How to Start / Open A Senator Keg Bar Busines in Kenya

A Senator Keg Bar Business Plan in Kenya

Download A Senator Keg Bar Busines Plan(Guide) in Kenya PDF➥

In the 12 years since the beer was introduced there have been ups and downs as reflected by the statistics below;

In October 2013 the government introduced a 50% excise tax on senator keg beer which resulted in EABL doubling the price of Keg, in turn reducing consumption.

After the price increase the average wholesale price of a 50 liter barrel increased from Kshs.3146 to Kshs.6544. At the retail a 300 ml sold at Kshs.50 from Kshs.30, and a 500ml sold at Kshs. 80 from Kshs. 50.

In May 2015 the prices reduced as a result of the Alcoholic Drinks Control (Amendment) Bill 2015 coming into effect. The act set the excise tax cut (remission) at 90 per cent from the current 50 per cent for beers manufactured using at least 75 per cent locally- sourced sorghum, millet or cassava.

In the year ending December 2016, EABL reported its emerging brands (Senator Keg, Balozi and Allsops) grew by 106%.

Presently, as seen by consumption figures the business is looking up again, not the least helped by policy which is harsh on cheap second generation spirits. This has a created a gap among the low income alcohol market which is still reeling from the effects of the 2015 wines and spirits crackdown.

Licenses

A Keg Bar is not special and considered like any other bar. Thus licensing, like that of other bars, is governed by the alcohol drinks act.

Alcoholic Drinks License

For a keg bar, opening at 5pm and closing at 11pm on weekdays and 2pm to 11pm during weekends you need the 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.

Below are the fees as stipulated by law.

General retail alcoholic

Fees

drink license:

 

 

 

12 Months ( Kshs)

6 Months ( Kshs)

Premises situated within a

50,000

30,000

City or a

 

 

municipality

 

 

Premises situated within

30,000

18,000

urban areas

 

 

other than city and

 

 

municipality

 

 

Premises situate elsewhere

15,000

9,000

than in a

 

 

city, municipality and urban

 

 

areas

 

 

The licensing function is now developed to the county governments. The definition of city, municipality and urban areas has become vague if not irrelevant. Most counties will charge the highest amount possible. Thus the very least you can pay for an alcoholic license for a keg bar is Kshs. 30,000 per annum. Budget at least Kshs 50,000 for the license.

As is often there are other associated costs with the license; these include the costs of bribery and incentives to the licensing officials. These are not cast in stone and will depend on your negotiating abilities, the greed of the officials and the licensing regime in the county. If there are ‘custom’ requirements to get the license, say for instance the many ‘alcohol’ rules that counties have established then the higher the bribe if any.

Like noted in our other alcohol business guides in the last two years the counties have come up with a raft of somehow arbitrary rules aimed at curbing the consumption of alcohol. Such rules are aimed at “protecting our youth ““increasing productivity” and all other such justifications aimed at maintaining the ‘good morals ‘of the county.

The latest of such raft of measures is Kiambu County which early 2016 declared that all alcoholic licenses will be issued in consultation with the community where the bar is to operate. That is if you want to start a bar the community has to say yes or give conditions under which you should operate. The modalities of consulting and ‘capturing the voice’ of the community are not laid down.

What this and such other ‘moral ‘conditions do is to raise the indirect cost of licensing in terms of bribes and bureaucratic time.

At the end the counties thirst for revenues and personal greed of its officials triumphs over any bureaucratic and moral conditions.

That said there are the basic conditions that are to be met before issuance of the alcoholic drinks license. These are based on the alcoholic’s drinks act and public health concerns. The very basic are:

Sink – The premises should have a sink from where to wash cups and glasses

Toilet - There should be a toilet for customers. Some officials will insist that a urinal is not sufficient after all there could be female customers, and these will want to relieve themselves too after a couple of drinks. Then again what if one wants to take a dump? Thus they will insist on a proper toilet and a urinal as an addition. The toilet should not be shared and is only to be used by the bars customers only.

Different officials enforce these rules in various ways. The reason you will see bars with only a urinal, a couple of keg bars sharing a toilet or others without a sink.

Still you should not just think of what the officials want but also the comfort and convenience of your customers; is there a clean toilet nearby? Are the glasses and cups clean?

Generally counties base their licensing on the alcoholic drinks license. This means the police could be involved because they need to give a report on security issues on the locations, vouch for your character, and proximity to institutions of basic education (300m from institutions rule which is now quite relaxed.)

In addition to the above the public health officials will look at the general sanitation and cleanliness, capacity, access to water and others.

Once you are approved you get a provisional license and the actual license a little later.

There are keg bars which operate without the alcoholic drinks license. They start the operations then chase the license later. The ability to do this depends on the authorities in your area of operations. To keep in operations you need to keep the authorities and especially the police happy.

There are a couple of keg bars, especially in urban centers which operate for 24 hours. Or other hours beyond the 5 pm to 11 pm bracket. By law for a bar to operate within the said times it needs to have a Members Club license which costs KSHS.100, 000 per annum or a Restaurant Alcoholic License which costs Kshs30,000 per annum. This allows the bar to sell food accompanied by alcohol.

Again the realities of such timings are not based on licenses only but also the police and other authorities. County liquor boards are reluctant to issue restaurant alcoholic licenses to keg and other low end bars. This has especially become tricky with the 2015 crackdown on ‘killer spirits’.

In the eyes of some the difference between a kegs bar and wines and spirits outlet are minimal. Sometimes the hustle and risks that comes with operating off hours on the goodwill of authorities are not worth it. Make the call based on your local conditions. Create rapport with a waiter of a bar which operates off hours to get an idea of what to expect in the particular location.

