… Chooses to work hand in hand with government to survive
Sechaba Brewery Holdings Limited group Managing Director, Johan de Kok, says they have accepted that the only forward is to work hand in hand with the government as the regulatory environment continue to present real challenges.
The alcohol levy was increased to 50 percent in December 2013 and de Kok says as a result they were compelled to ultimately increase the price of all alcoholic beverages. In the group’s 2014 annual report, de Kok says the introduction of Traditional Beer Regulations (TBR) which was implemented in July 2012 required a major revision of the opaque beer business model as close to 86 percent of the retail space was lost.
“The main challenge in complying with TBR continues to be unavailability of suitable land,” he says. Additionally, de Kok says, the development of smooth rollout of the outlet development programme.
“Although there has been some recent improvement in this regard, there are still a number of misinterpretations by local authorities of the provisions of the Liquor Act and the applications for both change of land use and licences,” says de Kok.
He, however, says KBL is actively working towards building strong working relations with said authorities with a view of mitigating future misunderstandings. Other efforts that KBL is engaged in is to assist owners of beer gardens meet regulations requirements and assist in licence renewal by engaging with local authorities on their behalf.
As the hostile trading environment for alcohol related products is expected to continue, de Kok says this does not make the task of producing world class beverages for local consumers impossible.
“We are adamant that the only way forward is to work hand in hand with government in ensuring that the beverages produced by KBL have positive, lasting effects on consumers and society as a whole,” he said.
Sechaba Holdings through its subsidiary, KBL, in which it owns 60 percent stake, has been experiencing profit decline since the introduction of the alcohol levy and TBR.
Despite the regulatory measures put in place by the government to reduce the rate of alcohol consumption, de Kok says, the results posted by the group are acceptable.
In the current year, Sechaba Profit after Tax (PAT) increased by 7.4 percent despite declines in sales of clear beer and soft drinks volumes which went down by one percent whereas the sales of opaque beer volumes also went down by 11 percent.
Total volumes for the current year are said to have fallen by one percent, the mainstream clear beer category however showed growth ending the year 11 percent up compared to the previous year while opaque declined by eight percent.
Mainstream lagers are reported to be the drivers of the clear beer category particularly the 750ml returnable bottles dominated by Black Label and Castle Lite brands. On the opaque beer category, the introduction of the Chibuku two-litre pack is said to be paying dividends as it is appreciated consumers due to its lower retail price compared to the 1L pack.