BUSINESS GUIDE KENYA

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Licenses:

Licensing of bars, wines and spirits business is governed by the Alcoholics Drink Act, 2010.
However since 2013 many county governments have come up with their own custom
legislation which if strictly implemented could affect the Wines & Spirits in one way or another.

The Alcoholic Drinks Act, 2010 is commonly known as the Mututho law defines the licensing
requirements and fees. And although the counties have passed their own liquor laws licensing
is basically governed by the Mututho laws.

Three licenses are of interest. General Retail Alcoholic License, Wholesale License, General
Retail License Off License:

General Retail Alcoholic License

The license is applicable to sale of an alcoholic drink for consumption in the premises such as
bars and related retail outlets whose core business is sale of alcoholic drinks. These are
authorized to sell alcoholic drinks from Monday to Friday during the hours of 5.00 p.m. to 11.00
p.m. And 2:00 pm to11:00 p.m. during weekends and public holidays.

If the law was to be followed strictly this is the most appropriate law for a Wines and Spirits
retail shop.

Wholesale License

The license applies to sale of an alcoholic drink by way of wholesale which implies that a holder
of such a license is not permitted to sell an alcoholic drink at retail or to consumers directly.
Therefore, the regulations related to operating hours do not apply to this category of license.

To go round the limitation of operating hours, there are retailers who apply for this license and
operate off hours, some even for 24 hours. However the ability to sell on retail using such the
wholesale license depends on the location. Some counties and police bosses are more strict
than others in enforcing the law and following up on licenses, while others are lenient.

Most wines and spirits retailers in Nairobi operate using the wholesale license. And although
some open at 5pm on weekdays and 2 pm on weekends, they have the wholesale license. If
the local police or administration regime change then they would open for as long as possible.

If you have plans to expand to the wholesale business in future this license will have you
covered.

So how do you know whether to apply for a General Retail License or Wholesale License
when opening a Wines and Retail bar? The only sure way is to ask at the county licensing
office. Call someone on the side and let them advice depending on your location within the
county.

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General Retail Alcoholic License (Off license)

The license is applicable to sale of an alcoholic drink for consumption elsewhere other than the
premises, for example outlets selling wines and spirits only. In this regard, there should be no
consumption of alcohol in the outlets licenses in this category. These are authorized to sell
alcoholic drink on any day of the week during the hours of 5:00p.m to 8:30 p.m.

This is the license targeted at strictly takeaway wines and spirits. As you can see it’s very
limiting. If you want to have a takeaway wines and spirits its advisable to go for the more
flexible wholesale license.

Below are the fees as stipulated by the Alcoholic Drinks Control Act, 2010:

Type Of License Fees

General retail alcoholic drink license: 12 Months ( Kshs) 6 Months ( Kshs)
Premises situated within a City or a 50,000 30,000
municipality
Premises situate within urban areas other than 30,000 18,000
city and municipality
Premises situate elsewhere than in a city, 15,000 9,000
municipality and urban areas
General retail alcoholic drink license (Off
License)
Premises situated within a City or a 24,000 14,000
municipality
Premises situate within urban areas other than 18,000 10,000
city and municipality
Premises situate elsewhere than in a city, 12,000 7,000
municipality and urban areas
Wholesale alcoholic drink license
50,000 30,000

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The alcoholic drinks act categorized the license fees based on the location of the business for instance city,
municipality, urban areas and so forth.

However with the county governments the categorization by location is often disregarded and every one street
town thinks itself as a city. In most counties the license fee for any alcoholic license is thus Kshs.50, 000 per
year or Kshs.30, 000 for six months irrespective of location. Budget at least Kshs. 50,000 for the license fee
though you could pay less say Kshs.30,000.

We recommend that you apply for the annual license. Again with the very unpredictable licensing and business
regime it’s only safe to have a longer term license.

Unlike pre 2013 when licensing of wines and spirits and bars was a continuous price some counties are setting
windows within which to apply for the licenses.

For example Kajiado County had given applicants for the year 2014/2015 up to 25th August, 2014 after which
the applications would be closed until 2015. These kinds of laws keep changing and it’s important to confirm
the present licensing status before you engage in the process.

Licensing Process:

The licensing procedures and requirements are stipulated in the Alcoholics Drinks Act but the
law no longer seems cast in stone. In some counties a few requirements are overlooked in
exchange for cash or other favors. In others authorities will demand for items not included in
the law.

But here is the official application checklist; at least you should have this right:

1. Application form 1 (See end of report for a sample)

2. For an application for renewal of licenses, the applicant must produce the original and a copy
license
3. Identification documents (ID or passport for individuals) or certificate of
registration or incorporation for corporate bodies;
4. Copy of PIN certificate for applicants (and directors for corporate bodies);
5. VAT certificate from KRA;
6. Public health certificate;
7. Names of persons to manage superintend or conduct day to day business of the premises
8. A sketch map describing the location of the premises;
9. Physical address indicating name of the area where premises are located,
name of the building where premises are situated and plot number where
applicable;
10. Where the applicant trades in a business name, the name shall be included in the license;
11. Members clubs to submit their constitution and details of ownership of
premises where the license is applied for and copy of annual returns submitted
to the registrar of societies. District committee may require the members club to
provide a list of members.
12. For proprietary clubs, discotheques and night clubs, the applicant shall
be required to produce a certificate from NEMA in regard to noise pollution
control

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 Most counties have devolved services and licenses to sub counties. More or less sub counties are like
the once active district and divisions. Though the exact bureaucratic process will vary from county to
county or even sub county to sub county the general steps that you follow to getting the license are
included in the appendix at the end of this guide.

A Note on the County Alcoholic Laws

The operatization of the county governments after the March 2013 elections meant there were now new
centers of power and policy. Although licensing of Wines and Spirits business is still governed by the Alcoholic
Drinks Act 2010, county governments have the power to boost or limit the business by the local laws they
pass.

In an effort to stand out as epitomes of morality a number of counties have come up with laws to strictly control
the alcohol business. Such laws often have to do with location and limiting the number of Bars, and Wines and
Spirits that can be licensed.

For instance in Kericho the first draft of the alcoholic bill proposed to totally ban the sale of alcohol. In the end
the assembly passed a law that banned the sale of second generation alcoholic drinks. These are the cheap
high alcohol content spirits introduced in the market in the last 5 or so years. ( 2009)”

The Nyandarua alcoholic law states that in case credit is extended to a bar patron it’s valid for 24 hours after
which the debtor can get away with it

Muranga County passed a bill in May 2014 that would see the shutting down of all Wines and Spirits in the
region.

In addition to the usual raft of measures the Nairobi alcoholic law has a clause that says an authorized person
can enter and inspect a bar or wines and spirits to see if it meets requirements as stipulated in the law. The
definition of authorized person is vague leaving it open to abuse.

There is something almost similar in Embu where the alcoholic drinks law says that police officers above the
rank of inspector are allowed to search any alcoholic premises to ascertain conformity with the bill.

The Meru bill says alcoholic drinks sold in the county will have to go a series of tests and certification before
being sold. Whether they have the capacity to conduct such tests is another question.

In reality the laws have not been very strictly implemented. One is because most counties lack the capacity to
implement them and secondly because of corruption which makes enforcers turn the other way.

For instance in Nairobi despite legislation which says that bars should not be within residential areas there are
many Wines and Spirits operating on the ground floors of some flats. George Aladwa , a former mayor and
active politician, is the chairman of the Nairobi alcoholic board.

The laws have created more avenues for corruption and increased the number of officials who can possibly
‘eat’ from your business.

Licensing Reality

Despite the hullaballoo about licenses it’s a fact that there are many wines and spirits bars operating without
alcoholic drinks licenses. For instance in Nairobi’s Umoja and Kayole estates there are countless bars without the
alcoholic licenses. It’s the same case in Kiambu, parts of Nakuru and Embu.

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Such bars survive by bribing police and other officials. In Nairobi for instance almost all wines and spirits retail
shops pay the police a daily amount which ranges between Kshs.50 and Kshs.200 whether they have a license
or not. Thus some entrepreneurs don’t see the need of getting the license.

Despite this it’s important to have a license. Its gives you peace of mind in case the police or administrative
regime changes,( National Campaign Against Drug Abuse) NACADA or Kenya Revenue Authority (KRA) come
calling , like they often do after an alcohol related tragedy of sorts.

Still if your budget is limited and your location, say Nairobi, allows you can start without an alcohol license and
apply for it later.

Basic Setting Up Process

Identify Location
Identify premise
Apply for License (Get waiting note)
Refurbish premises - Counter, branding, tables and chairs, television, music system
Look for suppliers and compare prices
Look for manpower by advertising or recommendation
Stock and open – By this time you should have gotten your license.