Other Licenses

In addition to the alcoholic license there are others that are other licenses that are required to run a bar. These are standard for any bar, Keg or otherwise.

 

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.15,000

 

 

Public Health License

- It's also a requirement when

At least Kshs.6000

 

 

 

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, sink,

 

 

 

 

smooth 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 health officers are

 

 

 

 

found at the

 

 

 

 

government/county hospitals

 

 

 

 

or county government offices.

 

 

 

 

 

 

 

 

Medical Certificate

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fire Clearance Certificate

 

The cost averages Kshs.1500

 

 

 

This is issued by the fire

per year

 

 

 

department of the county

 

 

 

 

government. The general

 

 

 

 

process is you go to the fire

 

 

 

 

department, they will ask for

 

 

 

 

the size of your premises in

 

 

 

 

square feet and based on that

 

 

 

 

advice on the number of fire

 

 

 

 

extinguishers you need.

 

 

 

 

Depending on the nature of

 

 

 

 

your business they will also

 

 

 

 

advice on the best kind of

 

 

 

 

extinguisher.

 

 

 

 

Once you have all in placed

 

 

 

 

you notify the fire officials who

 

 

 

 

come inspect and issue you

 

 

 

 

with the certificate. You need

 

 

 

 

to purchase the fire

 

 

 

 

extinguishers from authorized

 

 

 

 

companies, who will also be

 

 

 

 

inspecting the extinguishers

 

 

 

 

every six months and

 

 

 

 

stamping it.

 

 

 

 

 

 

 

 

Music Copyright of Kenya

This is required for all

MCSK fees are based on

 

 

(MCSK) License

establishments playing music.

sitting capacity:

 

 

 

These days MCSK officials

“Fee per room for each unit of

 

 

 

are a touch aggressive and

25 persons seating capacity

 

 

 

it’s good if you have the

(or part thereof) - 2,231/=”

 

 

 

license. MCSK is more than

 

 

 

 

enthusiastic to issue the

 

 

 

 

license. There are MCSK

 

 

 

 

offices or officials all over the

 

 

 

 

country. If you can’t find a

 

 

 

 

MCSK office within your

 

 

 

 

location kindly visit their

 

 

 

 

website: www.mcsk.or.ke

 

 

 

Performers Rights Society of

This is another artist collection

Prisk license depends on the

 

 

Kenya (PRiSK )

agency. Just like MCSK they

capacity of the bar,

 

 

 

have become rather

attendance and how you are

 

 

 

aggressive in enforcing

using the music. The charges

 

 

 

payment especially in urban

are calculated per square feet

 

 

 

areas. Kindly get in touch with

starting from Kshs. 4.50 per

 

 

 

them through.

square feet. Visit their website

 

 

 

 

http://www.prisk.or.ke for

 

 

 

 

exacts. Or call them on: 0710-

 

 

 

 

309695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to the opening hours of majority of keg bars (5pm to 11pm, weekdays, 2pm to 11pm, and weekends), enforcement of licenses often happens at night or weekends. So it’s not uncommon for health officials to pop in at 8pm and if all is not well order closure of a bar or bribes depending on the individual.

MCSK and PRSK often sneak in on Saturday and Sunday afternoons. Usually they are two officials in a private car and backed up by two policemen. Their mode of operation is usually to take the flash disk (if applicable) from where the music is playing, or parts of the music system and arrest whoever is at the counter. But of all the licensing authorities they are more interested in bribes than actual arrests or enforcement. And their bribes tend to be on the higher side compared to other agencies. Woe unto you if you are found playing local music from a flash disk; it matters little whether you bought the music legally or not.

Steps To Starting

Identify Location

Identify Premises

Apply for Licenses / Provisional Licenses

Acquire pump and barrels

Renovate / Acquire other equipment ( chairs, tables , TV, Music system )

Start Operations

Equipment

There are basic equipment and then the extras that will depend on the set up of your bar.

General Equipment

The basic equipment is what the bare minimum to run any bar are

Chairs

Keg customers unlike spirits is a sit down and swallow drink. Certainly there are those who

swallow in a ‘flash’ but that is not the norm. Socially keg leans more towards bottled beer than to spirits. Consumers sit to drink and talk.

Thus you need chairs for the customers to sit on. The common chairs in the business are plastic chairs and wooden benches. But as ‘ hip ‘ keg bars increase it is becoming common to see low and high metallic chairs and ‘ lounge ‘ seats , you know the kind which are basically wooden

benches but ‘pimped’ with cushions and white, red or some other colorful resin apparently to give an air of posh.

The type of chairs you choose will first depend on the space you have available and how you want to ‘brand ‘your bar. If you have limited space, like the keg bars in 10 feet by 10 feet room, then you will pack more customers if you have benches (forms).

If you have big enough space you can have a mix of benches and chairs. If you want to offer a level of comfort and look more modern, space and capital allowing then you can have the lounge and metallic chairs. Basic plastic chairs cost an average of Kshs. 700 each. While benches will cost between Kshs. 500 and Kshs.1000 depending on the carpenter, size, finishing and timber used. Metallic chairs will average Kshs. 1200 each and range between Kshs.800 and Kshs.1500.

Tables

Hand in hand with chairs are tables on which to place the drink. Wooden tables are preferred. Low wooden tables. Most tables used in keg bars are basic contraptions, covered with a keg table mat. A table costs an average of Kshs. 1500. Of course the price could be slightly higher or lower depending on how rickety or sturdy they are. Some are not even painted and the workmanship looks as if done by the owner himself.

