Tabitha Karanja: How Covid spoils beer party for Keroche

A visit to the giant Keroche Breweries located at Kayole area along the Naivasha was always an exciting experience for budding entrepreneurs eager to borrow a leaf from the industry trailblazer and proprietor Tabitha Karanja.

The state-of-the art Sh5 billion facility being the focus of interest for nascent industrialists with a keen eye for business. It was a beehive of activity on any day at the beer brewing factory.

With the coronavirus ripple effect continuing to take a toll on businesses across the globe, the company has not been spared and the minimal activities at the plant bare it all. Visits are at a bare minimum with reduced workforce, belying the potential of one of the biggest facilities within Nakuru County.

In an exclusive interview with Nation Business, Ms Karanja talked of tough times that the company continues to endure despite eyeing 20 percent of the market share.

“We are currently talking of losses of close to Sh300 million per month. The losses extend to the government which is losing at least Sh150 million monthly in direct and indirect taxes that were being paid by Keroche Breweries,” she said.

Without disclosing the actual figures, she admitted that the company was heavily loaned, saying the brewer is in close discussion with lenders on a new repayment plan.

Private business

Prior to the construction of the brewery with a production capacity of 250 hectolitre per brew and yearly production of 1,000,000 hectolitres in 2012, the new plant was financed by the then Barclays Bank to a tune of Sh2.5 billion. The additional cash being from an Italian supplier negotiated to be paid once production took off and extra money obtained from the company’s internal coffers. 

Keroche Breweries was to remit Sh6 billion to the exchequer.

“I worry about several things. First, how long it will take before the Covid-19 curve is flattened, allowing businesses to operate without the current restrictions. Secondly, is how private businesses like ours that are heavily loaned will bounce back,” she said.

Ms Karanja said the company has been forced to renegotiate loan repayments, incurring additional interest that will make the cost of doing business skyrocket. “We will be forced to borrow additional loans to be able to bounce back,” she said.

At least 40 percent of the employees who strutted across the factory in white dust coats during rosy times are at home, as the company continues with austerity measures to ensure it stays afloat.

“The first big challenge was the closure of all (approximately 50,000) alcoholic beverages outlets which is the heart of the market. While we understood this as a necessary precaution to flatten the Covid-19 curve, the effect on the industry and all its stakeholders – farmers, bar owners, bar staff, transport companies, banks, staff, the entertainment industry has been drastic,” said the company’s chief executive officer.

With the closure, the brewer had to, begrudgingly introduce a 50 percent salary cut with close to half of the employees proceeding on annual leave, awaiting improvement of the situation.

Ms Karanja, however, admitted that things were not looking up, especially the restriction on alcohol sale in bars and restaurants, leading to additional unpaid leaves for workers.

The closure of bars, Ms Karanja stated, had impacted severely on the cash flow, affecting monthly payment obligations. “We have held negotiations with our financial partners to restructure loan payments. However, as a result of these negotiations, the cost of our loans will be more expensive because of interest,” said Keroche CEO.

Before adding: “The in-build profit margin per bottle of beer is being wiped out when alcohol is kept off shelves, coupled with unsustainable payroll.” She was upbeat about the culture prospect, remaining resilient in the face of adversity.

“A brewery is not a facility that can be shut down as there are multiple procedures like keeping the machines running, enabling the production process to kick-start. Products that were in the process have to be maintained,” she said hoping for the best.

History

Tracing the beer maker's journey from an initial investment of Sh500,000 in 1997 that produced cost effective fortified wines for the low-end market, the company set its sights servicing markets and gaps they felt were neglected by other giant beer makers.

By 2010 demand had outstripped supply and Keroche’s Breweries new frontier was proving to be a success before the journey was momentarily curtailed by the pandemic.   

The company is the sole producer of Summit Lager, Summit Malt, Vienna Ice, Viena Ice Lemon Twist, Valley Wine; Pinotage’, Chenin Blanc and Savignon Blanc and recently launched a Crescent range of triple distilled spirits; vodka, Whisky, Dry Gin and Brandy. 

The ALN2015 award marks yet another milestone in fast-growing international recognition for Keroche, credited with breaking Kenya’s century-old monopoly and inspiring new brewers across Africa.