Equipment
Equipment Purpose Price Supplier
Chairs & Tables You need chairs and Plastic chairs range -Plastic chairs and tables
tables for customers between Kshs.600 can be found in
to sit and place their and Kshs. 800 supermarkets, some
drinks. The kind of depending on where hardware and plastic
furniture you chose you are purchasing items shops.
will depend on the them, and whether - Wooden benches and
setting of your wines they are the kind with tables can be bought at
and spirits, space arms or armless. the local carpenter
available and target Armless chairs are - Metallic chairs can be
market. slightly expensive. bought from local
Bare Wines and Plastic tables average blacksmiths.
Spirits don’t have Kshs.1400. - In Nairobi there are
chairs and customers Metallic chairs will blacksmiths who
take their drinks range from Kshs. 800 specialize in the bar
standing or sitting on to Kshs.1500. Price stools and chairs.
soda crates. depends on - www.Olx.co.ke and
Wines and Spirits blacksmith and newspaper classifieds
seeking to look whether they are new have listings of traders
modern and hip have or second hand. With dealing in bar tables and
a lounge feel and use a high turnover in the chairs.
modern tables and bar, wines and spirits
chairs. business there are
Others irrespective of many selling their
who their target items after closing
market is have down.
wooden benches and Metallic tables will
tables. Benches are range from Kshs.

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 cost effective and 2000 to Kshs.3000.
accommodate more Wooden tables range
people but they could from Kshs.1500 to
tire the customers if Kshs. 3000 again
not next to a wall depending on size,
where they can rest design and carpenter.
their backs.
Plastic chairs and
tables are a safe bet.
However if you are in
a small space they
are not the best
option since they are
bulky.
Choose the chairs
depending on your
branding, space and
capital. When in doubt
go for basic standard
plastic chairs, wooden
or plastic tables.
Television Televisions have Price will depend on Electronic shops
become standard in the size and make of Supermarkets
wines and spirits that the televisions. The website
have a sitting space. Price will ranges from www.Jumia.co.ke at
What with the Kshs.15,000 to times offers lower prices
popularity of news, Kshs.45,000 for a than what is found in
international and local standard flat screen. supermarkets and other
football. Despite your shops.
setting or possible
loyalty of your
customers, they will
slowly move on if
there is no television.
It’s not necessarily
that you show football
on TV, it could be
music videos or just
normal programming.
In the urban areas a
TV set is a necessity.
In rural areas TV are
also becoming crucial
not just for football but
music videos. Its part
of the wholesome
entertainment. Of
course a TV is not a
must but it adds so
much value to the
business. You can do
with a traditional TV
or go for a flat screen.
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 If you are targeting
the football crowd
then it’s advisable to
go for a flat screen.
The number of TVs
that you need will
depend on the size
and setting of your
wines and spirits. It
should be possible for
every customer to
watch television from
whatever position.
Some new wines and
spirits use televisions
as away of
penetrating the
market by shock and
awe. So they go for
the biggest and
highest number of
televisions per space
when compared to the
competition. This
works at times, but in
the long term will not
keep the customers
since the competition
can easily replicate.
If you are showing Kshs.16,000 DSTV headquarters in
DSTV football you need a Westlands, Nairobi.
DSTV connection. A Appointed dealers all
DSTV connection over the country. They
gives you access to usually advertise in
the English Premier different towns “ DSTV
League, Movies and APPOINTED
tens of other RESELLER”
channels. Depending
on your budget, size,
possible returns you
can go for the full
package has a
monthly subscription
fee of around 100
dollars. Or select the
lower package (
average Kshs. 4500
per month ) which is
biased towards
football.
Music System By default music is Kshs. 10,000 to Kshs. - Electronics shops
part of the drinking 30,000 - Supermarkets
experience. Good
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 music encourages
customers to drink
and spend more.
Depending on your
client music can be
moderate and in the
background as to
allow conversation or
loud. Keep in mind
your client when
choosing how to set
the music. Select the
music to play with
your clients in mind
and not your personal
tastes. Music can be
used to brand and
develop some
identity.
Glasses , flasks, Glasses are used to Price range between -Supermarkets
basins, jugs pour the drink. Kshs. 20 for towels to -General merchandise
Standard medium an average of shops
sized glasses will do. Kshs.500
Flasks are necessary
if you serve hot water
with which customers
can mix their drinks.
At least each table
should have a flask. A
1.5 to 3 liters flask is
sufficient. Hot water
was very common
when Wines and
Spirits started coming
into vogue in the early
to mid 20s but with
time many of the
wines and spirits have
stopped providing hot
water. Still hot water
and lemons are a
huge attraction and
could be used to
penetrate the market
where competition is
stiff. Juice and spirits
bottles are used to
store and provide cold
water. Basins and
kitchen towels are
used for washing the
utensils and cleaning
the tables .
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Shelves and counter You need a counter Exact cost of a Local carpenter
from where to sell, counter will depend
keep the cash and on your carpenter, but
stock. The counter budget Kshs.10,000
should have shelves to Kshs.15,000 for a
from where to display standard counter
the drinks. Again the
size of the counter will
depend on the setting
of your bar. Have a
counter that can have
some room for
maneuverability, a
cash box and stock.
Good counters are
friendly rather than
intimidating fortress.
Signboard You need to make the Price will depend on - Local craftsmen
presence of you size and design.
Wines and Spirits Range Kshs.4000 for
known. A signboard a simple LED
will help you do that. signboard to Kshs.15,
In every major town 000 for more
there are people advanced signboards.
making signboards. If Budgeted at least
you can’t get one ask Kshs. 8,000
the many who do
rubber stamps they
will likely know
someone who makes
signboards. LED
lights can also be
used though
sometimes they are
not distinct enough to
attract customers. A
blacksmith or
carpenter could also
make a signboard.

Location

When selecting the location and premises consider:

The demographics in the area

Is it a place consumers are likely to favorably respond positively to a Wines and Spirits?
What are the income levels?
Competition
Authorities
Renovation

Other Licenses
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License Details Cost
County Single Business This is a basic necessity for all Price will range from county to
Permit business operating within a county, location within the
county. Also you need this to county and size of the
get the alcoholic drinks premises. Budget at least
license. Kshs.10,000
Public Health License - Its also a requirement when Average – Kshs.3000
getting the alcoholic drinks
license, although it’s often
overlooked.
- By law all businesses selling
food and drinks need to have
this license.
-Issued by public health
officers in the area after
making sure the business
premises is fit
- Among the check list is
availability of water, toilet
facilities, drainage, and
condition of floor, walls and
the general environment.
- In some areas public health
officers are not so strict. At
times they ask for bribes to
approve your business even if
it does not meet all the
required standards.
- Public officers are found at
the government/county
hospitals or county
government offices.

Medical Certficate By law workers in a hotel or Averages Kshs.500 and can

bar need to have a medical be acquired at the local
certificate to ensure they do government/ county hospital
not have communicable clinic after some tests.
diseases they can spread to
customers. The standard
practice is for workers to
acquire the certificates on
their own cost since they can
still use it even after leaving
your employment.

Music Copyright of Kenya This is required for all Kshs.3000 but will depend on
(MCSK) License establishments playing music. size.
These days MCSK officials
are a touch aggressive and its
good if you have the license.
MCSK is more than
enthusiastic to issue the
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 license. There are MCSK
offices or officials all over the
country.If you can’t find a
MCSK office within your
location kindly contact their
headquarters at Mau Close off
Parklands Road, West lands
National Environment Supposdely this license is to Kshs. 3000.
Management Authority make sure you don’t pollute
(NEMA the air with noise from the
music you are playing from
your bar. It should be issued
after NEMA officials inspect
your premises and make sure
its sound proofed enough.

Capital

This is an ideal breakdown of capital. Depending on the amount of money you have available and your location
you could omit some items. Kindly see notes below

Item Breakdown Total (Kshs.)

Licenses
Alcoholic Drinks License 1 50,000
Single User Business Permit 1 10,000
Public Health License 1 3000
Signboard License 1 2000
Medical Certificate 1 500
MCSK 1 3000
NEMA 1 3000
Licenses Misc ( Bribes etc) 1 5000
Sub Total 76,500

Equipment
Chairs 10 @ Kshs.700 7000
Tables 4 @ Kshs.2500 10,000
TV 1 20,000
DSTV 1 15,000
Music System 1 16,000
Glasses , Basins, Flasks All 5,000
Counter & Shelves 1 12,000
Signboard 10,000
Sub Total 95,000

Premises
Rent 2 months deposit + 1 month 42,000
rent. Will depend on location.
(@ Kshs.14,000 per month)
Renovation Repainting and any branding 12,000
Sub Total 54,000

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 Working Capital
Stock All 40,000
Salary 3 months @ Kshs.8000 per 24,000
month
Electricity 3 months @ Kshs.2000 per 6000
month
Miscellaneous ( Police/ 3 months @ 3000 per month 9000
Authorities take, transports,
airtime etc )
Sub Total 79.000

Grand Total ( Adding all the 304 500

above sub totals)

Notes on Capital

The above are estimates based on actual figures of Wines and Spirits based in Nairobi, Machakos, Kirinyaga,
Nakuru and Eldoret. Actual price of items could be slightly higher or lower depending on your location or the
shop from which you purchase from.

