- Contract leaf growers have fallen to around 4,000 from around 5,000 in the previous two years as the UK-controlled multinational seeks to deliver a ‘crop of the right size’ based on consumer demand.
- Kenya increased the excise duty on cigarettes by 20% in 2019, followed by a further increase of 4.94% last October, in line with the average inflation rate for the year ended June 2020.
Tobacco growers under British American Tobacco (BAT) Kenya fell 20 percent last year, the company said in its latest annual report to shareholders, citing reduced sales of cigarettes in the domestic market.
Contract leaf growers have fallen to around 4,000 from around 5,000 in the previous two years as the UK-controlled multinational seeks to deliver a ‘crop of the right size’ based on consumer demand.
Kenya increased the excise duty on cigarettes by 20% in 2019, followed by a further increase of 4.94% last October, in line with the average inflation rate for the year ended June 2020.
The tax increase is aimed at reducing cigarette consumption which has been linked to an increased risk of contracting life-threatening diseases such as cancer as well as lung and heart disease which are very expensive to treat.
“As part of the effort to build a sustainable business, we engage tobacco growers based on demand for our products,” BAT said in an email response to Business Daily.
“Over the past few years, affordability issues facing tobacco users have increased, which has impacted the demand for our tobacco products.
BAT, whose shares are listed on the Nairobi Securities Exchange (NSE), reported that domestic sales fell 24% in 2020, reducing gross sales by a marginal 2.47% to 38.85 billion. shillings.
Net profit, however, jumped 42.03 percent to 5.52 billion shillings, largely due to increased profits from exports.
Tobacco yield in 2020 fell a modest 6.74 percent to 8.3 million kilograms, down from around 8.9 million kilograms in the previous two years, BAT says in the annual report, with the highest output. lowest since around 7.0 million kilograms released in 2017.
Net incomes of leaf growers – largely concentrated in Migori, Bungoma, Meru and Busia counties – also fell 6% to 1.41 billion shillings from 1.5 billion shillings in 2019 and 2018.
This means to gain per kilo on average Sh169.88, slightly improved compared to Sh168.54 the two previous years, and Sh118.71 in 2017.
“One of the challenges we have is that we have to adjust the size of the crop to meet the demand we have on the consumer side,” BAT East Africa Managing Director Crispin Achola said in an interview on March 18.
“We’re constantly looking at what we’re paying for the sheet to add an element of sustainability to it.”
BAT shareholders approved the final dividend payment of 4.15 billion shillings on Wednesday, bringing the total payment for 2020 to 4.50 billion shillings, a jump of 34.33% from a year earlier .