Consumer-friendly prices drive our sales growth - UBL

The East African Breweries Limited (EADL) half-year results indicate that out of all the subsidiaries in the region, only Uganda Breweries Limited (UBL) registered growth of 7 per cent. What explains this?
There is no magic as such. As a company, we have embarked on constantly innovating and renovating our brands through the introduction of strategic brands that are fit for purpose and that address the market as is.
So, we noticed a down-trading trend in the market as result of what is hitting the economy today and therefore we have innovated in brands that address exactly that.
Brands such as Ngule, Senator and Uganda Waragi are all addressed towards the changing market environment.

The second thing that we have done is we have maintained a consumer-friendly pricing policy that ensures that our prices are within reach of our customers.
We currently buy a lot of the raw material that goes into making our products from local sources. And we, therefore, feel that it is only right that we give back to those consumers that supply those raw materials for us at prices that they can afford.
The third thing is that our consumers love our products and are able to support our brands.

In as much as there was growth in sales volumes for UBL, we have seen that the mainstream brands such as Bell Larger are recording a fall in sales. What may have caused this?
As you probably know, the economy has not been doing very well. We had a drought for a while and in fact, some people did not have food in western Uganda for a long time.
For the first time ever, we had to give food relief to people in western Uganda. It had not happened before.
So as a result of that there has been less and less disposable income for people to spend on luxuries.

What we have, therefore, seen is some areas of the market are beginning to shrink and the value areas are growing. The mainstream areas include products like Bell.
However, in order to offset that drop, we were able to innovate a brand called Black Bell.
The feedback we are getting from our customers is that they love the product.
We are currently trying to grow the distribution base so that Black Bell is within the reach of every customer in the country. That should be able to bring in growth on the Bell brand.

People are very selective on what they consume in terms of alcohol. What could be driving Ngule and Uganda Waragi sales growth?
What we see in Ngule are two things. The first is that we were able to land a liquid that has an appeal across different segments of the customer base - a product that when customers tasted, they liked it immediately.
The second one obviously is the association that we had and continued to have with the Buganda Kingdom. The kingdom has been key to helping us market this brand.
We have been able to partner with them and part of the proceeds from the sale of Ngule goes towards the Buganda Kingdom.
Ngule is made out of cassava and we have been able to encourage farmers to grow this crop so that they are able to supply us.

Ngule consumption seems to be driven by sentimental reasons.
Absolutely not. Ngule is a world class liquid at prices consumers afford.

So then, what explains the growth in the spirits segments?
This year we celebrated 50 years of Uganda Waragi and that means it has built a heritage over the years. Because of the time it takes to mature, we thought we would give it some legs and that is why we decided to give it some flavours.
We have also been able to innovate into packaging and formats that have given us a plus in terms of distribution.
The biggest selling format is the sachet format at 100ml per serving. This format is popular because it brings the product within arms-length of the customers that want it.

In September this year, a government ban on the selling of sachets comes into force. Won’t this derail the growth you have been registering on the sale of Uganda Waragi?
I would like to put it on record that we support the ban because we see a lot of informal spirits being sold on the market.
The informal spirits cause a lot of underage drinking. We are currently working with government on agreeable kinds of formats after the ban. We should be able to ride the tide that will be caused by the ban.
We will start promoting the other formats – like the bottle.

How has the tough economic environment affected UBL’s performance?
Driven by low disposable incomes, we have seen a lot of down trading across our brand portfolio with the majority of consumers moving from the mainstream to the value category causing a reduction in our net sales value.
The cost of production has gone up driven by the drought that has caused scarcity of some of the locally sourced raw materials as well as a weakening Shilling that led to a high cost of imported raw materials and finished products.
However, due to the price sensitivity of consumers and the low disposable income, we cannot take price up as much; therefore, our margins have taken the hit.
As interventions, we have embarked on a productivity agenda that focuses on driving efficiency across the business especially on costs.

Also as a business, we have had to work smarter to remain profitable in these tough economic times. For example, we have also shifted focus to sourcing most of our raw materials locally to defend ourselves against forex loss.
We now source the neutral spirit used for the production of the spirits products from Kakira Sugar which we had previously imported from Mauritius. This, in turn, has significantly reduced our production costs, import taxes, and other logistical costs we otherwise would have faced allowing us to continue to deliver a quality brand to our consumers that they have come to expect without transferring the cost to them.