• Friday, June 21, 2024
businessday logo


Macro headwind holds back beer makers’ growth

Macro headwind holds back beer makers’ growth

Beer makers in Africa largest economy Nigeria have been held back by tough macro-economic environment that have hindered them from tapping into the country’s growing population and burgeoning middle-class that crave for consumption.

Nigerian Breweries plc (NB) ended 2014 financial year with sluggish growth at the top and bottom line level. The beer maker audited financial statement showed sales dipping slightly by 0.8 percent, while profit reduced by 1.3 percent. The company’s cost of sales ratio, operating margin ratio remained flattish at 49 percent and 26.44 percent, respectively.

International Breweries Nigeria plc (IBN) recorded a 13.02 percent increase in sales but did not fare well at the bottom line as its profit dropped by 24.43 percent. Cost of sales and operating profit margin was 48.98 percent and 29.13 percent, respectively.

Read also: General elections 2015: A costly false start

Guinness Nigeria plc’s (GN) inability to deepen its products across board and stiff competition from rivals who are introducing cheap brands into the market dented top line of the Nigerian beer maker.

GN was worst off among the beer makers as sales for the most recent period fell by 4.75 percent, while net income plummeted by 32.20 percent. Cost of sales ratio and operating margin ratio were 53.4 percent and 19.16 percent, respectively.

Devaluation in currency, declining discretionary spending and security challenges were drains on performance. The recent devaluation in the country’s currency is making imports more expensive. The implication on beer makers is that since 50 percent of raw materials are imported, material costs will surely spiral.

We have observed that the fuel hike of 2012 has pressured the disposal income of consumers thus affecting the demand for beer. A lot of people have switch to other cheap brands like the local ethanol called ‘Ogorogo.’

The menacing security challenges in the North part of the country has reduced economic activity in the area and left consumer wallets pressured. Additionally, the insurgency has hindered Nigerian beer makers from pushing their products to the crisis ravaged region.

Patrick Atuanya and Bala Augie