Get affordable but decent tables. You don’t want tables falling and shaking with drinks on. The table falls and you as the owner you pay for the drinks, refuse to pay and the customers walk out. If you decide to go for metallic tables have enough space. Metallic tables start at Kshs. 2000 depending on the usual factors of design finishing and size.

Cups

Keg is poured either in 300 ml and 500 ml cups. The cups can either be glass or ‘plastic ‘. Plastic cups are preferred because of breakage, and their lightness. Glass cups came in because of hygiene reasons; the plastic cups chip at the mouth making them not so friendly for the customers. There were also hygiene concerns because of the chipping and cleaning. The glass cups are easier to clean. Plastic are still the preferred cups.

The cups are sometimes distributed by EABL or bought from distributors but you can’t rely on that when starting, and it makes sense to walk to a supermarket or household goods to acquire yours. The 300 ml plastic cup average Kshs. 360 per dozen while the 500ml cups average Kshs.480. The prices could slightly vary. Remember it’s better to have more unused cup than less cups.

Jugs

Jugs are used to pour quantities larger than 500ml. Sometimes customers want to share a drink, and thus a higher amount is sold using a jug from where they pour to their cups .Plastic jugs, which are preferred average Khs.100 t depending on the size and design.

Glasses

Glasses come in handy for spirits and any beers that you are selling. Nowadays some customers due to hygiene reasons prefer to pour keg from the plastic cups into glasses from which they drink from. Alternatively they use drinking straws, so in addition have a pack.

Basins, Kitchen towels Table clothes and related items

These are used to clean the cups, wipe the table and other such cleaning activities. Basins costs at least Kshs.150, while table clothes cost an average of Kshs.50.

Music System

There is an adage that the price of an alcoholic drink should be inversely proposal to how loud the music. Meaning the cheaper the alcoholic drink the louder the music should be. This is not necessarily true but as a matter of fact music is appreciated in keg bars.

It has a big influence on the quantity of alcohol consumed. You need to have the music. The music system you use will depend on the size of the bar and your budget. Have a standard music system that you can play to the highest levels if need be. You don’t have always to play loud music but at least have some music playing. Budget at least Kshs.20, 000 for a music system. Certainly you can spend much more as need be. But base the spending on a cost benefit analysis. You don’t need to have a Kshs.100, 000 music system in a room that fits 30 people.

Television

Television is optional but crucial. Television is associated with football, but beyond football a TV is needed for music videos and news. The use depends on your location, competition and potential customers. In urban areas a television is a must. In peri-urban areas a television tends to be optional. However we recommend you have a television. If nor for football, then for music. If your core customers are young men, 21 to 30 then it helps to have a television for football. Again make the decision based on your competition. Prices of televisions are within range and if your capital allows acquire one.

Still if you are looking at the football crowd then you need to have a sizeable television, that can be viewed from afar and which makes the football come alive. If not necessarily for football you can have the traditional CRT television of whatever size you fancy. Budget at least Kshs. 25,000 for the television. Remember you might need more televisions, a digital decoder at between Kshs.3500 and Kshs.5000 depending on the provider. And a DVD which costs at least Kshs.4500.The DVD is used to show videos.

DSTV

If you are showing football you need a DSTV connection. A DSTV connection gives you access to the English Premier League, Movies and tens of other channels. Depending on your budget, size, possible returns you can go for the full package has a monthly subscription fee of 100

dollars. Or opt for DSTV Compact with a monthly subscription of Kshs. 3750 which is now showing football.

Counter

You need a counter from where to make your sales. Although you are selling keg, which is placed on the floor or stand the counter should have shelves from which to display spirits, cigarettes, beer or other drinks and create a bar feel. The counter should be such that it gives protection without necessarily seeming like a fort. Depending on the setting of the bar you should be able to sell from different faces of the bar. Have a standard bar which can at least fit two people and has some room for movement. Budget at least Kshs.15, 000 for a bar.

Bar Related Items: Barrel and Pump

Keg is distributed in barrels and pumped to a pump using a corresponding pump. Ideally a new retailer should acquire the barrel and pump from the local Keg distributor upon producing the requisite license and paying the required amounts. But that is ideal situation and does not always work that way.

A few months after Keg was introduced demand for barrels and pumps seemed to exceed what was available. This led to some crooked distributors to develop a black market for barrels and pumps, especially the latter. Since then things have not really been straightforward. There still seems to be some fog surrounding barrels and pumps. The only lull and the only time barrels and pumps seemed to be so easily available in the market was in the period late 2013 and 2014 after the tax on Keg was increased, prices rose sharply and consumption reduced in a big way.

As more Keg bars closed than opened pumps and barrels were more than what was needed in the market. Presently, and with the increased demand for Keg, the situation has reverted to the previous where the issuance is not very straightforward.

Not those distributors are supposed to issue the barrels and pumps free of charge, no you are to pay for them, but walk in to a distributor with the cash and even the licenses you are not guaranteed to get the items.

So what to do if you want to open a keg bar?

You have to start with the local Keg distributor. Talk to them and hear what they have to say. If they are straightforward they will sell you a barrel with keg at Kshs.7000 including so plus the cost of Keg. The pump will cost at least Kshs.14, 000. There are no clear price guidelines regarding empty barrels and pumps but the above is the range.

