Emerging
StrongerA better Future
2021 INTEGRATED REPORT AND FINANCIAL STATEMENTS About this Report The Integrated Report for the year ended 30 June 2021 provides a holistic view of East African Breweries Limited’s (EABL) business model. It comprises information about activities, strategy, approach to operating responsibly, financial, and non-financial results. The aim is to comprehensively report to our existing and prospective investors in an integrated way to reflect how the organization operates.
Framework Our Integrated Report is prepared in accordance with the International Integrated Reporting Council’s Integrated Reporting Framework, adhering to the fundamental concepts. The Annual Financial Statements were prepared in accordance with the International Financial Reporting Standards (IFRS). The report is part of our commitment to be transparent and accountable to our stakeholders. The Group constantly considers whether there are additional reporting frameworks or metrics we could use to enhance our disclosures.
Assurance To enhance the integrity of our report, the financial statements were audited by PricewaterhouseCoopers LLP. Their independent report in relation to the financial statements of the Group is set out on pages 125 to 128 of this report. CONTENTS Our Business Model 4 Our Value Creation Process 6 Stakeholder Engagement 8 Our Strategy 10 Financial Highlights 12 Executive Summary 14 EABL Overview Chairman’s Statement 16 East African Breweries Limited (EABL) is the leading branded alcohol beverage business Group Managing Director’s Statement 20 in East Africa, with an outstanding collection of brands that range from beer and spirits to Sustainability 25 adult non-alcoholic drinks (ANADs), reaffirming Commercial Update 40 our standing as a total adult beverage (TAB) company. Our extensive network of breweries, Our Brands 50 distilleries, and distribution facilities spans across the six markets within which we operate Our People 68 in East Africa, especially concentrated in the Compliance and Risk Management 76 three core markets of Kenya, Uganda and Tanzania. Despite operating in East Africa, our Board of Directors 84 unique products can be found in more than 10 Senior Management 88 countries across Africa and beyond. The Group’s diversity is an important factor in delivering Notice of Annual General Meeting 90 the highest quality brands to East African consumers and long-term value to investors. Corporate Governance Statement 94 Our brands are an outstanding combination Annual Report and Financial Statements 109 of local beers and spirits together with international premium spirits. These include: Corporate Information 110 Tusker, Guinness, Bell Lager, Serengeti Lager, Directors’ Report 112 Kenya Cane, Uganda Waragi, Smirnoff and Johnnie Walker. We are proud of the brands Directors’ Remuneration Report 118 we make and the positive impact they have Statement of Directors’ Responsibilities 124 in bringing people together, to celebrate life everyday everywhere. We are passionate about Report of the Independent Auditor 125 alcohol playing a positive role in society as part of a balanced lifestyle. Financial Statements 129 Principal Shareholders and Share Distribution 197 Proxy Form 198 Electronic Communications Consent Form 199 Our Business Model
ur business operates with the price points to suit our consumers’ changing simple purpose of supporting our lifestyles. We continuously invest in building We are proud of our long Oconsumers in ‘Celebrating life every strong brands that play a positive role in day, everywhere’. The consumer is thus at society. heritage of investing in the heart of our business. Our performance Our business model is centered on country- individual markets within ambition ‘to create the best performing, most specific strategies, which allow us the agility trusted and respected consumer products to identify and shape consumer trends, the region and enriching company in Africa’, coupled with our vision as well as respond to market dynamics the community; as well ‘to be the most celebrated business in every to support growth. We are a proud grain- market in Eastern Africa’, guide how we to-glass business and remain steadfastly as building brands that operate and every decision we make. focused on: continue to meet consumer EABL operates across East Africa through • Producing quality beer, spirits, and adult the following subsidiaries: Kenya Breweries non-alcoholic beverages (ANADs). needs and bring joy to Limited (KBL), Uganda Breweries Limited • Investing in responsible marketing to build