This section presents a synopsis of the chosen business, particularly East African Brewery Small (EABL). Considered are also current and likely future problems of the company. The past part covers customer behavior craze with regards to beer.
An Summary of East African Breweries
East African Brewery is a keeping company based in Kenya that companies both alcohol consumption and non alcoholic beverages. In partnership with its subsidiaries, the company manufactures, brews, marketplaces and sells drinks, malt, and barley and a glass storage containers. The brands that are core to its procedures are Tusker, pilsner, Guinness, All soaps, Johnnie walker, Bell much larger, Malta Guinness, Alvaro, Uganda Waragi, and Smirnoff snow. Its subsidiaries are disperse throughout Africa. They include, Salopia limited, All soaps (EA), limited central a glass industries, international distillers Uganda limited amongst others. The business produces its goods for local use as ell as for export to the international market. EABL is manipulated Diageo plc, a United Kingdom established company (EABL, 2012).
Current Challenges confronted by EABL
Exchange Rates
The exchange rate fluctuation observed in Kenya has had a negative impact to EABL's businesses (Piana, 2001). Exchange rate fluctuations have been a significant challenge to the procedure of EABL. It is because the exchange rate fluctuations erode the value of the Kenya shilling. The earnings of EABL are susceptible to the fluctuating interest levels. This is because of the fact that the company relies closely on imports to manufacture its products. The exchange rate fluctuations impact negatively on a company's quest to acquire recycleables and other inputs used in the development process. The cost of recycleables such as barley and hops go up with the weakening of the Kenya shilling. For instance in 2011, international current movements got a 2. 2% negative impact on the profits of EABL. EABL generally is determined by barley in development (Euromonitor, 2012). Backward integration hasn't had a significant impact on the business's earnings. Exchange rate fluctuations have been a significant obstacle to EABL limited. This has led the business to replace its raw brought in recycleables with local raw materials. This step has led to the business to compromise the quality of its products.
High Operation Costs
Power generation in Kenya remains a significant concern to EABL's procedures. The task that the company faces is freelancing for alternative ability sources. The business's operation costs are increased due to problem with ability generation in Kenya. Consistent dark-colored outs make the company to spend a large amount of its income on substitute sources of electric power (Biau, Dahou, and Homma, 2008). The business has been obligated to deploy gas powered generating vegetation to counter the difficulties associated with electricity generation by the Kenya electric power and lightening company.
Kenya's poor road network is another problem that negatively impacts the procedures of EABL. The company faces this obstacle because of poor highway network helps it be difficult to send out its done products. The business's functions are further affected by exorbitant raises in the price of grains and the growing cost of petrol (Biau, Dahou, and Homma, 2008).
Religious Faith and Healthy Consumption.
Individual faith and life styles advocated by some religious faiths is another obstacle facing EABL. Spiritual faith is growing in Kenya at a rapid rate. At this rate the consumption of alcoholic beverages is declining. This is because most spiritual faiths frown upon the consumption of alcohol. With the increasing number of individuals seeking solace in religion, alcohol ingestion has significantly been down. Typical consumption patterns have significantly gone down.
Another problem facing the production in EABL is the desire by most individuals to look at a wholesome lifestyle. EABL may eventually lessen production of alcoholic beverages. This is because of the people reducing the intake of alcohol as campaigns for a healthy life style advocate for reduced alcoholic beverages usage (Adetu, 2011).
The Increasing Costs of Natural Material Inputs
EABL faces a significant problem in its creation processes as a result of increasing cost of barley and hops. There is a frequent spike in the commodity prices of barley which is sorghum structured. The go up in engine oil prices ensured a commensurate increase in the input charges for EABL. This is reflected in the slow improvement in its income.
Between Apr and July 2012, the price of barley increased by 26. 06% percent. This exposes EABL to a substantial rise in the price tag on the inputs found in producing ale (Euromonitor, 2012).
