Covid-19 spoils beer party for Keroche

Keroche Production Manager George Otinga inspecting some of the beer bottles at the Naivasha-based factory. Macharia Mwangi
Photo credit: Nation Media Group

What you need to know:

  • Prior to the construction of the  brewery with a production capacity of 250 hectolitere 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.
  • 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.

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

The state-of-the art Sh5 billion facility was 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 company 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 Smart Business, Mrs 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.

Remit Sh6 billion

Prior to the construction of the  brewery with a production capacity of 250 hectolitere 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.

Mrs 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, entertainment industry has been drastic,” said the company’s chief executive officer.

50 percent salary cut

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.

Mrs 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, Mrs 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 the 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 started. Products that were in process have to be maintained,” she said hoping for the best.

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