Like mentioned above there are many wines and spirits which operate without the alcoholic drinks license. It’s
possible to do it but then it depends on the location. However you compensate for not having a license by
bribing police and any other authorities that could come knocking.

Be very sure of the dynamics of your location before you decide not to acquire a license. In some areas it
doesn’t matter whether you have a license or not, you have to bribe the police. Rarely are you given the
alcoholic license immediately, you are put on a waiting list and given a slip to show that you have applied for it.
The public health license is also ignored at times. That’s why you will find wines and spirits without even a
toilet. But it doesn’t hurt to have it. Even without the facilities there is always room in most cases to sweet talk
the public health officials and get the license.

The single user business permit is crucial. Even if you don’t have any other license then at least be in the good
books of the county. If the worse comes to the worse you have something to stand with (kujitetea). You cab
survive for some time without the NEMA license.

The chairs and table are plastic. The cost could be lower if you are using wooden benches or higher if you are
using metallic bar chairs and tables.

Exact cost of the TV and music system will of course depend on the make, size and dealer. If you need more
than one television then it will cost more.

Rent will depend on your location size of premises and the landlord. For commercial buildings landlords often
ask for at least 2 months deposit.

You could start with lesser stock. Have a little of everything. Most wholesalers are able to sell quantities like 5
or 10 bottles and so you don’t have to purchase a whole carton. Consider your target market in deciding what
to stock this is to avoid having a lot of dead stock.

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For instance if you are targeting a low end market no need to stock Smirnoff. Also if you are operating quite a
distant from a wholesaler then you need to stock more to avoid making many trips to restock. And although it’s
a Wines and Spirits you will need to have the most common of beer brands- Tusker, Submit, Pilsner, Allsops,
Smirnoff Ice and some Redds.

We have factored salaries and expense for three months because you are unlikely to make money in the first
or second month. In the third month, keeping every thing constant, you could start making some money. Have
money to at least survive for 3 months.

Police are likely to pass by every night and the rate is between Kshs.50 and Kshs.200. Factor that in your
expenses.

There are bare knuckles wines and spirits which have started with Kshs.100, 000 or there about. These have
only the single business license, a simple counter, 6 or so chairs, one table and sometimes none, a small
room, basic music system, no TV or small TV.

And some actually flourish. However success will depend on your location and target market. The bare
knuckles set up would not succeed when targeting middle income clients. However it would work in some low
income areas and among students.

The Market

The market for Wines and Spirits has been changed rapidly since the beginning of 2013. Among
the significant observations are:

 Beer Prices Have Been On the Rise – Beer prices have been on the rise since January 2013 from
averages of Kshs.110 per bottle to the 2014 average of Kshs.160 per bottle. This has made a
significant number of consumers even in the middle income groups (Earning between Kshs.30, 000 and
Kshs.200, 000) seek alternatives to beer in Wines & Spirits. Such consumers are interested in a
superior drinking experience even when taking spirits. They want a comfortable, secure and trusted
experience.

On the other hand the increasing beer prices means that even those in the lower income groups whose
fortunes change for the better don’t shift to beer as traditionally has been the case.

Since the second half of 2013 the inflation rates have on average been above 6% hitting highs of 8% in
2014. The high inflation rates have reduced the disposable income putting strain on consumers
especially the lower income and lower middle income groups.

This has in turn increased the demand for spirits. Spirits are more affordable in the sense that for a
lesser amount one gets the same effect as 3 or 4 times the amount that he could have spent on bottled
beer.

 Senator Keg Prices Have Increased – In 2013 the government increased taxes on Keg beer which
made prices increase more than double. In 2014 price have slightly come down with a half a liter going
for between Kshs. 50 and Kshs. 60 from highs of between Kshs. 80 and Kshs.100 immediately after the
tax increase. Before the tax increases a half a liter retailed at an average of Kshs.35. Keg was a direct
competitor to spirits.

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 The increase in prices led many Keg consumers to shift to spirits to an extent that in July 2014 East
Africa Breweries limited ( EABL ) said it was contemplating stopping production of Keg all together. In
October 2014 the company laid off 100 employees in the Keg production unit. They now brew Keg only
twice per week from a high of 5 days.

However after spirit related deaths in 2014 Senator Keg is making resurgence though not to pre 2013
levels. A number of Wines and Spirits have also started selling Keg.

 Fake Spirits have increased and more retailers are stocking them – The market for fake spirits has
expanded and moving to almost mainstream distribution channels. Fakes have become more attractive
to retailers because of the margins they offer which at times are double what the genuine spirits give.

With increased competition in the business Wines and Spirits want to be able to compete on price and
margins, and fakes help them do that. In lower income areas it then becomes tough for wines and
spirits selling genuine products to compete with those selling fakes. In middle income areas there is the
same challenge but because there are many more factors affecting patronage other than price a
business is able to survive even when competing with those selling fakes.

In 2014 there have been over 100 deaths attributed to fake spirits. This has made some consumers
more careful what and where they drink. Some have reverted to Keg while others take higher end
spirits which are not commonly counterfeited.

 Turnover in the wines and spirits business has been very high. In all regions there have been a
high number of wines and spirits opening and closing. The reasons for this range from increased
competition, regulatory reasons and perceptions.

 There has been an increase in hip wines and spirits, unlike the standard wines and spirits which
have been common for many years. The hip wines and spirits seek to offer a more ‘modern’ wines and
spirits experience away from the ‘cheap’ image that had existed before.
 In Nairobi there are now many Wines and Spirits operating throughout the day. This has nothing
to do with licenses since some have none of the relevant rather illegal collaborations with the local
authorities.

The Market (Retail)

Despite the changes in the market since 2013 standard wines and spirits like those found in
estates and urban centers can be generally classified into 3:

1. Strictly Take Away - In these customers buy their drinks and go have them elsewhere
say their homes. These are a disappearing lot, with now many of the take away spirits
allowing customers to drink on premises.

Those that are left are found in town centers and mid income estates. The take away
have faced intense competition from supermarkets which have sprouted in the
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 estates. Supermarkets are able to compete on basis of price , convenience and
impulse when shopping for other items.

2. “‘Flash’” and Standing Wines & Spirits – Here customers are allowed to have their drinks in the shop
as long as they don’t linger more than necessary. There are few or no seats, just the counter. If the
customers will have his drink in the shop then it has to be in a few quick gulps. This includes basic set
ups with a table or two and some simple basic chairs.

More advanced versions of this are the Wines and Spirits bars which are set like grocery
shops. Customers purchase drinks and stand outside of the usually small shops to drink.
A good example of these in Nairobi is the Wines and Spirits in a lane off Latema road,
next to Green court Hotel.

3. Sit-in Wines and Spirits – These are more like traditional bars, with sitting space and all. They have a
few beers but they specialize in wines and spirits and brand as so. These can be low end, mid carefree
types or hip wines and spirits. Some brand as Wines and Spirits but also have Keg.

Competition and Survival

Average number of Wines & 11

Spirits per estate
Highest number recorded in 59
an estate
Lowest number recorded in 3
an estate
On average 4 in 10 wines and spirits have opened in the last 1 year which also implies that
about 70 % of the wines and spirits have existed for over year.
On average 2 in every 10 wines and spirits have closed in the last one year.

Random Observations

- Every week there are an average of 3 wines and spirits advertised for sale. In online forums
such as www.olx.co.ke the average is 8. This is an almost two fold increase from the numbers
in mid 2013.

-NACADA baseline survey 2013 had Central province leading in consumption of second hand generation
drinks. Nyandarua , Laikipia ,Kirinyaga, Nakuru and Muranga followed closely.

An Overview of the Market

The Wines & Spirits retail business has become volatile since 2013. As much as there are a
high number of businesses getting into the business there is also a high number exiting the

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business. Harassment by authorities, unfair competition and low returns are some of the
major reasons for closing.

In some locations regular police, administration police and local security thugs all want to
have a daily take. Whereas authorities in some locations are content with Kshs.50 others
demand Kshs.200. If 2 or 3 sets of officials demand a daily fee then it definitely stresses the
business, leading to losses or low returns not worth the effort.