Often these transactions are not in black and white. A distributor will tell you neither the pumps nor the barrels are available. Yet when you press a little you realize that barrels are available through the backdoor at Kshs. 3000 per barrel. Then you will get a reference where to buy a pump at between Kshs. 15,000 to Kshs.20, 000. Don’t be discouraged by this, it’s possible to

get the barrel and pump. Start with the distributors. Alternatively talk cunningly to attendants in existing keg bars and they will hook you with people who can provide pumps or barrels. Actual owners could be reluctant to provide any information for fear of competition. Another option is to look at newspaper and internet classified sites, you will find individuals selling pumps and barrels. Budget at least Kshs. 3000 for a barrel and Kshs.16, 000 for a pump. You need at least four barrels to get started. In the worst case scenario have at least two. Not because you must sell four barrels everyday but extra barrels come in handy when restocking.

(Kindly get in touch with us through 0707 622875 if you have difficulties acquiring a pump, we could help.)

Capital

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 (est.)

PRISK License

 

1

 

3000 (est.)

Fire Inspectorate

 

1

 

1500

Business Registration

 

1

 

1500

Licenses Misc ( Bribes etc)

 

1

 

5000

Sub Total

 

 

 

79,500

 

 

 

 

 

 

Equipment

 

 

 

 

 

 

Chairs (Plastic)

 

20 @ Kshs.700

 

14,000

Tables

 

5 @ Kshs.3000

 

15,000

TV

 

1

 

20,000

DSTV

 

1

 

15,000

Music System

 

1

 

20,000

Fire Extinguisher

 

1

 

6000

Cups, Jugs Glasses Plates and related

 

All

 

10,000

Counter & Shelves

 

1

 

20,000

Signboard

 

 

 

10,000

Sub Total

 

130,000

 

 

 

Stock and Related

 

Empty Barrels

3 @ Kshs.3000

9,000

Pump

1

16,000

Keg

3 @ Kshs.3400

10,200

Other Alcohol ( Spirits, Beer )

Mix

15,000

Sub Total

 

50,200

 

 

 

Premises

 

 

 

 

 

Rent

2 months deposit + 1

45,000

 

month rent. Will depend

 

 

on location. (@

 

 

Kshs.15,000 per month)

 

Renovation and Remodeling

Repainting and any

20,000

 

branding

 

Sub Total

 

65,000

 

 

 

Working Capital

 

 

 

 

Salary

3 months @ Kshs.8000

24,000

 

per month ( 1 employee)

 

Electricity

3 months @ Kshs.2000

4,000

 

per month

 

Water

3 months @ Kshs.800

2,400

 

per month

 

Miscellaneous ( Police/ Authorities take, transports,

3 months @ 3000 per

9000

airtime etc )

month

 

Sub Total

 

39,400

 

 

 

 

 

 

Grand Total ( Adding all the above sub totals)

 

364100

Notes on Capital

This is a capital breakdown is based on some case studies but is a good enough guide. There are Keg bars which have started with lower amounts. For instance by not acquiring some of the lesser licenses (like Fire Inspectorate), selling keg only and no beer, paying lesser rent, having lesser working capital, not having television and only music and so forth. On the flip side are keg bars which have started with much more capital. Irrespective of the capital at hand have at least two months working capital, some form of entertainment , county business permit, health and alcoholic drinks license where possible.

Operations

Once you have the pump and barrel and are ready to start operations then you go to a distributor who will sell you a filled up Keg in exchange for the empty. The mode of operations varies from distributor to distributor. For some you pay by mpesa and they deliver while others you pick the keg yourself. In other cases you will pay in cash. The nitty gritties vary, and there is no uniform modalities other than that you pay, exchange an empty for a filled keg.

Once the keg gets to your bar, fix the pump and you are good to go. Customers will buy the ‘small’ cup (300 ml), big cup (500ml) or a jug. The preferred mode of payment is cash, this is more so in urban centers where you may not personally know customers or where there are no regulars. In estates and peri-urban areas keg is sold in a mix of cash and bill. The judgment is made on a per customer basis.

Once you sell one barrel, you load another and the process continues. The following morning you restock the empty barrel. Sometimes you don’t sell a whole barrel or you sell more than one.

If you have employed an attendant then you agree on the amount you get from each keg. A keg barrel is 50 liters. If the price per liter is Kshs. X, then you get Kshs.50x after each barrel. But say if by the end of the day the attendant has sold 2 barrels and the third one is half way empty? You get money for the two and the third one the following day when it’s empty. There is no foolproof way to know how many liters of beer have sold until the barrel is empty, that’s why accounting is done barrel by barrel.

It is an open secret that keg sellers under pour such that what is passed as 500 ml could be 400 ml or 450 ml. This means where the official price is x per liter and supposed to give Kshs.50x, it will give more. For example if you are selling a liter at Kshs.100, for 50 liters you are supposed to get Kshs.5000, but due to the under pouring the amount will be more.

The unwritten rule is that the excess amount goes to the attendant, you as the owner are

supposed to get the ‘legal’ amount. However there are cases where the owner gets the share of the extra, though it’s hard to monitor.

Under pouring requires a balancing act because if you or the attendant under pours the keg in a big way and consistently then gradually customers start moving away, sometimes even without complaining. You only realize you are not getting as many customers as before.

If an attendant gives credit and the customer leaves without paying the bill then it’s on her. Well it may not be entirely her fault but you have to maintain some strictness when it comes to cash otherwise they will start tricking you or being careless, and you end up losing money.

Revenue

Senator Keg now comes in two flavors Senator Keg Lager which is brown in color, and Dark Senator Keg which is black in color. The former is the original keg and most popular and widely available. The dark was introduced as a measure to help keg compete with the spirits at a time when the tax on keg was raised. Though more potent (7.5% alcoholic content against 5.8% of

the senator keg lager) It’s relatively expensive and not very popular. In some areas it’s a really hard sell.

