Tough economic times hit beer drinkers, leaving pubs empty

25Feb 2017
Bilham Kimati
The Guardian
Tough economic times hit beer drinkers, leaving pubs empty
  • Analysts say beer consumption acts as a barometer for the wider economy, with one job in the brewing industry supporting up to 17 additional jobs in other sectors.

TANZANIANS are drinking less alcohol and are foregoing premium brands for less expensive beer and hard liquor due to tough economic times, it has been revealed.

A weeklong survey by The Guardian has revealed that an ongoing cash crunch in the economy has forced drinkers in Dar es Salaam and other parts of the country to sharply cut down on drinking.

The country's two beer manufacturers - Tanzania Breweries Limited (TBL) and Serengeti Breweries Limited (SBL) - have been hit hard by a slump in beer consumption, with both companies reporting declines in beer sales and revenues in their latest financial results.

SBL, the number 2 beer maker in Tanzania with a 20 per cent market share, saw its net sales falling by 7 per cent in the six months to 31 December last year, dragged down by sluggish consumer demand.

Andrew Cowan, the chief executive officer of East African Breweries Ltd, which is SBL's parent company, said last month that although Tanzania's gross domestic product (GDP) has been growing at a rapid rate of around 7 per cent per annum over the past three years, a slump in consumer spending hit beer demand in 2016.

"The trick is to get that GDP growth through to consumer spending and it just isn't happening at the moment," he said.

Cowan said there were however good prospects for beer sales in Tanzania over the next three to five years, helped by the country's sturdy economic growth rates.

TBL, which has a market share of over 70 per cent in Tanzania's beer industry, similarly reported a decline in beer demand.

Its revenues also declined by 7 per cent in the six months ending 30 September 2016 due to "challenging market and economic conditions" in Tanzania.

"Consumer confidence has been subdued and together with the impact of stricter enforcement of trading hours, our overall volumes were down by 8 per cent for the half year compared to the same prior year period," TBL managing director Roberto Jarrin said in the company's financial results statement.

The money squeeze has caused more and more beer drinkers to slowly shift away from the golden liquid to hard liquor drinks and traditional alcoholic beverages, resulting in TBL noting an increase in sales for its Chibuku sorghum brew.

"We have also seen a consumer shift towards more affordable products, resulting in increased pressure on our margins," Jarrin said.

The financial results show that TBL's gross profit fell by 12 per cent while its operating profit declined by 13 per cent in the six months to September 30 last year.

Where are the customers?
Mwabuke Mwaigomole (28), who works at Recreation Pub in Dar es Salaam's Buguruni suburb, has been left wondering what had befallen her many clients who previously would spend hours binge-drinking at her small bar until the late hours.

“Business was vibrant but it suddenly changed just a few months ago. Today things are totally different ... Life is tougher than ever before, we (bar maids) are eight of us working here. Personally, I used to sell drinks worth 180,000/- a day alone. But for the last six months the number of boozers who come here continues to decline day by day,” Mwabuke explained during a cross-sectional survey.

She added: “Today I sell drinks worth hardly 30,000/- a day. You know, we are paid according to the number of bottles sold. Now you can imagine the little earnings that I get these days, which is not enough to provide for my family and make ends meet,” she lamented.

All the eight bar maids are now forced to scramble for the few customers who walk in, each striving to offer good services to attract drinkers in the hopes of making good sales.

Equally dejected pub manager James Urio said boozers were hardly seen at the establishment nowadays.

"Our permanent clients have disappeared. Whether they have shifted to other drinking places, I don’t really know the answer to that, but business is down ... there is no future,” Urio noted, adding:

"There is every likelihood that the owner will close down this business over the coming months because it becomes so difficult to foot bills such as rent and pay tax as demanded by the revenue authorities. Life has changed ... people’s purchasing power has been eroded severely.”

Hamisa Mbago, a 26-year-old bar maid at the city-based London Loaf Pub in Temeke district, said: “It is all pain here. Six months ago I could sell up to three crates of beer a day alone, apart from other drinks. Today I sell one or two crates on public holidays.”

Gibbons Terry, a bar manager at the bar, said he feared the sharp decline in sales of alcohol could impact their business.

An on-the-spot check by The Guardian at the pub at a time considered traditionally as ‘busy hours’ between 5-9pm revealed that many tables largely remained empty.

“The situation shows no sign of improving anytime soon. Dozens of drinkers usually gathered here, each taking their own favourite brand of beer, but that was in the past. Our sales volumes have declined by more than 70 per cent. I don’t really know what will become of this,” said Terry.

Tough economy

Analysts say beer consumption acts as a barometer for the health of the economy, with one job in the beer brewing sector supporting up to 17 jobs in supply, agriculture and retail such as bars, pubs, cafés and restaurants.

An economist from Mzumbe University, Prof Honest Ngowi, told The Guardian that there are many possible contributing factors to the ongoing decline in beer demand, which include the government’s ban on drinking alcohol before 4pm on weekdays.

“You will recall that the government banned drinking before 16:00 hours. This automatically reduces sales hours, sales volumes, sales revenues and profit. So, partly reduced times of sale explain reduced quantity demanded,” he said

He also listed the ongoing tough economic situation as another reason for a decline in beer demand due to liquidity problems facing the general population, which in turn reduces their purchasing power and therefore the quantity of beer demanded.

“There are beer substitutes that are cheaper.... when things get tough economically some beer consumers - mainly in the lower income group - will switch to cheaper substitutes including local brew and spirits including illicit ones, unfortunately," said Prof Ngowi.

"Cheaper beers, such as Balimi and Safari Lager 330 mililitres, sold for Sh1,500, are gaining popularity. This is a sign of a decline in the purchasing power of Tanzanians.”

Prof Ngowi warned that the decline in beer demand and revenues will have negative multiplier effect on the whole economy in terms of forward and backward linkages.

“The decline in beer demand will most likely affect all other related sectors, value chains and their nodes. It may even affect employment, incomes, consumption, sales, revenues and profits in related sectors ... may therefore negatively affect tax revenues as well,” he added.

Another economist, Prof EstomihiMwaseba, called for a sustainable solution to address the situation.

“The obvious decline in people’s purchasing power is a true reflection of restrained lavish spending that came from myriad sources of, perhaps, illegal income. People must learn how to work hard for justifiable income,” Mwaseba remarked.

He said there was no doubt that many individuals in Tanzania previously gained large sums of money unlawfully and now did not have that easy money to spend on alcohol and other things.

“Any cut off of the illegal money conduit will quickly be reflected on the expenditure as seen at drinking places. People had money in their pockets but were in fact not rich," Mwaseba said.

Mwaseba said the ongoing financial discipline instituted by President John Magufuli's government had a huge impact on people’s spending patterns.

"Close administration of revenue that has been in place since November 2015 when the new government came in continues to yield positive impact on monthly revenue collection," he observed.