Other than the usual suspects; police and local authorities Kenya Revenue
Authority,NACADA, Kenya Bureau of Standards ( KEBS) and MCSK a have joined the foray.

Though not as aggressive and regular as the police when they strike they do so hard. KRA
and KEBS are on the lookout for fake spirits. KRA is also interested in spirits for which duty
has not been paid for having been sneaked into the market from such bodies such as the
United Nations canteens and Armed Forces Canteen Organization ( AFCO) .

On suspicion that what you are selling is fake KRA officials will impound the whole stock in
addition to threatening to charge you and your workers. A hefty bribe can get you out the
situation. NACADA are interested in licenses and fake spirits while the Music Copyright of
Kenya will demand the license that allows you to play music. And oh if the music is loud some
busy body NEMA officials could come knocking too.

Although due to the ‘after work’ opening hours of many wines and spirits, and lack of capacity
and persistence only the police are consistent, the rest of the bodies are arbitrary often
getting excited when there is an alcohol related catastrophe .

There is no perfect way to deal with these eventualities. Often much will depend on the
particular officials who visit your bar and your attitude. To illustrate some MCSK officials will
just request you to get the license which they will issue there and then. It doesn’t hurt to be in
the right books of the law . You could have the licenses without following to the letter what
the license bids you to do .

As for the fakes there is absolutely no fool proof method. Yes it helps to purchase from
authorized distributors but some of the fake spirits manufacturers have made their way into
the mainstream. You could purchase spirits innocently without knowing whether fake or not,
and when KRA comes you just have to find a way round the situation.

In some parts of Central, Eastern and Rift Valley provinces the trade is under pressure from
the county governments and the community who make it hard to get licenses, to get space
and keep changing goal posts in terms of fees, opening hours and so forth making it hard to
run the business.
These kinds of regulations happen in waves. The governor could just wake up one day and
decree all wines and spirits be closed and apply for new licenses. Such regulations will make
authorities on the ground more aggressive asking for bribes and harassing customers.

Despite these challenges more and more Wines and Spirits continue being opened especially
in urban areas. There are opportunities in the business. And if you are able to navigate the
associated business politics and compete then it’s a feasible venture.

The slow economic situation has increased the demand for low affordable drinks and despite
the negative publicity that the business has attracted in 2014 there is sufficient demand.
Success will however depend on local conditions and your skill.

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Is it a good business to invest in?

Yes it’s a good business to invest in. The demand for spirits is there. The demand is growing,
and the returns are fairly good (See Revenue). However there is some level of uncertainty
due to the somehow unpredictable policies of the county governments and the recent deaths
attributed to spirits. This makes the long term seem a bit uncertain. Also competition in the
business is not fair. There are more fake spirits in the market. On the other hand there are
genuine wines and spirits getting into the market through backdoors.

If after considering the local authorities, competition and fairness of competition in the locality,
management and the conclusion is positive then it’s a good business to invest in. Otherwise
if you are not able to navigate the scene its stressful, draining in terms of cash and emotions
and the returns low if not outright losses.

Local conditions change from time to time. For instance they could depend on the Officer
Commanding Station (OCS), Officer Commanding Police Division ( OCPD) ,Chief, Member
of County Assembly (MCA) or county commissioner. Again a lot also depends on the whims
of individual officials and for that reason it’s not possible to give particulars of each. What we
have done is provide a template of possibilities.

The things that are likely to make you fail in the business are:

- Local authorities
- Inability to compete
- Unfair competition
- Poor location
- Poor positioning
- Poor sourcing
- Poor understanding of your local or target market
- Poor service

Some other observations

From the figures above there still exists opportunities in the wines and spirits market. There
are relatively many wines and spirits that have existed for over a year (Average break even
point is 8 months), meaning there is reason to stay.

It’s important to note that the number of wines and spirits closing is now almost equal the
number opening. This means that the market is reaching a level of maturity but is yet to get
saturated.

Competition is increasing and will continue to rise not only from traditional bars but also
between the wines and spirits themselves.

Although the market has been expanding there is no trigger at the moment for a geometric increase in the
consumption of alcohol. (Which is normally linked to a growing local or national economy), hence entering the
market means you are going to fight for a slice of what exists and some possible growth if the prices of bottled
beer continue increasing and the experience while taking spirits is made worth while and not second-rate as
has been the case for many years.

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Since genuine spirits are standardized in terms of quality there is not much room to compete
in terms of product differentiation. Thus location, the experience, price, loyalty become the
points of competition and survival.

Barriers to Entry in the Business

On paper the barriers to entry in the wines and spirits business have increased. What with the
county alcohol laws, NACADA and general pressure exerted on the business. However in
reality the barriers have gone down in some locations.

Entrepreneurs have over time learnt to navigate through the licensing hiccups to an extent
that it is not a must that a wines and spirits business starts with all the licenses. Also it’s not
compulsory that a business meets all the requirements for licensing for instance to do with
location and amenities.

Nairobi and Kiambu are some good examples where barriers to entry on average seem to
have gone down.

On the other hand the barriers in other areas are on the rise. In Muranga for instance the
licensing is more stringent and there is a genuine effort to limit the wines and spirits in
existence.

Though the process of licensing differs from county to county generally there has been an easing up of the
rules so that it’s now easier to get a liquor license than it was 3 years ago. Nevertheless this has come at an
extra cost in terms of bribery fees. The bureaucracy is a bigger barrier than capital and opportunity since in the
last 3 years there has been more wines and spirits outlets opening despite the Mututho laws.

On what is competition based on

Since genuine spirits are standardized in terms of quality there is not much room to compete in terms of
product differentiation. Thus location, the experience, price, loyalty become the points of competition and
survival.

Location:

For a wines and spirits location matters in terms of social and economic demographics (say locating near a
college, drinking culture, and population distribution). Many wines and spirits consider population, accessibility,
visibility and competition in choice of premises.

Traditionally wines and spirits were located in alleys, lanes and backstreets. There was the idea that a wines
and spirits is a ‘shimo’ and thus needed to be out of the main view. Partly this was because of the impression
that Wines and Spirits were cheap and for those without a touch of ‘class or dignity’; touts, students, casuals
and the like were seen as the people for which wines and spirits were established for.

But this has changed as more of the relatively higher income and ‘classy’ people started fully patronizing the
wines and spirits, driven by economic demands and increased faith in quality and experience. The latter was a
result of establishment of more comfortable and professional wines and spirits compared to rough dirty wines
and spirits of yore.

Page 19
Economies of location are also presently commonly used. This is setting up in a location with
several wines and spirits shops already, and which has developed a reputation as spirits area.
Starting your business in such a location means that even though there is competition, one is
guaranteed at least of foot traffic of spirit seeking consumers. The challenge is to make the
consumers defect from their present bars to yours.

A visible location gives new wines and spirits the exposure needed to make customers realize
of its existence. Yet depending on the target market such a location could be a disadvantage.
There are consumers who prefer not to be seen as they enter and leave a spirits shop.

If you are setting up in an area where there is stigma around spirits it could still be important to have a wines
and spirits located away from the limelight or with a backdoor. This will assure those who still ‘fear’ being seen
entering or leaving a wines and spirits.

These will prefer an easy to access yet not very open bar. Flash bars work best in busy market
places where it’s easy to pop in and out (Drivers, touts and other casuals in the market make a
big chunk of Flash bar customers). Sit-in bars targeting a more mature client are about
accessibility but also important the experience while enjoying drinks.

Location is also about starting in pockets where competition is minimal. There are areas with
only traditional bars but no classical Wines and Spirits. In some areas there is no bar or wines
and spirits and customers have to travel a distance to get a drink. Consider the demographics
of your area, your capital and decide how you are going to do your branding; whether flash /
standing or normal / hip wines and spirits.

Experience / Market Segmentation

This involves trying to differentiate by targeting the section of the market that is not presently
served or which seems to be most rewarding in a particular area. Thus if there are only hip sit in
bars one could set up a no frills carefree wines and spirits that will attract those who feel
intimidated by the hip bar.

Experience is also about music and things TV. Chose the music keeping in mind your
customers tastes rather than your personal tastes and what is hot is at present. This is more so
in urban areas. At times the wines and spirits tend to be a favorite with customers from a
particular community or age group, it’s thus important to suit the music to their tastes. This can
also work in reverse, where you play particular music so as to attract a certain kind of customer.

As sexist as it could sound there are wines and spirits who use staff to attract and retain
customers. Thus they go for pretty lively women who attract men. This works ,of course
keeping everything constant. Where a considerable number of women are likely to visit your
wines and spirits then its good to have clean toilets.

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Price

Price based competition is common in the business. Where majority of the clients are low
income earners or people with decent incomes but simpler tastes price will be key in
determining how many customers you get.