Prices

Brand

Wholesale ( 50 Liters)

Retail ( 50 Liters)

EABL Recommended

 

(Kshs.)

(Kshs.)

Price

Senator Lager

3380

5000 (at Kshs.100 per

Kshs.83 per liter

 

 

liter)

 

Senator Dark

4800

6000 (at Kshs.120 per

Kshs.100 per liter

 

 

liter)

 

Spirits will have an average margin of 25%. For instance Chrome sells at Kshs.155 in wholesale and retails at Kshs.200. Beer will give you an average of Kshs.30 per bottle. (See appendix for sample prices.)

Margins and Revenue Scenarios

The retail price of a 300 ml Senator Keg Lager ranges between Kshs. 25 and Ksh.35, with Kshs.30 being the most common price point. At Kshs.30 it means the price per liter is Kshs. 100, or (Kshs. 50 per 500ml serving).

At this price the margins from a 50liters barrel is Kshs. 1620. In reality the margins will be Kshs. 250 to Kshs. 400 higher depending on how much is under poured. On the other hand the margins could be lower especially for a new bar where the attendant is not used and thus over pours. Over pouring is not common.

The average consumption per customer is 1.5 liters. Certainly there are extremes where customers consume much more or less.

At 1.5 liters per customer you need at least 34 customers to empty a barrel.

Average sales per Keg bar is a barrels during weekdays and three on Saturday and Sundays. There are bars which sell less than a barrel, others two and other an average of three barrels on weekdays. Bars which sell more than three barrels everyday are the exception rather than the rule.

In estates and rural areas the dark keg sells at a slower rate because of its higher price and what some customers say is odd taste. A bar which sells one barrel of senator lager in a day will sell almost half that of dark keg.

There are few bars which sell at the recommended price of Kshs. 25 for 300ml ( February 2016) In some areas keg bars owners conspire to sell at the same price which is usually higher than the recommended retail price. The common price is Ksh.5 above the recommended. Bars selling at Kshs. 10 more (Say Kshs.35 for 300ml in February 2016) are few and about. They can’t compete in areas with several bars selling at lower prices, despite any facilities they have. Keg is price sensitive.

When entering the market use the price point used by most of the bars in the location. Under pricing is a short term strategy and although it will win you customers you will be leaving money on the table. If you are in an urban area with no other keg bar in the neighborhood at most add a markup of Kshs.5 to the recommended retail price.

Factors Influencing Revenue

Service – Friendly fast consistent and coordinated service retains customers, and pulls in more. Keg bars which respect their customers, are able to handle full houses and are polite and friendly tend to perform better in the neighborhood. Don’t underestimate the power of great service. Sometimes the owner will offer good service but the staff is completely the opposite. So hammer into your staff the importance of good customer service.

Facilities – Television and music also serve to attract customers. In areas where football is popular then you will be losing if you are not showing football. As much as customers love your bar they love football more so they will go to the bar showing football, and after the game flow back to your place. And sometimes they don’t. Sometimes there are clashes between customers who love football and those who don’t: to show football or music or news. A middle point is usually to play music in the background as football is playing.

Good music keeps customers drinking. Good music will depend on your target customers. You can’t satisfy all your customers but by trial and keen observation you can find out what really makes them tick. Some keg bars have tried to build an identity based on the music they play. The most common of these identities are reggae, rumba and luo music.

Keg bars are also moving from grumpy dumpy dirty places to more hip venues to hangout. Though the hipness maybe skin deep ; plastic carpets, pink walls, resin covered wooden chairs and other props like that; customers , whether the lower middle class or low class, young or old, are appreciating and voting with their feet and wallet. Soon this kind of hipness will become the standard.

Quantity/ Serving – How the keg is poured will influence whether customers continue drinking, and whether they come back or not. It will also create the local reputation of the bar. If there is significant under pouring then your bar will be “the bar which under pours”. You don’t have to pour the exact amount or over pour but never significantly under pour. Cunning attendants look at how drunk the customer is before deciding how much to under pour.

Expenses

The major expenses when running a keg bar are:

-Rent

-Manpower

-Transport

-Electricity

-Water

-DSTV Subscription if available

-Security - Could involve a daily cut to the police.

How manage your expense will have a bearing on the profits.

Case Study : Kirigiti

Profile:

Off Kiambu Road, On the Kiambu Ruiru Road. About 3 kilometers to Kiambu town, 14 Kilometers to Nairobi.

Population: Rural, Peri urban and urban. 72% are adults. Dominant age group 21 to 45 years

For long Kirigiti had been one of those satellite centers attaching themselves to a bigger town but nevertheless remaining colorless, stunted and lacking the shine of the mother town.

That has gradually changed since 2008 driven by the nationwide real estate boom which was first felt in Nairobi and the satellite towns near the city. The growth of Kirigiti was more of an overflow from Kiambu.

Economy: Tied to the construction industry and tee salaried workers moving to the area.Wages form the biggest source of income, followed by salaries. However with more salaried workers moving in the ratio is now almost equal.

At no time is there not a building under construction. In February 2016 there were as many as 18 residential flats at various levels of construction. The trend is slowing down as the land available for construction gradually reduces.

The Keg Bars:

There are 11 keg bars in the center, against 7 ‘local’ bars (bars selling beer and not keg). Of the keg bars three were opened in 2015. A businesswoman owns two keg bars and a local non keg bar.

The first of her keg bar started in 2013 as a six seat wines and spirits outlet before metamorphosing to a full keg bar though with the usual spirits and a few beers. She opened the second bar in December 2015, while she bought the local in February 2015.