Future Challenges for EABL
Poor Rainfall and Drought Across East Africa
For the past five years, the rain fall trends have been poor across East Africa. The elements forecasters have projected the situations to aggravate in the future. This circumstance poses a great problem for EABL in the foreseeable future. Poor rainfall influences household earnings in Kenya. This is because a majority of the Kenyan inhabitants is determined by agriculture for financial well being. Poor rainfall exerts financial pressure on households in Kenya. Therefore affects disposable incomes. Because of this, fewer people will consume alcoholic beverages. This might force EABL to cut down on production credited to reduced demand because of its products (EABL, 2012).
High Inflation, Money Depreciation and the Energy Crisis
High fluctuation in inflation, the Kenya shilling and engine oil prices are a potential problem for EABL operations. These fluctuations have a negative impact on the country's export and imports. The operation of EABL is mainly pegged on imports and exports a higher price of imports for imports will potential influence the margins of the business in future. The increasing Inflation and money fluctuations are making consumers to avoid luxurious goods such as liquor. This may lead to EABL to lessen its development.
Increased Regulation and Legislation
The legislations that limit the drinking alcohol behavior of Kenyans is a significant obstacle to EABL's sales level. The execution of the liquor drinks act in Kenya has put more constraints on alcohol usage and marketing. The company's business has experienced a down ward craze due to the strict regulations attached to the alcohol beverages act. The work sets control on the marketing of alcoholic products and drinking alcohol hours. Therefore, tight restrictions on marketing the merchandise and drinking hours regulation will probably continue affecting the company's sale in the future (EABL, 2012).
Threat of new entrants
EABL face a large problem in future due to the admittance of new companies in the beer market. A Kenyan managed beer company Keroche is proving to be a major competitive push that EABL will face in the future. Keroche has strategies to increase its market show to 20 percent and list its shares on the Nairobi Stock Exchange. EABL expects to face a stiff competition from Keroche. Keroche shows to be always a major rival for EABL as a result of financial shots it enjoys. The company has guaranteed an 80% of the $29. 27 million from Barclays Loan provider which it needs to fund its development program (Ratio Magazine, 2008). The company further encounters competition from companies like Heineken which programs to put more opportunities in its Kenyan market.
Trends in Customer Behavior
The present fads in consumer behavior in beer industry in Kenya give a great chance of investment by EABL (Kagwe (2012). The existing and future style in Kenya shows that the Kenyan consumers are loyal to a brandname. EABL being the business with products of choice has an higher hand in clinching a huge percentage of the marketplace. Most of its customers are loyal to its leading brands like Tusker, senator Keg, Pilsner, resident and Guinness. This tendency provides EABL with opportunities to increase production because it has devoted customers who are a ready market because of its products.
The customer tendencies in Kenya are seen as a binge drinking during evenings, holidays, and the festive times. The yuletide season and holiday trends provides an chance of EABL to boost the production of ale and senator Keg in expectation for a growth in its sales.
Another trend relates to the youth. Information show that the young ones are drinking more and more and era of starting to drink gets lower and lower (EABL, 2012). The Kenyan populace is largely composed of the youth. EABL may take good thing about this trend to increase creation and increase its income because the tendencies in increasingly more youth drinking are experiencing an upward craze (Hatch, Becker and Zyl 2011).
The Kenyan consumer is largely a sociable drinker. Men mostly drink to show a kind of independence from home and the duties of the household. This makes liquor to be always a ubiquitous part of each day life in Kenya. This provides an opportunity for EABL to intensify its marketing prowess to fully capture the niche market of the social drinker. The drinking alcohol tendencies of the Kenyan consumer slices across different life domains. This includes the religious, symbolic, public and psychological, monetary and politics spheres. The style in the buyer patterns is ubiquitous in both the rural and urban populations. The significance attached to alcoholic beverages in today's times as overdue drink is evenly a trend to use advantage of by the EABL.