millions. (UBL), Serengeti Breweries Limited (SBL) in aspiration for high quality brands. Tanzania, UDV (Kenya) Limited, East African Beverages (South Sudan) Limited and East • Continuously innovating to unlock new African Maltings Limited (EAML) in Kenya. opportunities and deliver new offerings Although our business is concentrated in that meet changing consumer demands. these markets, our brands are sold in more • Transforming sales execution and than 10 countries across Africa and beyond. extending our reach to ensure our The Group’s diversity is an important factor consumers can access and enjoy our in delivering the highest quality brands brands every day, everywhere. to East African consumers and long-term • Sourcing and producing locally where value to East African investors. Our portfolio viable to support local communities. and geographic reach enable us to deliver • Playing a positive role in society and sustainable performance and create value for delivering value to our stakeholders and our shareholders. shareholders. We are proud of our long heritage of investing in individual markets within the region and enriching the community; as well as building brands that continue to meet consumer needs and bring joy to millions. We have a broad portfolio across categories and
4 2021 INTEGRATED REPORT & FINANCIAL STATEMENTS PAMOJA Milele
2021 INTEGRATED REPORT & FINANCIAL STATEMENTS 5 Our Value Creation Process
Business Inputs Activities
Financial Capital Includes shareholders’ equity and debt. It is a critical input in executing our business activities and in generating, accessing and deploying other forms of Consumer insights Sourcing Marketing capital. We have well- We work with our We invest in world- Read more on page 132 established suppliers to procure class marketing to proprietary data high quality raw responsibly build Manufactured Capital tools used to materials and vibrant brands that We have a regional network of sites devoted to generate insights, services. resonate with our research and development, distillation, maturation, understand consumers. brewing, warehousing and packaging of spirits and and respond to beer. consumer interests Read more on page 44 and preferences.
Our investment in property, plant and machinery are a source of competitive differentiation. Read more on page 170
Human and Intellectual Capital Innovation Distilling and Brewing `We partner with We are proud of our people, whose passion, Using our deep We distill, brew, our customers commitment and specialist skills make the insights of trends, bottle and distribute through our sales difference. Championing inclusion and diversity is we focus on our beer and spirits teams to reach our fundamental to driving engagement and achieving driving sustainable brands, working to consumers daily. the best possible outcomes for our business. innovations that the highest quality Read more on pages 69-75 provide new of manufacturing products and standards. Social and Relationship Capital experiences for We continue investing in communities where we consumers. live and work. We are committed to do our business the right way from grain to glass. Read more on pages 25-38
Natural Capital We recognize that the threats to our environment are urgent and growing, and we are committed to taking actions to preserve the scarce resources. Read more on pages 25-38
6 2021 INTEGRATED REPORT & FINANCIAL STATEMENTS Our Value Creation Process
Value Created
Scale Global Giants: Johnnie Walker, Leading total adult Smirno , Baileys and Guinness are beverage company in among the global brands that we bring Eastern Africa to market with scale
99 years of Agility in innovation: Focused on growing 99 experience, share by innovating new o erings since 1922 that meet changing consumer needs
Market Extensive footprint leadership in in supply and 2 key markets distribution
+2 million people impacted Operating across 6 countries in directly or indirectly by our East Africa, with 6 breweries and water programmes 1 malting plant
Strong Working with a network of iconic capable distribution partners and brands over 110,000 retailers
A Winning Portfolio: Over 40 brands Partnering with within spirits and beer, making over 60,000 farmers to supply up East Africa’s largest and most our raw materials diverse portfolio of brands
Powerful Local Jewels: Some of the most Investing in iconic and loved brands in East Africa – capacity building Tusker, Serengeti and Bell Lager from Grain to Glass
2021 INTEGRATED REPORT & FINANCIAL STATEMENTS 7 Stakeholder Engagement
Our purpose and values help guide our engagement.
