Bots brewery looks to SA for Chibuku market

Gaborone ‑ Botswana’s largest brewery, Kgalagadi Breweries Limited (KBL), is eyeing the South African market for its traditional beer, Chibuku.
The plan is part of KBL’s efforts to expand its market base in the face of a decline in local sales after Botswana tightened regulations on the opaque beer sales.
The brewer has suffered sustained challenges in its trading environment, as a result of Traditional Beer Regulations that were implemented last July. The new regulations effectively banned the sale of traditional beer in residential areas [that previously represented approximately 80 percent of trading channels for KBL].
Other factors that have contributed to this untenable situation relate to licencing issues as well as the unavailability of land to set up Chibuku depots.
Announcing the results for subsidiary, Sechaba Brewery Holdings Limited (SBHL) recently, KBL managing director, Johan de Kok, said the group is planning to export Chibuku to South Africa because the Botswana market is limited.
“We are co-operating with the government concerning the closure of our depots because we cannot keep on running at a loss.
“Our alcoholic beverage brands were 13 percent below last year, as a result of the Chibuku sales decline.
“The trading environment for alcohol-related products remains challenging as the impact of high levy felt by consumers, “said De Kok.
The alcohol levy was increased to 45 percent in October last year and this has resulted in the group increasing prices of its products.
De Kok revealed that about 57 shebeens have closed operations in Palapye village. And this had led to the closure of KBL Palapye depot.
KBL said the Palapye Brewery has fared consistently worse off than others. The company said consideration to close down the operation follows the tough reality that despite efforts to mitigate the challenges
 and with performance steadily falling well below break-even point, a decisive approach was necessary for the entire business to remain sustainable and profitable to ultimately deliver to shareholder expectations.
Palapye Brewery that employs 57 people suffered a dramatic reduction in volumes and sales due the impact of the regulations and consequently, a good number of employees often remained idle due to the inevitable down-scaling of production to match changes in demand.
Efforts will be made to try to absorb as many of the affected employees as possible at both the KBL Opaque and Clear Beer sites across the country, according to the company.
“The group is struggling to invest in beer gardens as land availability continues to be a challenge.
“We are struggling to get land in the right place. We are trying to get as close as possible to Chibuku consumers but we only find land in faraway places,” De Kok said.
The regulations demand that Chibuku should not be sold in residential places but rather in licensed depots.
The traditional beer regulation and a further increase in the alcohol levy resulted in volumes falling below prior year. Although marketing expenses increased by 19 percent, as the company continued to invest behind its products, De Kok said the expansion of Castle Lite and St Louis Export into draught was very successful and the group would continue to roll this out across the country in the next financial year although from a lower base.
De Kok said, as to be expected in any business, management’s responsibility is to be proactive in taking timely steps to cushion the business and reduce the chances of the overall bottom line performance from following a continuous decline.
“This responsibility extends to our affected employees; to ensure that we can do the best we can to save as many jobs as possible, through negotiating a feasible redeployment to other areas of the business (where possible).”
“As in the past and as the business continues to feel regulatory and other external shocks, we will do all we can to minimise employee redundancies; while also accepting our limitations where such measures prove unsustainable,” he added.

June 2013
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