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EABL takes beer wars to SABMiller’s doorsteps

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by Geza Ulole, Jul 29, 2010.

  1. Geza Ulole

    Geza Ulole JF-Expert Member

    Jul 29, 2010
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    EABL takes beer wars to SABMiller’s doorsteps

    [​IMG] East African Breweries Limited bottling plant. The brewer has been allowed to buy a controlling stake in Serengeti Breweries. Photo/FREDRICK ONYANGO
    By Mwaura Kimani (email the author)
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    Posted Friday, July 30 2010 at 00:00

    Tanzania has allowed East African Breweries Limited to buy a controlling stake in Serengeti Breweries, handing the Kenyan firm a key weapon in the ongoing battle for control of the neighbouring country’s beer market.
    The green light by Fair Competition Commission (FCC) gives EABL a firm footing in the Tanzanian market where a protracted battle with South Africa’s SABMiller has been pulling back its operations.
    Serengeti Breweries Limited (SBL) is Tanzania’s second largest brewer with at least 17 per cent of the country’s total beer market.
    EABL announced the deal on Thursday but said it was subject to other regulatory conditions, which it did not specify.
    “EABL is committed to growing SBL’s portfolio and footprint in Tanzania and beyond as well as make SBL an integral part of our operations in East Africa,” it said although it did not say how much it had paid for the 51 per cent stake.
    People familiar with the matter said the FCC has barred the Kenyan brewer from closing the SBL plant in Tanzania – aiming to protect local jobs as the region moves into the Common Market platform.
    “They are also required to retain SBL’s key brand Premium Serengeti Lager among other brands,” said a source.
    The Acquisition is of strategic importance to EABL and British beer giant Diageo who have a controlling stake in the Kenyan brewer.
    In the past four years, it has seen both sales volumes and profits drop in key Kenyan markets evens as cash continued to pile in its vaults.
    A drop in volumes in the Kenyan market that accounts for about 77 per cent of EABL’s revenues has been significant, especially because it happened at a time when the brewer’s Uganda and Tanzania operations came under a wide range of market pressures that slowed down growth.Last year, Uganda Breweries, in which EABL has a 98.2 per cent stake, reported a two per cent drop in volumes and a 39 per cent fall in operating profit, a situation attributed to cost pressures.
    In Tanzania, the Kenyan brewer found itself at the centre of a legal dispute with SABMiller’s subsidiary TBL over a seven-year marriage that was on the rocks.
    EABL joined the TBL board in 2002 under an arrangement that gave the Kenyan brewer a 20 per cent stake in the SABMiller-owned operation. SABMiller gained a similar stake in EABL’s Kenya subsidiary in a deal that saw the South African brewer wind up its operations in Kenya.
    The two firms also agreed to manufacture and distribute each other’s flagship brands but EABL argued that TBL had failed to keep its part of the deal.
    The dispute saw EABL’s sales volumes in Tanzania decline by 14 per cent as the rivalry turned East Africa into battle zone between SABMiller and Diageo, which has a 50 per cent stake in EABL.
    SABMiller owns 60 per cent of Nile Breweries in Uganda where a vicious battle for market dominance has been raging for nearly three years.
    More recently, SABMiller front-run EABL in Southern Sudan with the opening of a Sh2.9 billion plant in Juba in an attempt to consolidate its presence ahead of the competitor.
    In November last year, EABL announced it had courted SBL as its sole distributors of its world-class spirit brands in Tanzania adding impetus to a long running battle with SABMiller’s Tanzania Breweries.
    Acquisition of SBL signals EABL’s intention to intensify its activities in East Africa to grow profits and reduce it’s over reliance on the Kenyan market that has been showing signs of maturity.
    Kenya’s largest manufacturer by market value grew its revenue to Sh18.6 billion in the last six months of 2009 on the back of improved sales of the Tusker and Guinness brands that also benefited from upward price adjustments last November.
    “Yes, Kenya is our fortress but at the end of the day we are East Africa Breweries and we must play the East Africa game,” said Mr Seni Adetu, the group managing director in February.
    Winning the Tanzania round now leaves EABL to focus on the Uganda market where SABMiller has announced plans to invest Sh1.2 billion in a malting plant to process locally grown barley.
    EABL’s marriage to TBL was formalised in 2002 agreement that saw SABMiller cede a 20 per cent stake in TBL to the Kenyan brewer in exchange of a similar stake in Kenya Breweries.
    The deal saw SABMiller leave Kenya where it had put up a bruising market share battle against EABL.
    The latter also left the Tanzanian market in return.
    Under the agreement, the two firms were to manufacture and distribute each other’s flagship brands in their separate territories.
    The agreement specifically provided that TBL would grow EABL’s flagship Tusker brand in Tanzania among other brands as EABL did the same for SABMiller’s Castle brand in Kenya.
    In the last five years, however, EABL increasingly got impatient with the marriage and embarked on a plot to end it on the grounds that TBL had breached the deal.
    In May 2007, when the contract came up for renewal as provided for in the agreement, EABL stepped back and later cancelled it, quickly initiating a similar deal with Serengeti Breweries.
    The fight for the Tanzania beer market has recently sparked serious fights between TBL and SBL, who have been accusing each other of unfair competitive prices.
    In May, FCC ruled that TBL should pay SBL an equivalent of its five percent of annual turnover basing on the current audited accounts of the company.
    The decision by FCC comes as a salvage to SBL which has for nearly a decade complained of being excluded in the market through anti-competitive practice by TBL.
    Business Daily: *- Company Industry*|EABL takes beer wars to SABMiller

