The Budweiser brewing giant, which has assumed management control over the St Louis Lager maker is embarking on aggressive cost cutting measures aimed at a lean staff, invoking employee concerns at its Gaborone based headquarters.
Responding to queries from this publication, KBL Managing Director (MD) Johan de Kok confirmed the ongoing exercise, initiated by AB InBev, which has resulted in 15 employees being retrenched so far. Though insisting that he does not foresee any major job losses de Kok acknowledged however that the restructuring is still ongoing.
The Belgium based company now decides the course of action at KBL after acquiring SABMiller Plc, which had the controlling interest in the local brewer. The resulting combined company has operations in virtually every major beer market, a stronger presence in the key developing markets of Africa and Latin America.
As the world’s largest brewer, AB InBev has acquired management control over the embattled KBL, availing KBL its insight and experience with regard to management, technical, brand building and distribution expertise.
Speaking to The Business Weekly & Review, De Kok, the KBL boss, says he believes that there won’t be a significant toll with retrenchments. The retrenchment, “is part of a restructuring exercise for employees to fit into the structure implemented by Ab Inbev,” he explained over phone call, without disclosing when the exercise will be complete.
Those familiar with the revised structure, point out that the group pledged to reduce combined workforce by 3 percent and will be developing the entire operational plan for KBL.
The executive team at KBL, insiders say, are waiting to be relegated to managers and supervisors, as AB InBev tightens grip on controls. It is feared that the new structure will not accommodate as many executive managers as it has in the past, nor will it be as costly as it was. Under the new structure, possibilities are high that KBL may no longer have the powerful position of a Managing Director (MD) but rather, De Kok will become a Country Lead.
As Country Lead, de Kok will be reporting via Mozambique to Business Unit President Southern Africa. Mozambique will in return report to Vice President Africa, at Johannesburg. There also will be Business Unit Presidents for West Africa, East Africa. In addition KBL will not have directors in departments as it is the current norm but rather it introduces managers for specified sections. The structure to be implemented would also phase out positions of Finance Director, Human Resources Director as well as Corporate Affairs Director who will be reduced to supervisors.
Reports indicate that the reduction of the workforce could increase savings by 14 percent. While involved in the current undertaking, AB InBev will have regard to hemorrhaging profits, affected by the alcohol levy, limited liquor trading hours and a sluggish economy. KBL’s problems can be divided in two: Internal problems and External problems. Internal difficulties have led largely to improvements in efficiencies, cost cutting, having a lean structure and new product developments. The biggest elephant in the room for the company are the External problems, based primarily on government regulations, namely the stinging alcohol levy.
KBL shares fell by 13.9 percent to P47, 5 million for the six months to June 2017, as a result.
The divorce from the money spinning agreement with The Coca Cola Company means that KBL will also no longer sell TCCC products after the multinational beverage corporation demanded that KBL terminate its bottling rights, due to potential conflict of interest that could, have seen AB InBev distributing for its competitor. De Kok says the separation will be complete by December.
Soft drinks which were mostly under the belt of Coca Cola sold the most volumes at an estimated 550 000 units, using the detailed 2016 financial year results as a guide, despite a 5 percent decline motivated by strong competition within the sector, as more retailers and wholesalers introduced in-house ‘B’ Brands at competitive entry price points. AB InBev will have a chance to introduce its flagship Pepsi which has previously been phased out after failing to appeal to Batswana.
For now, KBL’s life line is the Clear Beer and Chibuku segment, according to De Kok. Though he wouldn’t provide details of how much these segments each contribute to the bottom line, rough calculations without the inclusion of soft drinks, indicate that clear beer and chibuku will be KBL’s revenue driver, reducing the diversity of the income.
Toward the end of 2016, the Chibuku category began to exhibit signs of recovery, as strategic changes to cut back price on the popular Chibuku Beer Powder proved to be a success. The company said the positive appetite for the beer proved to be effective in meeting the need for affordable beer in the rural areas. During 2016, several pricing strategies were initiated, resulting in the overall recovery of the Chibuku brand, swinging it back into positive territory from the negative of the prior year. The category ended the period with a growth of 2.4 percent compared to the prior year.
The Clear Beer category on the other hand experienced a slow-down of -0.2 percent overall, despite that, the popular Carling Black Label (CBL) and St Louis Lager brands grew by 5.2 percent, and 3.5 percent respectively, compared to prior year. This according to Sechaba, was driven by the successes of the 440ml and 750ml bulk pack. The contribution of Carling Black label moved from a strong 57 percent for the first 6 months to 56 percent for the full 9 months reporting period.
In the six months to June 2017, KBL overall volumes declined by 6.3 percent compared to the previous corresponding period. All categories had recorded a decline with the exception of Non-Alcoholic beverages. KBL operates two traditional beer breweries in Gaborone and Francistown, and a clear beer brewery in Gaborone.