In Wines and Spirits targeting the mid incomes price is not a big consideration as much as trust
and experience.

The price you sell will depend on your suppliers, margins you seek, any form of price fixing
among the wines and spirits in the area and of course your costs.

For instance the ‘‘Flash’’ and other low income markets are highly sensitive to price. So it’s
crucial for such a store to sell liquor strictly at the recommended retail price in addition to
stocking a wide variety of low priced spirits. Also in the ‘Flash’ case it helps to sell the spirits
not only in full bottles but ‘half’s’ where a drink is opened and the contents shared in two or
three to suit the different pockets of the customers. To succeed in this customers need to trust
that you don’t adulterate the drinks. (See more in Revenue)

Service
This is about the basics of customer service: speed in fulfilling orders, a polite and friendly attitude and
honesty. Service plays a big role in making customers stick or seek different options.
Loyalty
Loyalty is based on relationships rather than anything else. The kind of friendly relationships the owner and
staff build with customers. That is why choice of staff is important and your Public Relations skills as the
owner. Still you need to strike a balance between friendly staff and those who could be considered nagging.
(“Buy me a soda” staff, who nag customers and if they don’t get the soda they become grumpy.)

Revenue
Below are average wholesale and retail prices for selected brands.
Brand Size Wholesale Price Retail Price (Kshs.)
(Kshs.)
Meakins. 250ml 100 130
Bluemoon. 250ml 126 170
Blue Ice. 250ml 75 100
Legend. 250ml 97 130
Black Stallion 250ml 246 350
Kane Extra. 250ml 108 150
Kenya Cane. 250ml 180 250
Jebel. 250ml 85 120
Kenya King 250ml 106 150
Kibao 250ml 147 200
Richot 250ml 285 350
Viceroy. 250ml 308 380

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Clubman 250ml 136 200
Konyagi 250ml 151 200
Napoleon. 250ml 116 150
Gilbeys gin. 250ml 282 350
V&A. 250ml 117 250
Metropolitan. 250ml 75 100
Smirnoff vodka 250ml 350 450
Top Secret. 250ml 185 250
500 ml
Bluemoon. 500 ml 180 250
Black stallion. 500 ml 235 450
Legend. 500 ml 140 200
Kenya Cane. 500 ml 285 350
Kibao. 500 ml 285 350
Richot. 500 ml 345 450
Viceroy. 500 ml 540 650
Top secret 500 ml 240 350
Smirnoff vodka. 500 ml 360 450
750ml
Meakins. 750ml 260 400
Bluemoon. 750ml 355 450
Black stallion 750ml 400 550
Legend. 750ml 265 400
Kenya Cane. 750ml 445 550
Viceroy 750ml 1000 1300
Clubman. 750ml 335 500
Konyagi. 750ml 370 500
Napoleon. 750ml 350 450
Gilbeys gin. 750ml 923 1300
Zappa 750ml 650 900
Meakins Rum. 750ml 265 400
Smirnoff vodka 750ml 943 1200
Top Secret. 750ml 435 650

Cellar cask. 590 900

Penasol 371 600
Kingfisher 106 160
Tusker 117 160
Tusker Can 125 170
Pilsner 116 160
Pilsner Can 120 160
Guinness 135 170
Guinness Can 140 180
Snapp 130 160
Smirnoff black Ice 117 150
Smirnoff Guarana 90 150
Faxe Can 135 180
Both wholesale and retail prices of spirits could be within a range of Kshs.5 and Kshs.15 depending on the
location, wholesaler and retailer. Retail prices of beer could be higher by Kshs.40 to Kshs.50 depending on the
branding of the bar.

Page 22
Pricing
The above are average prices. Actual wholesale and retail prices will depend on the supplier and the retailer.
At times there are significant price differences between suppliers. This is based on competition, how much
discounts they are able to squeeze from the manufacturer, and sometimes on whether the products are
genuine or not.
Compare the prices of different suppliers. In some cases one supplier will have better prices for one brand
while higher for another. Do also compare the prices in supermarkets such as Nakumatt and Ukwala.
Occasionally you could find lower prices than those of some wholesalers.
Retail prices will depend on your target market, competition and of course your supplier. If you are targeting
low income groups or operating in low income areas then you need to stick with recommended retail prices. On
one hand the consumers will be naturally sensitive to price while on the other you are likely to be competing
with retailers selling fake spirits.
Still if you are in such an area and offering extras like a big flat television connected to DSTV then you can set
your prices higher by 5 or 10 shillings: a reasonable amount that won’t strain a consumer. Remember such a
lead is so easy to bridge. Any competitor with enough capital can purchase the facilities. Thus, if your prices
are so high and the competition decide to offer the same or better facilities than you have but at lesser prices
then your customers will shift.
If you are targeting a more mature crowd with a monthly income of say Kshs. 25,000 and above, and the
experience in terms of company, music and service great then you can have slightly higher prices. But do
compare with what the competition is offering.
A slight premium works in a bar where there is sitting space. Unlike in the beer industry where the premium is
sometimes as much as 50 % of other retailers, in wines and spirits the extra charge works if it’s reasonable say
Ksh.10 – Ksh.20. Sit - in bars are more for social drinkers and thus things that enhance the social such as a TV
are a plus.
If your direct competitors are offering fake or black market spirits while you are selling genuine spirits then it
would be good to stick to recommended prices. Unlike 2 years ago or so (2010/11) where a relatively higher
price was a sign of genuine, presently consumers are skeptical whatever the price.
If you are selling genuine and the competitor has a large stock of fake then you will struggle to compete on
price, and if you go head to head you are likely to suffer losses.
The better option is to compete on basis of facilities and service.
Should you sell fakes? Well that will depend on your ethics. Know there are immediate and long term risks
involved. Immediate risks have to do with arrest or deaths if the fake is methanol or some other chemical. Long
term include the health risks of serving consumers sub standard drinks.
Further Pricing Observations
Spending averages
In a ‘Flash’ Wines and Spirits a customer spends an average of Ksh.70 per visit (think of a “half” Meakins or
Legend. That is a 250ml bottle divided into two) and Ksh.310 the whole day. A customer will make about four
visits in a day. And at some point join with a friend to purchase half or full bottle.
In take away shops the average spend is Kshs. 200 with customers purchasing 1 bottle of whatever drink.
(Think of a Kibao 250 ml @ Kshs. 200 or Kenya Cane @ Kshs. 230 to Kshs.250)
In a Sit-in Wines & Spirits the average spends per customer is Kshs. 300. Wine and Spirits bars where
majority of clients are above 30 years the average spend per customer is Ksh.400. ( Two 250 ml bottles of
Kibao, Konyagi, Kenya Cane, Legend with a soda, lime or just water)
This is a highly price sensitive market and a difference of Ksh.10 is enough to shift customers to or from a bar.
This is more so in ‘Flash’ wines and spirits and take away bars with a relatively young and low income client.
Popular low priced drinks tend to have a very particular fixed price in the minds of the consumers. A deviation
from this price and word spreads like bush fire.

Page 23
Break even Point

The average break even point is 8 months. The break even point is where you are able to meet your business
costs like salaries and rent, and remain with extra money. You can break even in 3 months but it’s good to
have a long term view.
Ideally your revenue should improve every month. However if the revenue dips consider that in terms of your
location and related economic activities, For instance if you are targeting students then revenue will be more
when they start their semester.
If the overall cost of living in the country rises then consumption is likely to reduce. If you start your bar in the
third quarter of the year then your revenue might rise month to month until December then drop from January.
Keeping everything constant, if your revenue drops month to month then you should go back to the drawing
board and consider what could be wrong. It could be increased competition, poor service, dishonest
employees, and relationships with authorities, poor sourcing or any other factor that could be leading to
revenue leakages, less spending by customers or customers shifting to the competition.

Revenue is influenced by:

Competition

Revenue will be more where the demand is high but competition is low. If there is competition within 200meters
or so radius and your service or prices poor then consumers are ready to sacrifice the convenience of enjoying
a drink at your wines and spirits which is near and walk the distance to the competition. In most locations there
will be competition within reasonable distance.
Unfair competition practices will impact negatively on your revenue.
Supplies
If you are able to source at the lowest price then you will have higher margins and revenues. Like mentioned
compare prices of different wholesalers before making major purchase decisions.
Regulatory issues
Where everyday authorities like the police harass and demand much from the business then revenue will be
affected negatively. Negotiate with the authorities whether regular police, administration police or any other for
a standard reasonable amount which to give them daily or weekly.
Target market
If you target a client with regular income, daily or monthly then your income will be higher compared to
targeting those with seasonal income. On average the spending of a more mature client is higher. Loyalty of
the 30 plus age group is also more when compared to the younger early 20s customers. Thus if the regular
income, older group are the majority of the customers then, keeping everything constant, you will have more
revenue.
Loyalty
Loyalty leads to more and regular spending and hence higher revenue.
Location
As pointed above a strategic location means more customers or higher spending which translates to more
revenue.