    MY TAKE: A stupid deal i can tell, why allowing an acquisition of 51%? didn't they learn from Precisionair? I am pissed off! Serebgeti beer might just disappear just like Kibo gold and Plisner Ice! I hate these guys!
  2. Geza Ulole

    Geza Ulole JF-Expert Member

    Jul 30, 2010
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    EABL faces tough terms in SBL deal Send to a friend Thursday, 29 July 2010 23:00 0diggsdigg

    By Samuel Kamndaya

    A proposal by East African Breweries Limited (EABL) to acquire a 51-per cent stake in Serengeti Breweries Limited (SBL) faces an uphill task, after the Fair Competition Commission (FCC) slapped the Kenyan firm with stringent purchasing conditions.

    In principle, FCC approved the acquisition on July 23, 2010 but the endorsement is laden with a string of conditions for EABL to meet, according to a public statement appearing in the press yesterday.

    According to a statement by FCC, the Kenyan brewer, which is a subsidiary of Britain's Diageo (DGE), is first required to offload its 20 per cent stake in Tanzania Breweries Limited (TBL). The latter, a subsidiary of SABMiller, is SBL's competitor in the local market.

    EABL sought acquisition of a stake in SBL after settling a dispute with rival SABMiller over investment in the local beer market in February this year.

    SABMiller owns 52.8 per cent of TBL, while EABL holds 20 per cent in the company. The rest of the stake is held by Tanzania's pensions funds and members of the public, through the Dar es Salaam Stock Exchange (DSE).

    "…the FCC approved the acquisition on condition that EABL, which is the acquiring firm, shall offload its 20 per cent shareholding in TBL before consummating the merger," the statement reads.

    FCC also wants EABL to ensure continuity and promotion of SBL's identity.

    EABL is also required to continue with production of SBL's current brands for at least five years from the effective date of the merger.

    Should EABL need to close any of SBL's plants, it will do so only after consulting and getting the approval of FCC.

    As soon as the merger is initiated, said FCC, EABL will be required to submit to the commission an annual progress report on how the Kenyan firm complies with the investment strategy plan that it submitted during the application for the merger.

    EABL will also be required to submit to FCC a progress report on how it complies with conditions attached to the merger. Currently, SBL controls a 17 per cent share of Tanzania's beer market.

    SBL officials hope that a partnership with EABL would see the Tanzanian firm grow and hence access regional and international markets.

    "In EABL, SBL has found a partner who is keen to invest in further capacity that will help their ambitious plans for growth in Tanzania and beyond. The teamwork between EABL and SBL is strong and the partnership will only serve to grow both businesses across East Africa," SBL's public relations and communications manager Teddy Mapunda said.

    It could not immediately be established whether EABL had consented to the conditions.
    EABL faces tough terms in SBL deal
  3. M

    MJM JF-Expert Member

    Jul 30, 2010
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    I dont know exactly what is this all about, i ask my self a lot of questions and fail to get appropriate answers.

    1. Why should SBL seek to sell 51% percent stake to EABL at the first place?
    2. If they dont have capital is it not possible to issue shares to the public (Tanzanians) and raise the capital they want.
    3. Are their brands weak to compete to the market? Are they not capable of establishing brands which can compete both internally and externally? Have they reached the peak of innovation and they can't move any further until they get a helping hand?
    4. Why should they think of selling their stake to rivals in the industry within the country and East Africa? Are there no fresh investors who are interested in the company?
    5. Why selling the controlling interest instead of minority interest? what exactly do they want?
    6. If they are interested to get market from outside the country why should go that far while they are still weak in the country? Are they satisfied with 17% market share. This is very small share, they need to capture much internal market to get acceptance externally.
  4. Geza Ulole

    Geza Ulole JF-Expert Member

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    Those are very good questions! i am very disappointed with business persons in Tanzania their thinking is short limited! SBL could compete with any company in EA what EABL did was to fend off any person to enter their market seeing the potential of SBL and since we have unstratergic Tanzanians, fail to see that and trust me Serengeti lager will disappear from the market just like Kibo gold and since they acquired the brand rights no one will ever produce the beer! I hate the Kenyans and i won't drink Serengeti beer anymore! if we fail to have our own companies across the border then what are we doing in EAC or SADC? f**k that! technically EABL has taken Stella Artois and vita malt brands with them and closed an opportunity for EABL to open up a brewery in Tanzania and create more jobs!
  5. Semilong

    Semilong JF-Expert Member

    Jul 30, 2010
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    it will take them five years to kill serengeti lager.
    sabmiller bado wanatengeneza safari, wamefufua ndovu na wameanzisha kilimanjaro