• Thursday, April 18, 2024
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BusinessDay

Nigerians cut champagne intake to 11-yr low as inflation bites

Nigerians cut champagne intake to 11-yr low as inflation bites

Champagne shipments from France to Nigeria have plunged to the lowest level in at least 11 years largely on the back of rising inflation and weaker naira, data compiled by BusinessDay show.

The country’s champagne import volumes fell by 53.2 percent to 302,141 bottles last year from 646,036 bottles in 2022. The value also declined by 49 percent to £12.9 million, according to Comité Champagne, a trade association that tracks volume and value of exports from France.

The level of champagne imports into the country last year is almost at par with that of 2020 (304,199 bottles). The drop in imports saw Nigeria fall from its position as the second biggest buyer out of 48 African countries.

Nigeria was the fourth biggest champagne importer last year in Africa behind South Africa (1.42 million bottles), Côte d’Ivoire (681, 549 bottles) and the Democratic Republic of the Congo (360,451 bottles).

“The decline in the value of the naira affected the purchasing power of consumers, making them to buy less luxury products like champagne,” Babatunde Odumeru, managing director at Brand Finance Nigeria, said.

He said the naira, which has depreciated by more than 60 percent since June last year, affected brands.

Victor Ikem, a Lagos-based champagne and wine retailer, said apart from the rising inflation, the foreign exchange crisis that has increased the import duty rate has made many importers unable to sustain their imports.

“The reality is that most of the prices for premium to middle-level products have increased by almost 50-80 percent. The price increase meant that consumers were not able to buy the volume of champagne that they would not normally buy. So, there was a bit of trading down,” he added.

Champagne, a French sparkling wine, has become more than just a mere alcoholic beverage in Nigeria. The drink, which is associated with luxury, has long been the go-to drink for celebrations.

Many Nigerians love to pop the drink to celebrate happy occasions, from birthdays to weddings to clubbing and spending time with friends. The champagne brands are at the higher end of consumers’ lifestyles.

A BusinessDay survey across some retail stores in Lagos showed that the prices different champagne brands such as Moet Imperial (Brut), Moet Rose, Vurve Cliquote, Don Perignon and Cristal, which used to be sold for between N50,000 and N200,000 last year, has almost doubled.

Over the past nine months, the inflation rate in Africa’s most populous nation has accelerated to a record high owing largely to the Federal Government reforms including the removal of petrol subsidy and naira devaluation.

The country’s headline inflation rate rose to 29.90 percent in January this year from 28.92 percent in the previous month, according to the National Bureau of Statistics.

Food inflation, which constitutes 50 percent of the inflation rate, increased to 35.41 percent from 33.93 percent.

The liberalisation of the foreign exchange regime in June 2023 weakened the naira from 463.4/$ to 1,605.7/$ as of March 6, 2024. At the parallel market, the naira depreciated to 1,590/$ from 762/$.

The FX reform also led to the adjustment of the exchange rate for cargo clearance at the nation’s seaports four times from June to December. The rate increased by to N952/$1 from N422.30/$1. This made importers pay more import duty for the clearance of their goods.

“Economic conditions in Nigeria were challenging in 2022, as a depreciated local currency impacted inflation. However, conditions worsened in 2023 as demonetisation policies and fuel price hikes exacerbated inflation,” analysts at Euromonitor International said in a recent report.

They added that with local consumers spending more on fuel, further rationing and the search for substitute foods increased.

Globally, champagne shipments also fell by 8.2 percent to 299 million bottles in 2023. According to Comité Champagne, orders have returned to a “steady pace” and to pre-COVID levels, following a rollercoaster three years that saw shipments slide during lockdowns in 2020 before rebounding strongly in 2021 and 2022.

“The decline was to be expected – but with the value maintained, champagne is still optimistic for the future, whilst remaining sensitive to the geopolitical context and the state of the global economy,” said David Chatillon, president of the Union des Maisons de Champagne and co-president of the Comité Champagne.