Why gambling crackdown is sweet beer for EABL
The Kenyan government has launched a major crackdown on gambling, whose rapid rise in the country has redirected consumer spending away from other industries.
Kenya Breweries boss Jane Karuku told a penal at the company’s headquarters in Nairobi early this year that gambling had become a serious competitor to the alcohol business. The executive complained that a growing number of consumers are now choosing to spend their money on gambling instead of beer. Karuku pointed out that the uptake of sport betting has particularly been high among young males of drinking age. The majority of Kenya Breweries customers are males, meaning that the rise of gambling culture among males threatens the company’s most important customer base.
KBL is the Kenyan arm of East African Breweries Limited (EABL), which also has operations in Tanzania and Uganda and sells beer in more than 10 countries across Africa.
The ongoing crackdown on gambling has mostly targeted sport betting and has seen the government cancel licenses of more than two dozen sport betting firms. To further tighten the noose on these firms, the government pushed mobile payment services such as Mpesa to stop processing payments for the firms whose licenses it has suspended.
The clampdown on the gambling industry is meant to ensure that betting firms operating in the country are complaint with local regulations around issues such as tax payment. It is also an attempt by the government to curb excessive gambling, which has been blamed for driving some people into debt and distracting young people from hard work because of pursuits of quick riches. The gambling industry in Kenya has grown to Ksh200 billion from Ksh2 billion in five year ago.
The efforts to curb excessive gambling in Kenya go beyond revoking licenses of existing operators. Kenyan lawmakers are also working on legislation that seek to make it harder for new betting firms to launch in the country and discourage low-income consumers from gambling. One proposal going through legislative process in the parliament would require a company planning to set up a new online betting business in the country to raise at least Ksh500 million capital before they can launch operations. Another proposal seeks to raise the minimum amount a gambler can stake. The goal of this proposal is to make betting more costly for low-income people and discourage them from gambling.
For EABL and other companies whose sales have been impacted by the rise of gambling, the crackdown on the industry is viewed as a much-needed protection against a market destroyer.
EABL’s financial year begins in July and runs through June. For the financial year ended June 2018, EABL generated revenue of Ksh73.5 billion, up from revenue of Ksh70.2 billion for 2017 financial year. The beer maker posted profit of Ksh7.3 billion for the 2018 financial year, down from a profit of Ksh8.5 billion in the 2017 financial year. Soaring operating costs and a Ksh2 billion tax provision led to the profit decline in 2018 financial year. EABL is expected to release its 2019 financial year results later this month.