Revenue Pointers

For a new bar some marketing is important. A catchy name, a display of prices a well designed eye catching
exterior. Depending on your location and clientele do it in a balanced way so that it looks attractive without
scaring away customers who may think the extras come at a price.

Page 24
‘Flash’ bars work best when on cash basis. They report the highest default cases.
Due to the relative affordability of wines and spirits customers tend to be more regular throughout the month
but certainly there are the usual mid and end month peaks and dips.
Wines and spirits shops which have some loyal core customers are able to earn more revenue throughout the
month. A few days after pay day some customers use Wines and Spirits as transits, where they take a quarter
or two then head to traditional bars to take beer and be ‘seen’. Think of ways to keep them there through out
the night.
Hot water attracts customers and so did free lemons and lime a couple of small wines and spirits offer. A few
wines and spirits bars have an anchor brand which they sell at a ‘fair’ price. Usually the price is lower than the
market average. They use the anchor brand to attract customers and compensate the price difference by
moving higher volumes or by selling other brands at a premium.
Depending on your target market be intelligent in the way you stock so as not to end up with a lot of dead stock
of brands no one will ever touch. No need to stock Amarula or Jameson in a ‘Flash’ bar.
Revenue is also affected by the ability to prevent leakages especially when the owner is not managing the
business on a day to day basis.
One source of leakages is when employees ride on your bar to sell their own drinks. They purchase their own
stock and sell it to customers instead of your stock. Others stock and drink not in your inventory. This can be
checked by regular and impromptu stock taking in addition to hiring as trustworthy employees as possible. But
don’t trust so much. Sometimes the cashier is trustworthy but the waiter is crooked.
Consumer Behavior
The basics work: A good relationship with the customers is crucial. No matter the type of bar don’t assume
good service and personal relationships. Customers don’t want to be taken for granted. Good customer service
makes the customers feel appreciated and important.
In ‘Flash’ wines and spirits and low income areas it’s absolutely important to massage the customers’ ego. This
however should not be at the cost of the customers not paying.
Price is also important and no matter the setting it should not exceed a particular level. A difference of Ksh.10-
20 is manageable. The cheaper the spirit the more prices sensitive its customers are.
Some form of entertainment is great.
Trust is also important. First, trust in the sense that the waiters don’t try to swindle the customers when they
get drunk.
Secondly trust in the quality of the drinks. Customers need to have faith that the spirits are original, won’t make
them blind etc. They are many imitations in the market. Like Kibao vodka bottle containing Blue Moon.
When your bar is operating off hours customers need to feel secure; assurance that they won’t be arrested
when and if the police burst in. And in the case it happens you will stick with them to the end.
Variety is also important. Have enough of all the necessary drinks. This of course does not mean over stocking
but enough variety for the target market. There are many salespeople selling all manner of drinks who move
from shop to shop sometimes offering free samples. For new
Drinks from not very well known manufactures make sure they are safe before offering them to the customers.
Manpower

Average no of employees - 2
Lowest number of employees - 1
Highest number of employees - 6
Average Salary - Kshs. 5, 500
Lowest Salary - Kshs. 3000
Highest salary recorded - Kshs. 17, 500
Average qualification - KCSE
Highest qualification - Diploma

Page 25
Employees matter so much in this business especially if you are not managing it full time. It’s so easy for
employees to steal from the owner that it is important to employ someone trust worthy. Many owners avoid
relatives.

But even the most trustworthy of employees have to be checked. We gathered the best way to do this by trying
to maintain a balance between authority and motivation. Employees should not feel they are not trusted, this
demotivates them and even if they were not stealing it makes them more devious. Random stock taking and
random stock taking and strict cash management will help much. It’s also good to rotate the workers once in a
while. For instance the cashier can interchange with the waitress and so forth.

A monthly salary is the most common reward method but some owners pay daily (Ksh.200) while a few pay a
salary and a commission on every sale they make above a certain amount. One bar paid Kshs. 50 for every
sale of a 750 ml bottle.

Overview of the Wholesale Wines & Spirits Market

Wines and Spirits wholesalers operate at 2 main levels; Distributors and Wholesalers cum Stockists. The mode
of operation depends on the manufacturer. A crude rule of the thumb is that the bigger and more efficient
manufacturers deal with only a few regional distributors who then sell directly to retailers or stockists. A stockist
is a wholesaler of sorts. Some stockists purchase from distributors or bigger wholesalers then sell to retailers.

A distributor is in charge of a relatively large region say half of a town or county. He is supposed to make sure
the products get to the retailers and hence consumers in the most efficient manner. Different manufactures
have various distribution models. For instance EABL distributors are able to sell directly to retailers or to when
need be use stockists.

Manufactures that use distributors advertise for opportunities in the press or appoint distributors from existing
wholesalers or other business. The conditions are stringent and the amounts involved on the higher side.
The average among the bigger manufactures and importers is at least a capital of Kshs. 5 million, a bank
guarantee of the same amount, premises large enough and at least some vehicles for distributorship.

EABL demands more for its distributors including at least a capital and bank guarantee of Ksh.10 million,
vehicles with stipulated carrying capacity, a warehouse/store of appropriate size and commitment to run the
business hands on ( See index for a sample). The conditions vary from region to region. Kenya Wine Agencies
Limited (KWAL) requires you have traded with them goods worth Ksh.2 million in addition to getting bank
guarantees, an appropriate premise and vehicles.

To become a wholesaler though one approaches a distributor, who sells at a discounted price. To avoid over
crowding in one area some distributors manage their wholesale network such that they don’t simply allow
anyone with capital to become a wholesaler.

They insist on a plan or conditions that will help them capture more of the market. The minimum amounts you
can purchase vary from a distributor and the region. Some insist on purchasing goods worth at least half a
million every month while others will accept any walk in customer who can purchase a set minimum say 10
cartons at a go.

Relatively small manufacturers deal with wholesalers directly. They are not strict and will allow anyone to
purchase as long as they meet the wholesale threshold. In some areas they make effort to sell to retailers
directly.

The bigger manufacturers tend to have sales representatives in each region, and at times the sales rep in the
region has to approve before one can become a wholesaler.
Page 26
These have a clear distribution model where they use a few distributors in every region. Wholesalers purchase
from the distributors and resell in smaller quantities to retailers. Some distributors only sell to particular
wholesalers while others will sell to anyone who meets the minimum threshold even if it’s a retailer or
individual.

So the way to become a wholesaler is to approach the distributor or sales rep in the region. The distributor will
give his minimum purchase, terms and conditions.

Away from the formal distributorship and wholesalers is an underground network of tax free and fake spirits
which are sold at a lower price. Some of the low priced products also come through manufactures.

loopholes. Organizations like UN and the armed forces enjoy tax free spirits. There are entrepreneurs who are
able to get products from such place and get them in the distribution network.

Other notable manufacturers and distributors include:

Competition & Survival

Average number of wines and spirits per estate 5

Highest number recorded per estate 17
Lowest number recorded per estate
0
On average 2 in 10 wines and spirits wholesalers have opened in the last 1 year.
On average 1 in every 10 wines and spirits have closed in the last one year.

As noted above the Wines & Spirits retail market is growing. This has led to an almost equivalent growth in
wholesalers. The barriers to entry in the business, unlike those of distributors, are not such that entrepreneurs
would be reluctant to venture into the business. There are wholesalers who have started with Ksh.300, 000 by
specializing in a few products first and expanding gradually.

The new alcoholic regulation (Mututho laws) which introduced higher licensing fees and related bureaucracy
are now relatively easy to overcome by hook or crook and thus not discouraged investment in the business.

The fact that there are significantly more wholesalers opening than closing means there exists opportunities in
the business. In the medium term revenue will continue to grow at an exceptional rate until a point where the
market matures or a national government or county government policy which curtails consumption of spirits is
implemented.

With the barriers to entry manageable and the returns in the business attractive, Competition will continue to
increase. This will also be fuelled by growth in the spirits retail sector and the relatively larger bar
establishments purchasing spirits in wholesale rather than retail. Investors seeking less crowded fields will
continue putting money in the business
Genuine wines and spirits products are standardized.

Page 27
This means that competition does not depend on differentiation and branding of individual wholesalers rather
it’s tied to location, price discounts and credit, sales acumen and service.

A good location is not only one with enough retail shops to sustain the wholesale business but with consumer
numbers and income enough to sustain the retail businesses. Since there is always a possibility of a new
wholesaler establishing in an area the retail market in the locality should be growing, or with possibility of future
growth.

