Mark Ocitti is the managing director at Uganda Breweries Limited. He spoke to The Independent’s Julius Businge on the sidelines of a joint roundtable press briefing held in Kampala recently.
You have spent a year at UBL. What experiences have you noted so far?
I inherited a great team that inspires and supports me to achieve success. As an organization we have come a long way in driving our culture from a more inward focused to a more outward focused culture. I have been put in a company with great heritage of 71 years old with great brands like Uganda Waragi, Bell Larger and Tusker. These brands bring our brand purpose to life.
What strategy are you deploying to achieve growth?
We are building our physical distribution network which has doubled in the last one year; the other is regionalisation of our products where specific products are offered according to the need of consumers in a specific region. The third thing is innovation that has seen us come up with two products – Uganda Waragi – coconut flavour and Black bell – all have been well received by the market.
How did UBL record a 31% growth in profit in the year ended June 30?
We are happy with the performance that we recorded for the last 12 months. If you look at the volume performance, we grew by 7% above the previous year with the key performing brands being Uganda Waragi, Senator and Smirnoff. Our profit delivery came out at a higher gearing with a 31% growth driven by great brand positioning, productivity initiatives and managing our costs. We had a negative gearing performance which means that we are selling more and more products which have lower revenue. Customers are choosing to consume those products – Senator and Uganda Waragi – because of what is happening in the economy where people have less disposable income.
What is your view on government’s lamentation of banning alcohol sold in sachets?
This is a thorny issue; we think that if we manage that area well, we can give our customers a product of good quality and ensure that the tax man collects what is due to him. This is part of the larger conversation about alcohol industry. We are open to supporting government in the ban of alcohol sold in sachets.
We believe the industry has not been as responsible as it should be when it comes to packaging alcohol in sachets. The privilege of doing so has been abused by some industry players and therefore regulation in this area will solve that abuse. When you look out in the market, some sachets are being sold at Shs 600 but ours that are packed in same quantity is retailed at between Shs 1, 500-2, 000 after factoring in all factors of production. So we wonder how other players get the price of Shs 600 and remain profitable. There can only be two things; either they are taking shortcuts in the manufacturing process which means they are putting consumers at risk of getting medical problems or they are taking shortcuts in respect to payment of duty which means government is losing revenue.
How should government go about preventing illicit alcohol on the market?
Market research has told us that 70% of alcohol consumed in Uganda is either informal or illicit. Informal alcohol per se is not bad. Illicit alcohol is what is bad because it is produced in the backyard without required standards and some is smuggled into the country without paying tax. The third illicit alcohol in this category is called counterfeit. We therefore think the time is right for government to come out and pronounce itself against illicit alcohol because of the dangers related to health and reduced tax collection. In terms of consumption, Ugandans consume 110 million liters of alcohol and 67.7 million of this is illicit and only 43 % is from the formal, regulated, taxed sector. The lack of consistent or proper enforcement, inspection and registration of traders and transactions has allowed illicit production to flourish.
What economic impact does UBL have for Uganda?
We are working with 20, 000 farmers who supply us with raw materials and we project this number to reach 50, 000 in the next two years. Last financial year, we paid over Shs 64 billion to farmers and we expect this to grow to Shs90bn in the next two years with a positive tax policy.
We have increased purchase of four main ingredients for our beers including cassava, maize, sorghum and barley by 151% from 6610 tonnes in 2012 to 16585 tonnes in 2017.
We have added a total economic value of over Shs 150 billion from stakeholder investment, employment, taxes, consumption and forex savings and opportunity for beer export income in the past five years.
Alcohol products are highly taxed in this country. What is your view on this?
UBL is the fourth biggest tax payer in Uganda, having paid Shs 110 billion in 2015 alone. The leading two players in the alcohol industry are among the top five taxpayers contributing in excess of Shs330 billion in tax revenue in 2015. Only 0.1% tax payers account for 75% of tax base – in which category we belong. We believe that overtaxing Ugandan goods makes them expensive and Uganda unattractive investment destination.
What is the future like for UBL?
We will continue to focus on innovations as a growth driver in response to changing demands of our consumers in addition to driving distribution and availability of our brands. We will continue to focus on quality of our brands so that our consumers continue to enjoy our internationally acclaimed gold award winning brands.