The Effects of Excise Tax on Pricing Strategies: Evidence from Zambian Breweries Plc

Abstract

This study examined the impact of excise tax on the operations, financial performance, and strategic decision-making of Zambian Breweries Plc., a leading player in Zambia’s brewery sector. The research was driven by growing concern that escalating excise duties continue to erode profitability, limit expansion, and constrain competitiveness within the local alcohol manufacturing industry. Guided by the objectives to identify key issues arising from excise tax, analyze its effects on financial performance and competitiveness, and evaluate brewery responses to these fiscal pressures, the study adopted a qualitative research design. Data were collected through semi-structured interviews with managerial and operational staff, providing insights into the lived experiences of employees dealing with tax-related challenges. Findings revealed that excise taxation exerts substantial pressure on the company’s financial structure by inflating production costs, squeezing profit margins, and reducing available capital for investment. Participants emphasized that frequent and unpredictable changes in tax rates disrupt financial forecasting and undermine strategic planning, forcing management to redirect resources toward tax compliance rather than innovation and market expansion. Furthermore, the study found that these fiscal challenges often lead to price adjustments that may weaken competitiveness against informal or untaxed beverage producers. In this context, Zambian Breweries has developed adaptive strategies, including cost optimization, focusing on core brands, and implementing more conservative investment policies to sustain financial viability. The analysis also demonstrated that the company’s response strategies align closely with theoretical perspectives such as the Resource-Based View (RBV), Agency Theory, and Stakeholder Theory. From the RBV standpoint, Zambia Breweries leverages its internal capabilities, such as brand equity, human capital, and operational expertise, to withstand fiscal shocks. Agency theory highlighted the tension between managerial accountability to shareholders and the operational limitations imposed by tax burdens, while stakeholder theory emphasized the need for balanced decision-making that considers consumers, employees, suppliers, and regulators. Collectively, these perspectives underscore that the company’s adaptive strategies are both reactive to immediate fiscal constraints and proactive in sustaining long-term operational resilience. The study concludes that while excise taxes serve an essential fiscal purpose for national revenue, their unpredictability and magnitude can have adverse consequences for private-sector growth and employment sustainability. Therefore, a more stable and consultative excise tax policy framework is necessary to balance public revenue generation with private-sector competitiveness. The research recommends enhanced collaboration between government institutions, industry associations, and brewery management to create a more predictable fiscal environment that encourages investment, innovation, and long-term sustainability within Zambia’s alcoholic beverage industry.