EABL warehouse cuts distribution costs by Sh502m

East African Breweries Limited Group managing director Charles Ireland. FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• EABL distribution and warehousing costs during the past financial year decreased to Sh4.7 billion from Sh5.25 billion posted the previous year.
• The brewer in April 2014 ceased leasing a Castle Brewing Limited facility in Thika upon constructing a Sh1.5 billion warehouse at its headquarters.
• EABL managing director Charles Ireland said the offsite facility was seeing them incur double costs, hence the decision to build their own 20,000 square metre warehouse.

East African Breweries Limited’s (EABL) distribution costs for the year to June dropped by Sh502 million after the regional brewer set up its own warehouse in Ruaraka.

EABL’s newly released annual report indicates that its distribution and warehousing costs during the past financial year decreased to Sh4.7 billion from Sh5.25 billion posted the previous year.

Increase efficiency

The NSE-listed company in April 2014 ceased leasing a Castle Brewing Limited facility in Thika upon constructing a Sh1.5 billion warehouse at its headquarters.

This investment, which was meant to increase efficiency in distribution and logistics, seems to have yielded the anticipated savings, bolstering the brewer’s full-year profits to Sh9.6 billion.

“In the financial year, we gained traction in our distributor transformation in Kenya and Uganda and converted over 1,000 newly-licensed outlets in Kenya,” EABL’s annual report indicates.

EABL acquired Castle from rival South African Breweries (SAB) during the 2002 deal that saw Diageo, EABL majority owner, exit Tanzania and SAB Kenya.

It however sold the plant to another company and entered into a leasing agreement, lasting two years, which saw the brewer transport products that could not be accommodated at its aging facility to Thika.

EABL managing director Charles Ireland said the offsite facility was seeing them incur double costs, hence the decision to build their own 20,000 square metre warehouse.

“This meant that we would load products into trucks at Ruaraka, transport them to Thika, offload them again awaiting distributors to come and collect,” Mr Ireland told the Business Daily after commissioning the facility.

Cost-cutting

EABL’s new warehouse, which has a capacity to hold about 700,000 cases of beer and spirits, was part of its cost-cutting strategy which also saw the firm retrench about 100 employees late 2013.

These measures were however not visible in the pay to directors as their perks went up by Sh14.6 million in the year to June, maintaining a trend by NSE-listed firms to compensate their top executives generously.

EABL’s executive and non-executive directors in the regional brewer collectively took home Sh276.33 million in the year to June, up from the Sh261.74 million they received the previous year.

This remuneration to directors, when added to that of senior managers, lifted the total compensation awarded to the brewer’s key management by 3.2 per cent to Sh716.9 million.