Why we engage People Consumers Customers Our people are at the core Understanding our consumers Our customer partners are of our business. We aim to is key to growing our business experts in the products they build a trusting, respectful and sustainably for the long term. buy and sell, as well as in the inclusive culture so that every Consumer motivations, attitudes experiences they create and individual feels highly engaged and behaviour form the basis deliver. We work with a wide and can be their best. We want of our brand marketing and range of customers: big and our people to feel their human innovations. We make our brands small, on-trade and off, digital rights are respected and that with pride and want them to and e-commerce. Our passion is they are treated with dignity. be enjoyed responsibly. On to ensure we nurture mutually We are committed to creating occasions when consumers beneficial relationships that opportunities for growth and to choose alcohol, we want them to deliver joint value and the best a continuous learning culture. ‘drink better, not more’. outcome for all our consumers.
Our stakeholders’ • Prioritisation of health, safety • Choice of brands for different • A portfolio of leading brands interests and wellbeing occasions that meets evolving consumer preferences • Investment in learning • Innovation in heritage brands • Identification of opportunities for employee and creation of new brands opportunities that offer growth and development • Responsible marketing profitable growth • Ways of working, culture and • Great experiences • Insights into consumer benefits programme • Product quality behaviour and shopper • Contribute to the growth of • Sustainability credentials trends our brands and our • Affordable products • Trusted product quality performance • Innovation, promotional • The promotion of inclusion support and merchandising and diversity • Availability and reliable supply and stocking • Technical expertise
How we respond • Safety strategy anchored on • Broad portfolio of choices • Use of best practice sales our Zero Harm goal that across categories and price analytics and technology ensures everyone goes home points to support our retailers and safely everyday • Insightful innovation that distributors • Company-wide employee satisfies consumer preferences • Ongoing dialogue and engagement surveys • Responsible advertising and account management • Consistent talent and marketing that adheres to our support performance management strict Diageo Marketing Code • Sales calls approach • Active engagement and • Development of joined-up • Extensive online learning and education to promote business plans development material moderation and reduce the • Regular business updates harmful use of alcohol • Informative and up-to-date • Training through unique employee communication • High-quality manufacturing offerings like the Diageo Bar channels and environmental standards Academy
8 2021 INTEGRATED REPORT & FINANCIAL STATEMENTS Stakeholder Engagement
Suppliers Communities Investors Governments and regulators Our suppliers and agencies are Investing in sustainable We want to enable equity The regulatory environment experts in the wide range of growth means supporting and and debt investors to have an is critical to the success of goods and services we require empowering the communities in-depth understanding of our our business. We believe it to create and market our brands. where we live, work, source strategy and our operational is important that those who By working with them, we and sell. By ensuring we make and financial performance, so can influence policy, laws and not only deliver high-quality products marketed responsibly, a positive contribution, we can they can more accurately assess regulation understand our but improve our collective help build thriving communities the value of our shares and the views. We also want to share impact, ensuring sustainable and strengthen our business. opportunities to finance our information and perspectives supply chains, reducing our business. on areas that can impact our environmental impact and business and public health. making positive contributions to society.