The original keg bar has expanded to occupy more space, and now can hold a least 25 people. With growth the bar has moved from plastic stools to plastic chairs (with arms) to naked benches, and the present naked wooden benches and ‘lounge chairs’; benches but now with foam and covered with resin.

Part of the sitting area has changed from a dirt floor to white flowery tiles which were fixed mid 2015. The walls have gone from a drab white to a shade of pink and purple as painted in February 2016.

The bar didn’t seem to have a particular target market but its customers seemed to attract the more ‘mature’ and ‘reasonable’ of the keg crowd in the location. That has diluted and it’s presently a mishmash of customers.

The bar didn’t have a TV when it started, then she bought a fourteen inch television and DVD player. The television developed mechanical problems after a few months and until late 2014 there was no television, but in November of the same year the 14 inch was back.

A simple DVD player connected to two speakers is the music system. The television is never used for news, and since there is no decider does not receive any local channels. It is used for music specifically local vernacular tunes and roots reggae. The bar now has a 20 inch television but no DSTV yet.

The owner started operating the bar alone, but as it grew he brought in an assistant; a local guy smooth with words, stories and service. With time she hired a female assistant, and she started spending less time in the bar. After acquiring the local she would only make technical appearances at the keg bar.

It’s instructive to note that the woman, in her early forties, is also smooth with words, smiles a lot and flirts and talks dirty with customers for sakes. Occasionally she will dance with a man, and even surprise customers with a round of kegs.

Fast forward to the present the bar sells 1-2 barrels per day. The amount increases as the week grows older with a peak over the weekend of 2-3 barrels. The amount is affected in a negative way when there is an English premier football game and a significant number of the fans go looking for bars with DSTV.

The initial male employee went briefly late 2015 and came back in February 2016. His absence negatively affected sales. The female employees have a higher turnover with an average of 3 every year. One was rejected by the customers who ganged up and told the owner on the face they would stop drinking there if she remained. They accused her of always trying to swindle customers and under pouring as a habit.

Opposite this bar is another set of three keg bars of 20-30 sitting capacity. Two are a favorite with men in their late forties and above 50. Comparatively they look dull.

However the third one is vibrant. No television but with music and young female waitress. It also does 1-2 containers daily. . In January 2016 the three bars were closed by public health officials due to the conditions of the one toilet they shared. Not only was the toilet filthy and rickety but was also shared. Some repairs were made to the toilet and another built before they were reopened after11 days.

The other keg bar owned by the same businesswoman we noted above is bigger with a capacity of around 40. Still it’s yet to catch up. It’s not uncommon for the bar to sell half a barrel per day.

About thirty meters away is a bar which was renovated in 2016 and has a sitting capacity of at least 60. Until December 2015 there used to be three bars in the premises; some container structures next to each other but set like a house. The owner of the containers (the landlord) run one of the bars which were the length of a 40 feet container. The other two bars shared one container.

One of the smaller bars owned by a younger woman was very popular, filling to the brim and over flowing, despite its small size and lack of television. The owners bar was struggling. Come January the owner evacuated the other two bars , renovated the place, you know some lounges, metallic chairs, new painting, an outdoor setting, two counters and most significantly three televisions connected to DSTV.

The change has attracted some customers but yet to pick up in a big way. Part of the reason is the waiters (one is the lady who customers rejected in another bar, another is woman who is always asking for a “30” rather aggressively), the poorly kept toilet were also an issue among some customers and so was the music selection, which was very random like hardcore hip hop playing even when customers are demanding vernacular music.

Another major reason was sympathy; the lady with the popular bar found a new location nearby and went with ‘her ‘customers. The narrative that her former landlord threw her out because she was popular has made some sympathetic in the process pulling in more customers. She sells an average of 2 barrels in a day. The amount is expected to go up when she connects to DSTV as she plans to do. As a note the lady’s new bar has also moved to the hip with lounge chairs, red and white paint and dim lights. The lady is also very smooth. She could pick a random customer and sit next to him for long, talking this and that, making the customer feel special. And such a customer can never drink anywhere else.

The biggest bar in the center, with a capacity of at least 80 people, is a rough place; what you would expect of a typical keg bar; no props or anything. Still the owner was the first of the keg bars to install a DSTV connection showing football. That was in 2014. This has helped to pull in very many of the football loving keg consumers, and they are significant in numbers. The service, setting, cleanliness are actually below average compared to most in the center, but the football does it. During a game, especially the ‘hot’ games the bar easily sells five barrels.

Other bars in the location are normal and average a barrel daily. The price is standard at Kshs.30 for 300ml.

Of note though is that about 4 kilometers away in Kiambu town, the regional keg distributor has reopened ( February 2016) his keg bar which he had closed after the tax hike in 2014. The bar has a sitting capacity of at least 150. Here he sells at the recommended retail price of Kshs.25 per 300ml (March 2016) and does not under pour. This has attracted customers from Kirigiti who will drink and walk home or take a matatu ride at Kshs.20. At times during weekends he averages 14 barrels a day. The peak was 26 barrels on the reopening day where he was selling at Kshs.20 per 300ml so as to create buzz.

Competition and Survival

The number of Keg bars has been on the rise. From a quick study an average four out of ten bars have opened in the last two years. (2014)

Demand for keg is on the rise, and peaked in 2015 after the crackdown on wines and spirits. Demand increased to an extent that shortages were recorded in the market. As we pinpointed EABL had had cut the production capacity of keg after the 2013 tax increase, and seems to be trying to catch up to the increased demand.

As late as February 2016 shortages are sometimes recorded in some areas. It is usual to find long queues of bar owners at the distributors’, waiting to purchase keg.

