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Spirits Sales Outpacing Beer, Expanding In East Africa

Spirits Sales Outpacing Beer, Expanding In East Africa

Distiller Diageo plans to boost the share of revenue from its spirits business, where triple digit growth is outpacing the increase in beer sales in East Africa, according to a Bloomberg report.

The region’s biggest beer maker, Diageo’s East African Breweries Ltd. plans to grow its distribution infrastructure in South Sudan and migrate from trading to fully operational business units in Rwanda and Democratic Republic of Congo, CEO Charles Ireland told Bloomberg.

East African Breweries controls 95 percent of the Kenyan beer market and half its spirits business, according to Ireland. It has manufacturing plants in Kenya, Uganda and Tanzania and exports to Rwanda, the Democratic Republic of Congo and South Sudan. SABMiller, the world’s second-largest brewer, operates the only brewery in South Sudan.

South Sudan, the world’s newest nation since gaining independence from Sudan in 2011, is expected to see its economy expand 32.1 percent after contracting 53 percent last year, IMF said on its website. South Sudan’s economy shrank when it shut down crude oil output in a dispute with neighboring Sudan over pipeline fees. Output resumed earlier this year.

Economic growth in Kenya, the region’s largest economy, is expected to increase from 4.7 percent in 2012 to 5.8 percent this year, according to IMF.

The spirits business, particularly premium and international brands, has grown more rapidly than beer and the company expect that growth to continue, Ireland said.

Revenue at East African Breweries increased 6.5 percent to $689 million in year through June. Spirits contributed at least 16 percent of sales.

“As economies develop consumers become aware of international brands, they become aware of mainstream and premiums offerings,” Ireland said.

Biggest-selling spirits in Kenya by sales volumes are derived from sugar cane and include Kenya Cane. Premium brands such as Johnnie Walker whisky are recording the fastest growth, according to Ireland. The company’s biggest beer brand, Tusker, accounts for a fifth of sales volumes, he said.

Annual growth in sales of premium spirits is expected to be in low triple digits over the next three to five years. Beer is expected to grow in the range of single digits, Ireland said.