Keroche magnate now wants a piece of the rest of Africa

PHOTO | BILLY MUTAI An employee oversees the production process of Summit Lager.   NATION

In Summary

• Risking everything, I made it because I did not back down, says Mrs Karanja
• The manager is a former library administrator — she’s helpful enough to clarify that she was never the librarian — who started business with Sh200,000 from a hardware shop located on the main street in the dusty town, three kilometres away as the crow flies.

By MUNA WAHOME

Off the steep road from Naivasha to Nairobi is a fast-changing brewery and distilling complex that aims to capture 20 per cent of the national beer market.

The manager is a former library administrator — she’s helpful enough to clarify that she was never the librarian — who started business with Sh200,000 from a hardware shop located on the main street in the dusty town, three kilometres away as the crow flies.

By August, Keroche Breweries Ltd Managing Director Tabitha Karanja hopes to have expanded the brewing capacity 10 times to a 100 million litres a year, which her managers estimate to be a fifth of the capacity of East Africa Breweries Limited — the market leader and her main competitor.

She has borrowed Sh2.5 billion from Barclays Bank to finish the Sh3 billion building of the massive solid metal structures at the expanded brewery.

If her temerity to walk into a bank and expose herself to huge debts makes your skin crawl, Mrs Karanja has, in the past, borrowed Sh1 billion from the bank and by the last quarter of this year, her total investment, including in a modern distillery, should be in excess of Sh4.5 billion.

She has risked everything to become, arguably, the most celebrated indigenous manufacturer.

In 1997, she thought she was only filling a gap in the lower-income segment of the alcohol market. But then she waded into the storm of her life.

Around the same time, she cleared scrubland to install the original distillery, giant South African Breweries put up a Castle Brewing Ltd plant in Thika, inviting a mighty fight from the 95-year-old EABL.

Unable to compete, the South Africans were forced to close shop in 2002, laying off 800 workers and selling the plant to the rival Diageo, the majority owner of EABL.

Mrs Karanja’s troubles were not long in coming. In 2003, Parliament debated her factory, with one MP claiming that the distillery was causing more harm than good to his constituency. It was then that Trade minister Mukhisa Kituyi called Mrs Karanja to give her side of the story.

“It is like we had been forgotten all along during the beer wars (between EABL and Castle), then suddenly everyone noticed us,” she recalled.

The Kenya Revenue Authority slapped her with a tax arrears in excess of Sh1 billion for allegedly underpaying the taxman for some of her products. More was to follow.

The Treasury increased taxes on fortified wines, which ended up affecting only her company.

She went to court to oppose the tax demands by KRA and won. But the authority later filed an appeal that is yet to be concluded. She also got the House Committee on Finance to scrap the tax on fortified wines but it was later imposed again by former Finance minister Amos Kimunya.

This just strengthened her will to diversify into the beer market. All along, she has maintained a strong fighting spirit that has unnerved both friend and foe.

At one point, she gave such an unnerving speech during an interview with a local TV station after KRA officials delayed the release of the excise stamps for her spirits that officials from Times Towers called her to pick them up the following day.

“I came out strongly to defend our right to invest,” she said, explaining that she did not want to be a showcase of failure after investing a lot of energy and money in a venture her research had indicated was viable. In hindsight, she admits that she was a bit naïve in thinking it would be easy to go up against entrenched monopolies.

“If I had backed down, it would have taken other Kenyans at least 40 years to do it. I did not want to be the reference point that “it can’t be done”. I did not want future generations to be told that this is the person who tried and failed so that they also give up.”


At one point, she felt she had been isolated by both Parliament and the government.

Interestingly, she said, the much-maligned courts prior to the reformist Willy Mutunga era rescued her. Those in the know concede the victory at the High Court against KRA in 2007 steered by out-of-work lawyer-cum-politician James Orengo at his most brilliant, may have inspired other companies to challenge tax bills. “I had to fight; this is my country. Where else was I going to go?”

The woman who says that when growing up she only wanted a good job “to make money” would love to retire at 55 but not before she has ventured into the rest of the continent.

But why choose the untested alcohol sector? At the hardware shop owned by her husband Joseph Karanja, she would always wonder who made the items she was offering for sale.

That was when she thought about manufacturing gaps in the market, and after conducting a survey, settled on affordable wines and spirits.

The same survey revealed a gap in the beer industry, but that investment would have to wait until 2007. Today her flagship Summit lager is fighting for a share of the market. 

COURTED RISK

If she is not courting risk, it seems to court her. When she started her business in 1997, it was an election year. So was 2007 when she borrowed from Barclays to start brewing as was 2013 when she started the massive expansion. Most businesses usually hold back such ambitious investments during election years.

“You must start somewhere, but you also have to take risks. The more risks you take, the larger the loans financiers will give,” she says. “Kenyans must think big and take more chances, otherwise only foreigners will invest and take home the profits.”

And she is not immune to political risk. A well-orchestrated rumour that she was supporting Cord pervaded the marketplace just ahead of the 2013 elections, hurting her brands, especially since her roots are in Central Kenya, and in Kenya political alignments, real or perceived, dictate success in business.

She was forced into an expensive counter-campaign. “I made an appeal to our customers to set apart business from politics; and like before when we faced challenges, the customer proved to be our loyal ally.”

In her spacious boardroom, Mrs Karanja, confident that the worst of her challenges are now behind her, concludes confidently: “The sky is the limit.”

BY MUNA WAHOME