In addition to the limited options for spirits demand is also driven by the rising pricing of beer, which has made some low mid class beer drinkers oscillate between bottled beer and keg depending on the cash at hand.

Keeping everything constant, that is tax on keg, subduing of spirits, tax on beer then the demand for keg will continue rising.

The increased demand will continue attracting more investors in the business. Competition will become more intense and there will be more efforts to differentiate.

Barriers to entry

In the keg business the major things that make potential investors hesitant are:

a)Availability of Keg barrels and pump

b)Licensing

c)Premises

Those are the major items. Still none can be said to be a strong barrier. Entrepreneurs have figured out licenses and the related bureaucracy as discouraging as it is.

Pumps remain the biggest hitch but there are unconfirmed reports that EABL is trying to streamline the issuance of pumps.

Brokers specializing in keg pumps are emerging; these source pumps from whatever place and sell to those getting into the business. As more entrepreneurs seek to get into the business such brokers are set to increase. The ‘shortage ‘of pumps is an opportunity in itself that some crafty entrepreneurs will try filling. Who knows perhaps in the future there will be some entrepreneurs who will mass produce universal pumps that can be used with the EABL barrels.

The barriers are not high enough to discourage investment in the business. The capital required is also affordable to many. The margins attractive enough and the marketing understanding not steep. We noted several cases of former keg bar attendants who have opened their own outlets.

All in all bar any significantly change in current regulation policy and market conditions the barriers will continue going down and attract more investors and hence competition.

Prospects

So is the market expanding and can it profitably sustain more keg bars? The general answer is yes; there is still a big market generated by the spirits orphans; those who were consuming third generation spirits before they were banned.

Secondly as inflation bites the lower middle class some will shift to the keg. The shift is even more comfortable with the rise of trendy keg bars; bars with a DSTV connection, some above average ambience when compared to the traditional keg bar, great service and a fitting crowd. Thirdly is that we are headed towards elections. Candidates will start spending, and part of the money will find its way to the keg bars. That is already happening in Kiambu where occasionally candidates for MP and MCA pop to a keg bar, have the door closed and then buy everyone a 500 ml serving as they sell their policy.

So yes it’s a good time to get into the business. But make judgment based on the particulars of the location. There are areas which could be said to be crowded. While there are areas which look as if they are crowded but there is enough money to profitably sustain all the keg businesses present.

Factors Influencing Competition

Facilities – Things like a television connected to DSTV and showing football create an edge in the market if few or no one else is offering the same. If several people are showing television then it becomes about the size of the television, position of the television and how easy it is e to watch the game. With music it’s about the power of the sound and the playlist.

Other facilities include the setting and comfort.

Service – Competition is also based on quality of service. Service is especially a touchy point in the keg business. And as much as consumers won’t complain much they vote with their feet in locations with options. There are keg bars which have failed because of poor service.

Pricing – There are areas where competition is based on price. You find one or a couple of bars undercutting the rest. The business is price sensitive and small change in price is enough to pull in customers. Competition on price is not enough to sustain the business in the long run, you need to match it with service and if necessary facilities. Competition on price could also trigger a price war with the more established of the keg bars hitting back with better facilities., at the same or lower prices.

Ring Fencing – In some locations, established keg bars will book and start new bars whenever an ideal premise becomes available within the same area. This way they are able to keep the competition at bay while tapping customers from another position.

Relationship with Authorities – Often keg bars will need to occasionally bribe the police. In some competitive markets bar owners will bribe the police extra so they harass customers of the rival. For instance close right on time and alert police if the rival is still open. If customers are arrested, and whether they are bailed out by the owner or not, the bar acquires a reputation as one where customers are arrested then people keep off.

Branding – A bar could brand as targeting the older customers, younger ones or people of particular tribe. This is by the music, waiters who rhyme with the target market, name and other such factors.

Branding could also be allowing some habits like chewing miraa or muguka in the bar. There are bars which actually brand as the place for the muguka and miraa crowd. Where people can chew, smoke and drink freely. Such kind of bar attracts a very particular crowd. You have to be careful with letting your bar be a free for all miraa and muguka chewing. Do some cost benefit analysis. This is because in some areas the chewing crowd tends to scare away some customers who find the habit disgusting, feel out of place or not comfortable in some other way. On the other hand the chewing crowd could become faithful customers. The problem comes when they are not drinking enough, and just purchase a 300ml cup or soda to help them keep chewing for hours. Some bars have segmented sections for the chewing crowd

In the keg business you don’t have to be on the frontline or highly visible location for you to acquire customers. You just need to be easily accessible. Keeping other factors constant people will soon discover your bar, and location won’t be a problem as long as it’s accessible and secure.

Market Entry

You can use the points of competition to differentia as you enter the market. This is a business with no absolute loyalties, and customers easily move from one bar to another without any sense of guilt.

If there is only one or no bar offering DSTV then you can introduce the same in your bar. If there are already there you can have a bigger TV, if there are bigger TVs you can have a modern lounge feel at no extra price. Most keg bars tend to have standard service, and so you can have yours a notch higher with friendly, and no offence to the female, women waiters. Over 96 % of customers are men, and lower income men tend to be more excited by the presence of pretty women serving them than those of relatively higher income.

Capacity of the bar is not necessarily a point of competition. So you don’t have to go for the biggest space available if your pocket does not allow. Concentrate on winning the core customer, building a following and gradually expanding. Again outside branding and a signboard could help. There are many bars which survive without any form of advertising but who knows how much they are losing by not saying here I am fair prices and football available. Let price based competition be the last option after you have exhausted other means.

