The high cost of production and inflationary environment are making Nigeria’s top beer (alcohol) makers focus more on improving their profitability and financial performance as against fighting for market share and brand awareness.
According to BusinessDay findings, last month, the beer makers increased their products’ prices. For instance, on March 1, International Breweries increased price, followed by Nigerian Breweries on March 15 and Guinness Nigeria on March 30.
“They are moving away from the fear of competition and now becoming bolder by increasing prices to strengthen their bottom lines,” Abiola Gbemisola, consumer analyst at FBNQuest, notes.
Between 2019 and 2021, the beer makers have increased prices more than twice due to high Excise Duty, a levy on the manufacture of locally produced goods.
According to Bolanle Ige, a marketer at Guinness Nigeria, the new price margin for most Guinness beer products is higher compared with the previous one in 2019. “For example, the wholesale price for a crate of medium Guinness Stout is N4,260 from N3,970, while the retail price is N4,400 from N4,000,” Ige says.
She also adds that this increase is longer about a game of market share or retainment of customers, but of cost of production.
From the recent analysis of their financial report, Nigerian Breweries made a profit of N7.36 billion in 2020, a 54-percent decline from a profit of N16.1 billion in 2019, while its revenue grew by 4.3 percent to N337 billion in 2020 from N323 billion in 2019. International Breweries made a loss of N12.3 billion in 2020, even though revenue grew by 3.3 percent to N136.7 billion in 2020.
Guinness Nigeria posted a loss of N11.4 billion in 2020 from a profit of N4.12 billion in 2019. Revenue declined by 18 percent to N108 billion in 2020.
“Guinness and International Breweries have been making significant losses as their cost of production has been going up, and they have not been able to pass that cost to consumers. So, it is necessary to increase prices,” Ayorinde Akinloye, a consumer analyst at United Capital plc, states.
Despite the challenges, other beer makers are still making inroads into Africa’s largest market. According to a report by market research group, Global Data, Africa is the fastest growing region for beer consumption.
Nigeria also leads the pack of 10 biggest beer-drinking countries on the continent. Beer brands make up just 16 percent of alcohol consumption in the country, while other drinks (spirits and locally brewed drinks) make up 84 percent.
Apart from the increase in price of alcoholic drinks, there has also been an increase in the price of non-alcoholic drinks such Coca-Cola, Pepsi, Bigi, etc. due to increase in international sugar price.
“Now that the beer makers have increased prices, should we expect the brewery sector to do well in 2021 or not, but that is dependent on factors like the 12am-4am curfew and low purchasing power,” Gbemisola points out.
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