s dominance continued unabated as it contributed over half of the category’s volumes, which went up 22 percent on prior year. St Louis lager declined by one percent, though indicating signs of stabilization while Castle Lite declined 12 percent for the year. Global Brand Miller Genuine draft grew 24 percent on prior year. De Kok stated that sparkling soft drinks finished 12.0 percent above prior year notwithstanding increased competition from in-house brands. The 2L pack experienced growth and were the biggest contributor in this category.┬á
“The total non-alcoholic beverages ended 15.6% ahead of prior year attributed to strong growth of source water (23%), Mageu (9.5%) and introduction of Mazoe during the year,” said de Kok.
He also revealed that KBL has completed functional integration of its opaque business adding that it is now fully integrated into structures of the brewer. Sechaba Brewery Holdings Limited also noted that both water and electricity supply interruptions will require contingency measures as they have increased the cost of doing business.