Beer and spirits manufacturers have directed bar owners to stick to recommended alcohol prices to lift sales during the Christmas period.
The manufacturers, through their lobby-Alcohol Beverages Association of Kenya (ABAK)—say higher alcohol costs could hurt sales, arguing bar owners to sell drinks at lower recommended prices.
Locally brewed beer prices were adjusted upward by Sh10 in July due to tax increases, with the recommended retail price of Tusker Lager set at Sh160.Some bar owners have raised prices above the recommended price and are expected to further increase product costs on increased demand during the festive season.
Manufacturers reckon that selling beer prices above the recommended price will dim sales, and push some drinkers to illicit drinks .
“If retailers really want to grow their business they have to offer value to consumers otherwise buyers will take their money elsewhere, meaning that in addition to lost sales, goodwill across other categories will also be lost,” said ABAK Chairman Mr Gordon Mutugi. “Despite well-spelt out prices that are often published in the media for all to see and adhere to, it is not uncommon to see some retailers raising prices beyond the recommended ranges.
ABAK reckon a study it commissioned last year showed that increasing the price of legitimate alcohol has been shown to push drinkers to illicit brews. “Increasing the price of legitimate alcohol has been shown to encouraging contraband alcohol from other countries that have lower tax regimes,” says the lobby.
Beer on the Ugandan side of the Busia border costs half what it goes for on the Kenyan side, a situation that has proven uncompetitive for bars and restaurants on the border towns, driving down sales and taxes.
A half-litre beer bottle in Kenya, which sells at an average of Sh200, is sold at Sh80 in Uganda. Bars on the Kenyan side that smuggle Ugandan brands sell them at about Sh100 between Busia and Malaba.
Close to half of Tusker’s recommended retail price goes to the taxman.