For wholesalers starting with a few key products, consumers in the region of operation should have a taste for
the products and be able to afford them. For instance since there are independent importers of wines and
premium spirits legally or otherwise there are wholesalers who enough in areas where there are no consumers
numbers big enough to afford the premium wines.

Competition dynamics in an area are also key in choice of location. There are areas dominated by one or a
couple of large wholesalers or distributors. Such wholesalers have economies and efficiencies that allow them
to offer extremely competitive prices and service to retailers.

A new entrant with lesser funding and efficiencies may find it difficult to break into such a market. Still even if
the new smaller wholesaler offers more competitive prices forma the dominant wholesaler may use unfair
business practices to lock out the new entrant. Lesser funded wholesalers thrive in markets where there is no
dominant player, and if a bigger player exists he is not too big relative to the competition.

Location economies where they exist may help jump start a new business. These occur when a relatively high
number of retailers or wholesalers are located in the same area of a town. Setting up in such a location gives
the immediate visibility and immediacy that attracts many walk in customers.

At times such locations with a ready foot traffic may be considered prime and attract higher rent or goodwill
payments. If these are reasonable then they may be worth it.

The biggest customers of wholesalers are Wines and Spirits retailers. Others are individual or organizations
throwing parties. For retailers their main concern are profits, thus to maximize the returns they seek to
purchase from the wholesaler offering the lowest price.

This is an extremely price sensitive market. Though two wholesalers may purchase products from same
distributor at the same price, the amount they sell to retailers depends on how much margins he wants for
himself, his relationship with the distributor, supplier sources, quantity or cash discounts he enjoys and his
internal efficiencies.

The same also applies if the wholesaler is purchasing from a small manufacturer directly. A slight price
difference has effect on competitive advantage. Some wholesalers sacrifice part of their margins to offer lower
prices and gain market share. If the wholesaler is able to squeeze discounts from a distributor he is able to
pass on them to retailers. Such discounts largely depend on the quantities the wholesaler is purchasing, how
important the distributor thinks the wholesaler is in getting products to consumers, and whether he is paying
cash or not.

If a wholesaler sources from the black market tax free or in any other form then he is able to offer lower prices.
Some wholesalers by pass local distributors and purchase from those in other regions who offer lower prices.
Internal efficiencies have to do with how efficient the wholesaler is able to manage costs such as rent, staff and
transport.
In areas with only one wholesaler the retailers don’t have much choice but to go with the prices set by the
wholesaler. Where competition exists like in most urban centers the biggest consideration is price.

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Retailers drift towards a wholesaler offering a credit line. The credit line may not be used often but the fact that
it exists attracts and keeps retailers coming. Friendly and realistic terms of the credit also matter. At times
retailers don’t mind paying a small premium for credit facilities.

Offering credit means that the wholesaler has enough capital and a trustworthy relationship with retailers.

The more successful of wholesalers surveyed didn’t just rely on walk in customers only. They tried to reach out
to retailers, enticing them with prices, credit, discounts or service. Some wholesalers had a dedicated sales
person while others had no clear sales policy and the owner did most of the lobbying to win new customers.

Revenue

(Refer to Price Table in the Retail Section)

Brand Wholesaler Purchasing Average Wholesaler

From Price per Selling to
Distributor/Manufacturer bottle from Retailer
(Kshs.) distributor Kshs.)
(250ml)
Kshs.)
Jebel 2050 85 95

Meakins 2000 83 95
(Dry Gin)
(200ml)
Kane Extra 3149 131 (Price 140 (Price
range 115 range 130 to
to 130) 140)
Kenya Cane: 4890 203 230

Moonwalker: 2000 84 100

V&A 5160 216 235

Viceroy 328 328 340

Richot 7608 317 330

Smirnoff 7700 320 330

Kibao 4000 166 175

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The above are average prices. Actual prices depend on the region, and as mentioned above terms of trade of
the distributor. Relatively smaller and regional manufacturers offer higher margins even for low priced spirits as
a way of penetrating the market.

Total sales depend on the wholesalers’ price, their marketing efforts, and the relationship they formed with
retailers.
A price lower than average attracts more customers, but this works if the retailers trust the wholesaler. Trust in
terms of source and quality. Some retailers didn’t care about the source of the spirits, whether they were tax
free or fake as long as they had an assurance that the drinks would not have any negative effect on their
customers.

In some areas wholesalers operate under informal agreements where they zone particular areas to be served
by each wholesaler. In such constrained markets revenue is determined by the no of retailers in the area and
the volumes they are selling. To increase sales such wholesalers sometimes find themselves creating
incentives for retailers to make more sales. These include extending lines of credit, offering discounts and
promotions for particular brands and helping interested investors get lines of credit.

Wholesalers who have a proper marketing mechanism record higher revenues. Marketing efforts involve
reaching out to retailers with offers and prices to purchase at your shop.

As seen the price that a wholesaler offers to retailers depends on how much margins he wants, his relationship
with the distributor, supplier sources, quantity or cash discounts he enjoys and his internal efficiencies.

Revenue is high among wholesalers who sell to retailers in small quantities. For instance there are wholesalers
who sell as few as 2 bottles at wholesale price to retailers at wholesale prices.

Appendix

Summary of Steps Taken To Apply For A General Retail Alcoholic License

Step 1:
Submit a written expression of interest for pre-clearance by district committee. At this point you don’t need to
have acquired the premises or other licenses. This protects you from incurring costs just in case your
application is rejected. That said you should know the exact location where you wish to locate the business as
this will be used in assessing your application.

Step 2
If the committee gives you a letter of approval which basically says go ahead and make the full application then
you have to acquire the other necessary licenses such as the single permit license from the country
government and the public health certification.

Step 3
Once you have the licenses in step 2 above then you make a full application with the check list as the
guideline. The police, local authority official and public health personnel make reports which are submitted to
the committee and play a big part in giving or denying you a license. (See below this report for what each
official considers)
Again please note the above is the official way of doing things but not all counties follow the above to the letter.

Application Form (Sample)

APPLICATION FOR THE GRANT OR RENEWAL OF AN ALCOHOLIC
RETAIL DRINKS LICENCE
[To be completed in triplicate]
1. Name of applicant........................................................................................................

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2. Applicant's postal address ...........................................................................................
3. Address and plot number of premises ........................................................................
[Give sufficient details adequately to identify the premises]
Street, phone number
4. Name by which premises known................................................................................
5. If for renewal, give expiring license number .............................................................
6. License to run from ...................... to .....................
7. Type of license applied for.........................................................................................
Date.....................................
Signature of Applicant......................................
Note.—if the application is for a wholesale alcoholic drinks license to be
applicable to more premises than one, paragraphs 3 and 4 must give
particulars of all such premises.

Officials Reports

For each license applied for (brewers, retail and wholesale) save for importers license, district committee shall
require and consider 3 written reports for each premises applied for in accordance to Section 9 (4) of the Act:

(i) Police Report

The report shall cover matters such as:
o Security issues related to location of the premises
o Information on the character of the applicant and if they have had previous convictions in regard to offence
related to alcoholic drink
o Peace and public order and safety in the locality- is the premises likely to interfere with peace and public
order of the neighborhood
o Proximity to institutions of basic education (300m rule . Nowadays it’s quite relaxed)
o Public interest of residents in the locality
o The number of similar premises in the same locality offering the same service
o The appropriateness of the premises in relation to proximity to religious institutions, health facilities and other
community facilities and amenities
(ii) Medical Officer of Health Report
The report shall cover matters such as:
o Report of the officer in charge of public health in the district
o Impact on public health in the neighborhood by the premises
o Conformity with section 9 (16) of the Act
o Structural soundness of building including condition of infrastructure within the premises
o Sanitation, cleanliness and hygiene
o Safety of the premises/ occupational health and safety
o Capacity approved
o Public interest of residents in the locality
o Public health certificate
o Suitability of the premises for establishment of the business for which license is applied for
(iii) Local Authority Report
The report shall cover matters such as:
o Report of zoning and classification of areas within the local authority or district in terms of residential,
commercial and industrial and whether the premises is located within a residential area
o Public interest of residents in the locality
o The appropriateness of the premises in relation to proximity to religious institutions, health facilities and other
community facilities and amenities
o The number of similar premises in the same locality offering the same service
O The structural plan of the premises and its suitability for the license applied for

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Wines & Spirits Suppliers (Nairobi Region)

