Keroche Breweries: The Inside Wars Of The Multi-Billion Company That Started With Ksh500,000 Capital

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Keroche Breweries: Inside The Multi-Billion Company That Started With Ksh500,000 Capital
Photocredits/Courtesy

By Prudence Minayo

Keroche Breweries was founded in 1997 and has gone to become the second largest producer of alcoholic drinks in Kenya. The company was set up by Tabitha Karanja and her husband Joseph Karanja at their Naivasha farm. It started operations with only 5 employees and produced fortified wines for low income earners. The multi billion Keroche Breweries began with a capital of Sh500,000. The couple pooled money from their hardware business to set up the brewery. 

While the company would grow to be a household name, it has often been at the receiving end of the Kenya Revenue Authority (KRA). For years, the company has been a subject of endless court cases. 

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Growth 

In 2004, the company came under scrutiny for allegedly packaging alcohol in sachets. They were blamed for steering alcoholism in the region and had to change their packaging from plastic to glass bottles. They attributed this move to counterfeit goods. 

In 2007, they would face another hurdle after heavy taxes were introduced on locally manufactured wines. Rather than giving up, Tabitha came up with ready to drink vodka under the name Vienna Ice. 

In 2008, they decided to take on the big player in the industry by venturing into beer manufacturing. Their flagship beer was the Summit Lager,  launched in October 2008 in a ceremony graced by then Prime Minister Raila Odinga. This was followed by Summit malt and KB lager. The latter is a sorghum beer launched in 2020. 

In 2015, Keroche Breweries was declared Africa’s Best Growing Company. This was during the 6th Annual gathering of the African Leadership Network Summit. 

Trouble with KeBS

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In 2003, Kenya Bureau of Standards were unwilling to grant them a standardization mark claiming their alcohol was substandard. In 2016, they would try to go after their permit following a crackdown on illicit and substandard alcoholic drinks. Keroche moved to court and was able to stop KeBS. 

KRA Trouble 

According to a piece by Business Today, Keroche’s war with KRA started in 2006. In 1997, KRA allotted Vienna Fortified wine a category under HS (Harmonized System) code Tariff 22.04. This attracts 45% of exercise duty. They re-affirmed this classification in 1997. In 2006, they were to remit Sh84 million in tax refund to the beer manufacturer. Instead, they wrote to Keroche saying they had made a mistake in classifying Vienna. They made a decision to a classify it in a higher HS which would attract 60% exercise duty. They objected but KRA remained adamant and put out Sh1.1 billion assessment. They backdated the new code for five years to make up for their error. Keroche moved to court and it ruled in their favor. 

In 2015, KRA closed the company for two weeks over Sh1 billion backdated duty. The company re-opened after a court ruling in its favor. Two years later, Keroche won a Sh1.1 billion tax case against KRA. 

In 2019, Tabitha and her husband were arrested over Sh14 billion tax evasion allegations. They were accused of mis-declaring both VAT and excise tax between 2015 and 2019. 

On 15th June 2020, the company was closed down by KRA once again. This time it was over defaulting on a plan to pay tax arrears amounting Sh30 million. While speaking on this move, the CEO said this would see beer worth sh350 million go to waste and cost the jobs of about 400 people. She cited the Covid-19 as one of the factors contributing to the default payments, saying they signed the payment scheme under duress. Mrs. Karanja said during the pandemic they stopped operations for about two years crippling their finances. 

Tabitha also said that this move was politically driven even as she urged KRA to re-consider their stand. She accused the tax man of issuing agency notices to a number of banks against giving them a loan. 

“More particularly, my perfectly legitimate decision to contest the senate election under the United Democratic Alliance is the immediate source of the company’s dire predicament. I have called various offices for intervention, and it has been made clear to me that I can only safely exercise my political and democratic rights under the Azimio la Umoja coalition and that as matters stand, the adverse action will be sustained,” she said.

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