Senator Keg - Diageo's Answer to Illicit Brews in Kenya

Case Code: BSTR452 Case Length: 18 Pages Period: 2004-2013 Pub Date: 2014 Teaching Note: Available

Price: Rs.500 Organization: Diageo plc, East African Breweries Limited Industry: Beverages Countries: Kenya Themes: Business Environment, Emerging Markets

Abstract Case Intro 1 Case Intro 2 Excerpts

Introduction

In October 2013, East African Breweries Limited (EABL), the Kenyan subsidiary of UK-based Diageo PLC (Diageo), introduced a low cost spirit 'Jebel Gold' (Jebel) priced at about 10 shillings in Kenya. The company started selling Jebel on a trial basis in 300 outlets across the country, after a revision in taxes forced it to hike the price of its popular low-cost beer, Senator Keg. The price of 300 ml of Senator Keg went up from Sh 30 to around Sh 50, which according to EABL, could bring down sales, as the consumers at whom the product was targeted were not in a position to absorb the rise. Senator Keg was earlier exempted from excise duty but from June 2013, it attracted tax at the rate of 50%.

Senator Keg was launched in November 2004 and was targeted at low income consumers who could not afford commercial beer and often resorted to consuming illicit liquor brewed locally. In several African countries, the per capita alcohol consumption was high, but most of the alcohol consumed was illicitly brewed. The locally brewed and homemade drinks were not very hygienic and posed a health risk. To make matters worse, chemicals like methanol were often added to the brew to increase the alcohol levels. Often, they were fortified with toxic substances, which made the resulting drink unsafe. However, the high prices of commercially produced alcoholic beverages ensured that this kind of liquor continued to be popular with the people. While, nearly 46% of Kenya’s population 7 earned less than $2 per day, the cost of the 330ml beer available in the African market then was approximately $0.60 to $0.85. Since the commercially produced beverages were unaffordable to the low income population of Africa, they opted for low cost illicit alcohol brewed locally from finger millet malt (Busaa) and a corn-meal based drink (Chang'aa), which was available at around one tenth of the price of commercial beer...

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