KENYA – The consumption market of spirits in Kenya has experienced a notable decline in the aftermath of the Covid-19 pandemic, as consumers grapple with increased taxes on premium international drinks.
According to data from the Kenya National Bureau of Statistics (KNBS), the drop in imported spirits, including brandy, gin, whiskey, and rum, is striking, plummeting from a peak of 16.3 million litres in 2020 to 13.2 million litres in 2022.
The decline is attributed primarily to a substantial increase in taxes, with the import duty escalating from 25 to 35 percent, as outlined by Eric Githua, Chairperson for the Alcoholic Beverages Association of Kenya (ABAK).
This tax hike, implemented on July 1, 2022, across all East African Community member states, significantly impacted the affordability of premium liquor, particularly Scotch Whisky and other imported spirits.
Furthermore, the 13 months leading up to November 2021 witnessed a threefold increase in excise duty on spirits, exacerbating the drop in demand for international premium spirits. This reversal in trends marks a departure from the pre-pandemic era, where spirits had gained popularity, surpassing other alcoholic beverages like beer and wine.
Mr. Githua stated, “Even before the pandemic, there was a significant shift from other types of alcohol such as beer and wines to spirits. And the main reason was because of affordability.” However, this affordability factor has taken a hit due to the successive tax measures.
During the height of the pandemic, Gilbeys, a renowned gin from the US, experienced increased consumption, notably promoted by East African Breweries Limited (EABL), the region’s largest alcohol manufacturer under the UK multinational Diageo.
In its 2021 annual report, EABL highlighted a deliberate focus on popularizing the Gin and Tonic ritual, witnessing a 24 percent spike in spirits sales during the financial year ending June 2021.
Despite this initial surge, the growth momentum for spirits has been hampered by the tax measures implemented in the subsequent 13 months. The excise duty on spirits saw a threefold increase during this period, prompting a shift in consumer behavior. The upper middle class sought more affordable alternatives, while the lower consumer class turned to illicit drinks.
Mr. Githua emphasized the impact on local drinks, stating, “Due to the increased import duty and excise taxes, what was initially affordable has become expensive for most revelers, with those who were drinking imported drinks moving to a local drink.”
This shift has not only affected consumer preferences but has also led to a rise in the consumption of illicit drinks in Kenya.
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