• Friday, December 08, 2023
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Bullish investors eye Nigeria’s $6.2bn non-alcoholic beer market

Bullish investors eye Nigeria’s $6.2bn non-alcoholic beer market

Some bullish investors are weighing the possibility of setting up shop in Nigeria to share from the country’s growing $6.2 billion non-alcoholic drinks market, findings by BusinessDay have revealed.

They say Nigeria’s demography is a sweet spot for investments as affluent populations tend to gradually lose their thirst for beer in favour of wine, spirits, or abstention — a trend that is well underway in developed countries where people tend to pick non-alcoholic drinks in the earlier stages of income growth.

“We are expecting more investments for non-alcoholic beer in Nigeria due to rising demands by a younger generation of average income earners who are seeking healthier style,” Jan Biering, head of research for German-based Beer and Beverage Production told BusinessDay at the African Brewing Conference in Douala, Cameroon.

“Nigeria is among the top five leading countries in the world in terms of sales volume for non-alcoholic beer, however, investors believe the market is still under-served,” Biering said.

Non-alcoholic beer is a beverage that has been brewed with the same ingredients as regular beer but has had the alcohol removed or reduced to a very low level. It typically contains less than 0.5 percent alcohol by volume, which is the legal limit for a beverage to be labeled as non-alcoholic in many countries.

Alexander John, a beer investor with German-based Ziemann Holvrieka GmbH, said Nigeria’s booming population and labour pools that are to emerge in the coming decades are far more than just the consumers seen by AB InBev, Diageo and Heineken.

“That is an opportunity for companies that can deliver non-alcoholic beer and we are currently strategising on how to penetrate the market,” John said on the sidelines.

“While some investors are eyeing investing in Nigeria’s raw materials sourcing, also known as backward integration, others are talking about the prospect of bumping billions in new production lines,” Andres Eiken, a German investor told BusinessDay.

Anthony Osunde, head of sales at Krones LCS West Africa, an industrial machinery and equipment manufacturing company, said the market potential for non-alcoholic drinks in West Africa is very attractive for beer investors with the right strategy.

“Without constant innovation and detailed strategy, we will all be out of business,” Osunde said.

Read also:Bank stocks push market higher

According to a report by Grand View Research, the market value of Nigeria’s non-alcoholic beer market was valued at $1.99 billion in 2014 and is expected to reach $6.20 billion by 2023, growing at a compound annual growth rate of 10.42 percent from 2019 to 2024.

The report attributes the growth of the market to the rising awareness of the health risks associated with alcohol consumption, the growing number of people who are looking for healthier alternatives to alcohol and the increasing popularity of sports and fitness.

For new investments to yield returns, experts said Nigeria must fix hurdles around rising operating expenses, foreign exchange losses, and rising interest rates among others.

“One of our biggest challenges is the struggle to source foreign exchange from Nigeria’s central bank. That did not start today, but it has become even more severe in recent times,” Helmut Rumm, the managing director at Krones said.

Nigerian Breweries, which has been operating in the West African nation since 1946, has nine facilities, about 13,000 distributors and sub-distributors as well as about 800,000 outlets to sell its brands, including Star Lager Beer, Legend Extra Stout and Maltina malt drink.

Hans Essaadi, chief executive officer, Nigerian Breweries, said Nigeria’s foreign exchange crisis in 2022 caused a shortage of dollars and euros for a business where “roughly 50 percent of our input costs is imported.”

“We’ve been faced and we are not going to stop being faced with a very significant storm,” Essaadi told BusinessDay at its last annual general meeting in Lagos.

Revenue at Africa’s second-largest brewery by sales increased 26 percent last year, extending its recovery from a Covid-19-induced slump.

Sales are forecast to rise 14 percent in 2023, according to six analysts surveyed by Bloomberg.

BusinessDay’s findings showed the firm incurred a loss of N10.72 billion in the first quarter of 2023 from N13.61 billion in the same period of 2022.

The firm’s net revenue amounted to N123.31 billion in the first quarter of 2023, 10.5 percent decline from N137.77 billion in the comparable period.

“Despite challenges, the opportunities in the coming decades for non-alcoholic beer are quite substantial. That is a prospect worth drinking to,” John said.