Alcoholic drink sales surge 33% despite price hike

The total sales of alcoholic beverages (drinks) in Africa’s biggest economy surged to a six-year high in 2021 despite increased prices, a report by Euromonitor International shows.

The report, titled ‘Alcoholic drinks in 2021: The big picture’ by the London-based strategic market research firm, showed that the sales rose by 32.6 percent to $6.1 billion in 2021 from $4.6 billion in 2020. And it is projected to hit $6.7 billion in 2022.

In terms of volume, it also rose by 15 percent to 2.3 billion and is expected to hit 2.5 billion in 2022.

“This strong performance came in spite of relatively difficult economic conditions, with local consumers squeezed by mounting inflationary pressure, partly due to a decline in the foreign-exchange value of the naira,” the report said.

It added that during 2021, on-trade (bars, restaurants, hotels, nightclubs) demand rebounded strongly, even though some COVID-19 pandemic restrictions remained in place for much of the year, while growth in off-trade volume sales accelerated sharply.

“In particular, there were far more social gatherings, such as birthday parties and weddings during the year.”

A breakdown of the total alcoholic drinks value showed that beer contributed the most with $3.5 billion, followed by spirit ($2.1 billion), wine ($442.6 million), ready-to-drink cocktails ($98 million) and cider/perry ($1 million).

With an average beer consumption of 12.28 litres per year, Nigeria leads the top 10 biggest alcoholic-drinking countries in Africa.

The reopening of the economy, especially nightclubs and event centres, has increased the consumption of alcoholic drinks, especially beer.

According to AsokoInsight Market data, beer is the most widely consumed alcoholic beverage with a 55 percent market share, followed by spirits (30 percent) and wine (15 percent).

Last year, alcoholic drink makers, especially from the beer segments (International Breweries, Nigerian Breweries and Guinness Nigeria), increased prices of their products.

Manufacturers were forced to increase prices due to the introduction of a new excise tax regime, as well as the depreciation of the local currency, which made imported raw materials much more expensive, analysts at Euromonitor International said.

“The average unit price for alcoholic drinks increased by almost 20 percent during the year,” they said.

For example, the wholesale price for a crate of medium Guinness Stout increased to N4,260 in 2021 from N3,970 in 2019, while the retail price rose to N4,400 from N4,000.

Bolanle Ige, a marketer at Guinness Nigeria, told BusinessDay that the increase in prices was necessitated by the cost of production.

From the recent analysis of their financial report, sales of Nigerian Breweries improved by 51 percent to N437.3 billion in 2021 from N337.1 billion in 2020; Guinness sales rose by 30 percent to N109.1 billion; and that of International Breweries grew by 29 percent to N206.8 billion.

“Nigerian Breweries’ wide portfolio of recognised and popular brands across categories and price segments enabled it to continue to cater to a consumer base whose spending power had shrunk further due to COVID-19,” the report said.

For Guinness, the report added that its investment on advertising, particularly on TV and social media, helped to both stimulate and maintain local consumer interest. “The company’s much smaller rivals cannot hope to match Guinness Nigeria in terms of marketing.”

Apart from raising prices, alcoholic drink makers also expanded their taste segment by pushing out more flavours to entice consumers around the country.

For example, within a period of more than one year, Nigerian Breweries introduced flavoured drinks such as Star Radler’s “Red Fruit” and Citrus flavour, while Guinness Nigeria introduced Tigernut and Ginger flavour.

“In the course of exploring new flavours, you are able to create a new one that the market likes, thereby making consumers demand more which is good for their volumes,” Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, said.