• Developing strong, mutually • Impact of our operations on • Strategic priorities • Contribution to national beneficial partnerships the local economy • Financial performance economic and development priorities • Collaborating to realise • Access to skills development • Corporate governance innovation • Tax, excise and illicit trade • Opportunities for • Leadership credentials, • Fair contract and payment employment and supplier experience and succession • Positive drinking terms opportunities programmes and impacts • Executive remuneration policy • Consistent performance • Improved access to water, • Wider sustainability agenda, • Shareholder returns measurement sanitation and hygiene including human rights, • Environmental and social • Responsible use of natural environmental impacts, resources commitments and progress sustainable agriculture and support for communities • Gender equality, inclusion and diversity • Corporate behaviour • Transparency and engagement
• Partnering with suppliers • Ongoing dialogue, annual • Results announcements • Ongoing dialogue standard, our code for reviews • Investor roadshows • Collaboration on responsible working with suppliers • Partnerships, including drinking initiatives and • Meetings and calls • Direct resolution process local raw material promotion of moderation, supply partnerships • Annual General Meeting and strengthening industry • Confidential, independent • Investors’ information on standards whistleblowing helpline and • Learning for Life, our global training programme www.eabl.com • Participation in governments website business and industry for hospitality and retail • Participation in investor • Supplier financing advisory groups sector workers conferences • Supplier performance • Community programme • Embedding business measurement and design that includes gender integrity into the way performance reviews equality and inclusion and we work • Regular training on diversity considerations • Diageo Code of Business Conduct sustainable farming practices • Tree planting and water to our farmers replenishment programmes • Provision of drought resistant • Our community water, seed varieties sanitation and hygiene (WASH) programmes
2021 INTEGRATED REPORT & FINANCIAL STATEMENTS 9 Our Strategy
Our strategy is underpinned by our passionate profitability and our own right to win. governments across the region in addressing desire to serve our consumers with high Our strategy is delivered through four the health risks associated with consumption quality brands to suit every occasion and executional priorities: bringing vibrancy and of illicit alcohol. economic level, and our desire to deliver long dynamism to mainstream beer; exploding Delivery of our ambition is further reinforced term shareholder value to our investors. We mainstream spirits with an affordable and by our laser focus on: building an effective are committed to serving the communities aspirational portfolio; accelerating and route to consumers, ensuring our brands in which we operate by ensuring alcohol winning in premium by building aspiration are highly accessible and available; investing continues to play a positive role in society as and availability of our brands; and shaping across our supply chain from grain to glass: part of a balanced lifestyle. new frontiers by recruiting new consumers guaranteeing supply through an advantaged Our strategic ambition is to be one of the within total beverage alcohol. but fit for purpose value chain; and enforcing best performing, most trusted and respected The informal sector is still the largest source of a culture of continuous evaluation to consumer products company in Africa. We growth in the region, with as high as 50% of optimise our costs for maximum returns. recently refreshed our strategic priorities to alcohol consumed and sold through informal Lastly, we pride ourselves in the reputation we reflect the changing consumer trends and channels. Hence, we will continue to innovate continue to build and solidify as a respected market dynamics, hence sharpening our at scale to provide safe and accessible partner in the community by enforcing a focus on where to invest and win based alternatives to our value driven consumers. culture of integrity and compliance across on an understanding of growth potential, We are also committed to partnering with the business.
To create the best performing, most trusted and respected Ambition consumer products company in Africa
Strategic Vibrant Explode Win in Shape New imperatives Mainstream Mainstream Beer Spirits Premium Frontiers
Aspirational and Accessible Innovations
Key enablers Route to Supply E cient Growth / Consumer Reputation Footprint Productivity
Unlock Growth Through People and Organisation
10 2021 INTEGRATED REPORT & FINANCIAL STATEMENTS Our Strategy
Our Brands Our broad portfolio consists of outstanding local jewels and international brands, reaching across categories, occasions and price points. We endeavor to participate where we believe there is great consumer opportunity and growth potential. A selection of our brands are included in the table below:
2021 INTEGRATED REPORT & FINANCIAL STATEMENTS 11 Financial Highlights
Net Sales ( Kshs bn) Gross Pro t (Kshs bn)
+3% -2% Net Sales Growth +15% Gross Margin (%) "!! "#! #! +13% 86 "# ! 83 75 38 37 (! "!! 33
&! "! ! 12% -9% 15% #! 46% 44% 44% $! ! +! ! #
! *#! ! ! F19 F20 F21 F19 F20 F21
Pro t Before Tax (Kshs bn) Operating Cash Conversion Pro t Margin % +! 18 &! +35ppt -1% 16% : Pro t Margin 113% Excl. provisions$! 103% 22% 11 11 +! 68% 14% 13% ! ! *+! F19 F20 F21 F19 F20 F21
Shifts in Net Sales Contribution by Country F17 Net Sales F21 Net Sales