SUNS 4332 Thursday 26 November 1998
BEER WAR ERUPTS IN SOUTHERN AFRICA
Nairobi, Nov 24 (IPS/Philip Ngunjiri) -- The entry of South African Breweries (SAB) into Kenya, lodging itself within the shooting range of the huge East African market, has enraged Kenya Breweries Limited (KBL).
But for consumers, a beer is a beer.
The war, which erupted after SAB entered the East African market last month, also brings into sharp focus the long perceived high protective tariff wall erected by Pretoria, against its trading partners.
While SAB has managed to enter the Nairobi market, KBL has found Pretoria's attitude less sober and unbudging. KBL had wanted to introduce Tusker beer, its flagship brew, into South Africa but were unable to do so after Pretoria registered in the country a brand that features Tusker's logo.
A top Ministry of Trade official, Francis Awuor, says Kenya has formally protested to the South African government over the issue, and warns that Kenya might use the same tactics to keep South African goods out of its market.
The famous Kenya 'Tusker' beer has been refused entry into the South Africa because of its trademark - an elephant brand -- which infringes on the trade-mark rights of another South African beer 'Elephant'. The South Africans say they will go to court if the brand hits their market.
KBL, which controls about 60 percent of the East African market, accuses SAB of erecting a high tariff wall to lock Kenyan beer out of South African market, 98 percent of which is controlled by SAB.
Anything goes in this war. The South African company accuses their Kenyan counterparts of defacing their advertising billboards.
The multi-million shilling billboards (one costing 500,000 Kenya shillings) mounted along the city's main roads and on top of buildings have been torn apart, sprayed with paint and others have simply been knocked down.
"I have never seen anything like this in my 20 years in the beer industry, even in Zambia where competition is fierce," says Castle Kenya (SAB) Ltd Managing Director, Roger Smith. Smith claims his company has spent more than 150 million shillings (one US Dollar is equal to 60 Kenya shillings) in advertising. He terms such vandalism as underhand corporate marketing wars that could undermine competition and fairness in a free market environment.
Kenya Breweries has formally petitioned the Kenya government and the Kenya Association of Manufacturers (KAM) over the move by the South Africans to keep them off their market.
"While in Kenya we have liberalised the economy which has made it possible for the South Africans to invest in Kenya, South Africa has not reciprocated. Is this not double standards and anti-
competitive activity?," asks KBL Marketing Manager, Michael Karanja whose company wants to retain Kenyan market with an annual turnover of 25 billion Kenya shillings.
Both companies are placing expensive ads in both electronic and print media on a daily basis. But price and product variation appear to be the main weapons of choice for KBL, while SAB is using its
international experience and its financial muscle.
Within days of SAB unveiling Castle Milk Stout to compete with the local KBL local Guinness brand, another new brand by KBL, Pilsner Ice, targeting the urban youth hit the market. KBL has also started canning its Tusker beer to match Castle.
A 0.5-litre bottle of Tusker costs 54 shillings, while Castle sells for 52 shillings. These prices are expected to drop as the competition intensifies. "Prices will no longer be determined by the company's accountants, but by beer drinkers," says Smith.
The effects of the beer war have also been felt across the borders where KBL controls 45 percent of the Uganda beer market. Last year, KBL's exports earnings stood at 600 million shillings, including 4,000 crates of beer delivered daily to Uganda. SAB has also made inroads in the Ugandan market.
And, as the corporate war rages on, local beer consumers have become the major beneficiaries.
"I can forsee good days ahead, there is now a wider choice, beer quality has shot up and prices come down," says John Mwaura, an Engineer with Kenya Power and Lighting Company (KPLC), the main electricity power provider in the country.
"It does not matter whether they are foreigners or not, the issue here is that Kenya has become a better place," he argues.
If anything, the arrival of the South African should be welcome. There has not been any significant foreign investment in the manufacturing sector for more than 15 years, until SAB came to Kenya and set up their 45-million-US-Dollar factory in Thika, in the outskirts of Nairobi.
"Without no new investment there will be no employment opportunities in the country. The majority of Kenyans view the investment by SAB in Kenya positively," argues Japheth Oluya of the Kenya Institute of Economic Management (KIEM).
He says Kenya has enjoyed an additional asset of 2.4 billion shillings, the biggest in 15 years. "Additionally, it means that within the next five years, Kenya's current account will be boosted by 15 billion shillings from tax contribution of the brewery. This figure is expected to soar as the brewery expands," he adds.
South Africa has been accused of its steep and uncompromising trade barriers in regional trade as the East African region becomes its increasingly significant market. While the Kenya government, continues to pursue its liberalisation policy, the rapidly regional trade scenario has a huge imbalance which tilts in favour of South Africa.
South Africa exported goods worth 313 million US dollars to Kenya, while the later exported a paltry 18 million US dollars to South Africa last year.
Oluya says the way forward is for the two giants to face competition and not fear it. "An ugly war could scare away investors and kill weaker entrants," he says.