Tough Operating Environment See UBL Post Modest Growth

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The just released FY21 financial results for Uganda Breweries Limited (UBL), whereas have posted positive growth, indicate that a tough operating environment and the growth of the informal alcohol sector have stifled what would otherwise have been excellent net sales performance by the brewery.

Data from the Group financials revealed that revenues up 15% to KShs 86.0 billion for the year ended June 2021, driven by smart investment behind brands, channel focus, and innovations o Profit after tax down by 1% to Kshs 7 billion, as growth was partly impacted by cost inflation, foreign exchange and tax charges

“The closure of Bars and entertainment venues, and other restrictions necessitated by measures to curb the spread of the COVID -19 pandemic, affected not only our customer base but also led to both local and global supply disruptions, for our produce and for raw materials that we need in our production processes.” Alvin Mbugua, UBL Managing Director said.

He said that the tax burden bore by the regulated and licensed alcohol beverages sector, while the Illicit and unregulated sector continues operating tax free continues to eat into the profit margins of the industry.

According to a report by EuroMonitor International, a market research firm, in the year 2020, due to the ongoing pandemic and restrictions on gatherings, as well as pubs and bars closures, consumption of illicit alcohol recorded increased growth and accounted for 64.7% in volume terms (HL LAE) in 2020.

This accounts for 50% of all Alcohol market value, growth from 31% in 2017. There is, therefore, need for the government to widen its tax base by extending taxation and regulation to this market.

Uganda Breweries Limited, which this year celebrates 75 years of operations saw a 33% growth in their beverages driven by their flagship Beer and Spirits, Bell Lager, and Uganda Waragi respectively as the business adapted quickly to the times to respond to changing consumer shifts.

The positive results are also a result of heavy investment in capacity expansions in packaging lines and filtration plants at Uganda breweries which have increased production efficiency

The tough operating environment has seen the brewery turn to creative e-commerce partnerships to improve distribution channels, partnering with Jumia and Safe Boda to deliver products to customers as well as embraced e-marketing by channeling unprecedented marketing budgets to online platforms to speak to customers who due to lockdowns are spending a lot more time online.

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 “We continue to engage government and other stakeholders to improve the operating regulatory and tax environment as well opening up dialogue with the different stakeholders to identify and tackle issues rising from illicit trade, key of which is cost of revenue to the government through missed taxes.” said Mbugua.

He noted that a 30% levy on beverages produced using local raw materials is steep considering the annual investment the industry makes in farming communities in Eastern, Northern and South Western Uganda where Uganda Breweries alone contributes more than 30 billion shillings annually

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