Name of Location Contacts

Distributor/Wholesaler
Mwalimu Wine Agencies Githurai 45/Kasarani/Mwiki/ 0723 675037
Pangani/Mathare/Huruma/
Zimmerman/Shauri Moyo
Eve Wines & Spirits CBD, Mlolongo,Kitengela 0721693118
Triple Nine Merchants Kahawa West & Githurai 44 0706991245
Mbukan Investments Kimabu, CBD, Umoja 0722624659
Saki Wines & Spirits Uthiru,Kikuyu,Wangige,Banana 0722624650
Limuru, Fly Over
Slater & Whittaker CBD 0704 220210
Twins Wines & Spirits Komarock, Umoja 0722388235
Miami Stockist Wine & Kenyatta, South B, South C, 0721 213129
Spirits Kibera
Jonfra Investments Umoja 0722423161
Shadas C.S Ngong Road 0722701714
Claire Wines & Spirits Nairobi West 0726799278
Haven Agencies Lavington, Ngong Road, Valley 07222260561
Arcade
Pine Wine Agencies CBD 0721722968
Chemi Chemi Highridge, Parklands 0722820504
Midhan Enterprises CBD, Ngong Town,Kiserian 0723638890
Joskah Wines & Spirits Thika 0722247478
Lexkam Wines & Spirits CBD 0722761739
Safari Wines Agencies CBD 0721446548
Vintage Liqour & General Westlands 0729367751
Supplies
New Gen Investments Highridge 0722748925
Menta Buruburu,Jogoo Road 0722899228
Gakwa Wines & Spirits Buru Buru Phase 1 0739540767
Agencies
Wine Merchants & Grocers CBD 0722519987
D.O Stores Kawangware, Ngong Road 0722792736
Abuya Wines & Spirits Kitengela 0721419459
Vintage Cigars & Wines CBD 0721275298
Lisper Wines Bahati 0721246628
Bandwagon Wines & Spirits CBD 0721980221
Vineyard Liqour Studio Umoja, Kitengela 0720701045
Elles & Region Wines Rongai 0721244081
Hunters Wines & Spirits CBD 0736186411
Iddi Wines & Spirits Rongai 0722662296
W.G Chihi & Co Ltd CBD 0722623556
Pine Wines CBD 0721722698
Paramount Wines & Spirits Uthiru 0722619425
Jukoma Wines & Spirits Uthiru 0722633979
Jumbo Kayole 0720813081

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 Jimlo Dagorreti Corner 0733950380
Lecyn Embakasi 0722839773
Liqour Logistics Umoja 0786787441
One Stop Kitengela 0721419459
Kinak Kitengela 0722445880
Alice Wines Mlolongo 0721752532
Hunters CBD 0736186411
Sam Kim Ngong, Kiserain, Rongai 0710273229
Turtle Wines CBD 0722747214
J & R Wines & Spirits Maringo 0724541516

Licensed spirit & wines companies with brands ( April

2014)
COMPANY BRAND NAMES
Aberdare beverages Goal
Aberdare beverages Royal horse
Aberdare beverages Kick
Advance limited Poond gin
Advance limited Poond brandy
Africa spirits ltd Blue moon
Africa spirits ltd Legend brandy
Africa spirits ltd Furaha whisky
Africa spirits ltd Furaha gin
Africa spirits ltd Furaha brandy
Africa spirits ltd Afrigold gin
Africa spirits ltd Club 360
Awas enterprises ltd J movers gin
Awas enterprises ltd J movers brandy
Bilflex industries Billys vodka
Bilflex industries Billys brandy
Bilflex industries Billys gin
Bilflex industries Billys whisky
Biscept limited Sting
Biscept limited Achor
Biscept limited Horizon
Bms limited Arrow
Bms limited Striker
Cannate breweries ltd Malasu etra brandy
Cannate breweries ltd Malasu etra gin
Chania prime mart ltd Identity
Chantaleps ltd Whispers gin
Connections enterprises ltd Moto moto
Connections enterprises ltd Naps
Continental beverages Afican gin
Continental beverages Afican brandy
Continental beverages Hansa brandy
Continental beverages Avian gin
Continental beverages Vodka moonshine
Continental beverages Vodka captain
Continental beverages Ice savannah
Continental beverages Ice havannah
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Crystal world Survivor gin
agencies(pinpoint solutions)
Crystal world Survivor brandy
agencies(pinpoint solutions)
Crywan enterprises ltd Visa
Crywan enterprises ltd Kingstone

Among the larger manufacturers and importers are:

Kenya Wines Agencies Limited (KWAL)

London Distillers Kenya (LDK)
Wines of the World
Viva Agencies
Distel Wines
African Spirits
East African Breweries Limited (EABL)

Medium Size Manufacturers & Distributors:

Moonwalk Investments – Manufactures of Moonwalker

Kapari Limited – Distributors of Konyagi

Vinepack Limited – Manufactures of Fiesta

African Spirits - Distributors of Blue Moon, Furaha and Gypsy

|

Sample of EABL Call for Distributors

East African Breweries limited (EABL) is East Africa’s leading branded alcohol beverage business with an
outstanding collection of brands that range from beer, spirits and adult non-alcoholic drinks reaffirming our
standing as a total adult beverage (TAB) company.
With state of the art manufacturing plants and superb distribution networks across the region, delivery of the
highest quality brands to our consumers remains a key objective.
EABL has opportunities for additional Senator Keg Beer and Spirits distributors in Eldoret, Kapsabet and
Kitale.
The requirements for Senator KEG Beer & Spirits Distributors are:
1. Ability to obtain appropriate bank guarantee of Ksh 10Million.
2. Ability to raise appropriate start-up capital of Ksh 10Million.
3. Ability to avail distribution vehicles with adequate carrying capacity as stipulated by EABL.
4. Appropriately located warehouse facility comprising a minimum of 3500 sq. ft.
5. Entrepreneurs with commitment to dedicate themselves to this business in a hands-on manner for the
foreseeable future.
6. Entrepreneurs with passion for high performance and growth.
7. Entrepreneurs who are dedicated to high customer service standards and strong business relationship.
8. Entrepreneurs with strong sales or general business expertise, including door-to-door selling.

Interested applicants should send their applications including the following information:
1. Application letter, dearly indicating the market of interest.
2. Copy of certificate of incorporation, memorandum and articles of the Applicant and PIN Certificate.
3. Business case, illustrating ability to tap full potential in the market of interest.
4. State working capital and level of bank guarantee available.

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Applications should be enclosed in a sealed envelope and addressed to:
Sales Director East African Breweries Limited P.O. Box 30161-00100 Nairobi, Kenya.
Applications should reach the Sales Director not later than Friday 15th February 2013 and should be deposited
in the Tender box located at the EABL’s Tusker House Reception (Ruaraka) clearly marked “Application for
Senator Keg Beer and Spirits Distributors.”
East African Breweries Limited (EABL), East Africa’s leading beverage company focused on the development
of great brands and great people. With a state of the art manufacturing plants and superb distribution networks,
delivery of the highest quality brands to consumers, is a key objective.
East African Breweries Limited has opportunities for additional Beer and Spirit distributors in Meru, Nanyuki,
Karatina, Voi and Naivasha markets.
The requirements for beer & spirits distributors are;
1. Ability to obtain appropriate bank guarantee of Kshs. 12 Million.
2. Ability to raise appropriate start-up capital of between Kshs.1 0— Kshs 15 million.
3. Ability to avail distribution vehicles with adequate carrying capacity as stipulated by EABL.
4. Appropriately located warehouse facility comprising a minimum of 7,500 sq.ft.
5. Entrepreneurs with commitment to dedicate themselves to this business in a hands-on manner for the
foreseeable future.
6. Entrepreneurs with Passion for high performance and growth, including ability to overcome challenges in
order to achieve full market potential.
7. Entrepreneurs who are dedicated to high customer service standards and strong business relationship.
8. Entrepreneurs with strong sales or general business expertise, including door-to- door selling.

Interested applicants should send their applications including the following information:

1. Application letter, clearly indicating the market of interest.

2. Copy of certificate of incorporation, memorandum and articles of the Applicant and PIN Certificate.
3. Business case, illustrating ability to tap full potential in the market of interest.
4. State working capital and level of bank guarantee available.
Applications should be enclosed in a sealed envelope and addressed to:
Sales director East African Breweries Limited P.O. Box. 301 61-001 00 Nairobi, Kenya.

Some things to think about as you plan:

ø Problem - What's a problem your product will solve – What gap will your Wines and Spirits
ø Channels - How are you going to distribute your product – This is about location.
ø Solution - What is the solution that you will give to the problem
ø Key Metrics - How will you measure the success of what you are doing
ø Unique Value Proposition - Why should your customer buy from you as opposed to the thousands of
other alternatives, including not buying.
ø Unfair Advantage - What is the advantage you have.
ø Customer Segments - What are the customer segments that you will address
ø Cost Structure - How much will it cost
ø Revenue Streams - How much will you make.

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