Consumer Behavior

Men are the majority of customers, forming 96% of customers according to our survey. Customers are sensitive to price, irrespective of what is being offered to justify the price. Great service is appreciated and bad service highly frowned upon. This includes any form of rudeness. A very easy to drive customers away if for the waiters to try swindle the customers by over shooting the bill.

There are daily customers, weekend customers, and those who pop irregularly. Daily customers are most important because despite what they spend they are loyal and keep the business running.

Weekend customers give the windfall; often they are more loaded than the daily customers and they are ready to drink thus they buy large amounts of alcohol. The irregulars could fall either way. Sometimes the irregulars drink daily but not at your bar; find a way of capturing and retaining them for good. Some bar owners will reward the daily customers with a free drink once in a while.

You have also to be conscious of the income trend in the location. For instance in places where there is a lot of construction going on, keg bars fill up from Saturday afternoon when workers in the constructions are paid. Thus because of the money in their pockets they are likely to be more demanding in not only in terms of actual drinking but also service. At such times they feel kings, and powerful enough to walk away if there is any hint of bad service or ‘disrespect’. Such should not intimidate you but know best to handle them. This could involve hiring an extra hand, playing particular music and being extra keen with bills and cash. The point is to win as much of their spending as possible for probably they will drink heavily in two days and significantly reduce the drinking until the next weekend.

Manpower

The number of employee you have will depend to a large extent on how busy your outlet is and not necessarily the size. There are some 50 capacity bars which have only one waiter for the simple reason that one waiter can handle everyone as there is no time the bar is filled to capacity.

On the other hand there are bars with half the sitting capacity but with two to three employees because they are filled to capacity and the customers are spending big. If not sure have at least one permanent employee, another on call, who can be summoned as need be. With time add permanent employees as need be.

Remember an employee is given one day off every week, and if the day falls on busy days say Saturday and Sunday, depending on your location, you must have a backup plan. The learning curve in the business is not steep so you don’t necessarily have to employ someone with experience though it helps to have at least one person with skill during the busy times.

If possible don’t poach staff from local bars unless they are exceptional. Sometimes such staff comes with a lot of baggage. Some workers will have demeaning attitude towards those drinking keg and spirits, nip that in the bud, and insist on great service.

For permanent employees payment is monthly. The amount varies but average Kshs.7, 000 in peri-urban areas and Kshs.9, 000 in urban areas. We have recorded pay of Kshs. 5,000.

A key agreement as we stated above is such that the owner expects a certain amount equal to the agreed price of a barrel, and anything above that the employee can keep. Use the ‘rule’ with moderation lest the employees focus more on under pouring so that they remain with a bigger amount at the end of the day. You need to have a level of honesty especially if you are also selling spirits. Again if your staff keep bugging customers for a drink or soda or fare day in day out it might chase away some of the employees.

Appendix

Sample Beer Prices. Keg bars sell some of the beer at lower prices .

 

Alcohol (Beer)

Category

Pack size

Number of

Buying

Selling price

 

 

Brand

 

(ml)

units in a

price per

per bottle

 

 

 

 

 

case

case (Kshs)

(Kshs)

 

 

 

 

 

 

 

 

 

 

Tusker Lager

Mainstream

500

25

3,165

160

 

 

 

 

 

 

 

 

 

 

Pilsner Lager

Mainstream

500

25

3,165

160

 

 

 

 

 

 

 

 

 

 

Guinness

Premium

500

25

3,615

200

 

 

 

 

 

 

 

 

 

 

Whitecap

Premium

500

25

3,390

200

 

 

 

 

 

 

 

 

 

 

Whitecap Light

Premium

300

25

3,165

170

 

 

 

 

 

 

 

 

 

 

Balozi

Mainstream

500

25

2,940

150

 

 

 

 

 

 

 

 

 

 

Allsops

Mainstream

500

25

2,512

130 -150

 

 

 

 

 

 

 

 

 

 

Tusker Malt

Premium

330

25

3,068

200

 

 

 

 

 

 

 

 

 

 

Tusker Lite

Premium

330

25

3,068

200

 

 

 

 

 

 

 

 

 

 

Guinness Small

Premium

300

25

2,940

180

 

 

 

 

 

 

 

 

 

 

Alvaro

Non –

330

25

1,305

80

 

 

 

Alcoholic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Download A Senator Keg Bar Busines Plan(Guide) in Kenya PDF➥

Tusker Malt Can

Premium

500

24

4,120

200

 

 

 

 

 

 

Tusker Lite Can

Premium

500

24

4,120

200

 

 

 

 

 

 

Whitecap Can

Premium

500

24

3,471

200

 

 

 

 

 

 

Guinness Can

Premium

500

24

3,687

200

 

 

 

 

 

 

Tusker Can

Mainstream

500

24

3,255

200

 

 

 

 

 

 

Pilsner Can

Mainstream

500

24

3,255

200

 

 

 

 

 

 

Windhoek

Premium

330

24

4,120

200

 

 

 

 

 

 

Smirnoff Ice

Premium

330

25

4,120

200

 

 

 

 

 

 

Smirnoff

Premium

500

24

4,120

200

Guarana

 

 

 

 

 

 

 

 

 

 

 

Snapp

Premium

330

25

4,120

200

 

 

 

 

 

 

Summit

Mainstream

500

25

2500

170

 

 

 

 

 

 

Soda

Non -

500

24

900

80

 

Alcoholic

 

 

 

 

 

 

 

 

 

 

Soda

Non -

300

24

480

50

 

Alcoholic

 

 

 

 

 

 

 

 

 

 

Base November 2015