Amidst the economic hardship in the country, Nigerians who find succour in alcoholic beverages may have to turn to other options as Nigerian Breweries has announced a price increase in some of its products effective August 10, 2023.
In a letter seen by BusinessDay, Nigerian Breweries said the price hike became necessary due to the continued rise in input costs and the necessity to mitigate its impact.
“This s to inform you that we will review the prices of some of our SKUs (Stock Keeping Units) effective Thursday 10th August 2023. This review has become necessary because of continued rising input costs and the need to mitigate the impact,” the letter signed by Ayo Lawal, the company’s sales director said.
SKU is a unique identifier used to track inventory within a business. The Nigerian Breweries is the producer of major alcoholic products like Star Lager, Gulder, Legend Extra Stout, Heineken, Goldberg, Life, Star Radler amongst others.
Some alcohol-free drinks under the company include Maltina, Amstel Malta, Fayrouz, Climax Energy drink, and Malta Gold.
While appreciating its partners, Lawal said, “In appreciation of our great partnership and your commitment, we will deliver at current prices all open orders that are fully funded and created in our system before 00.00hr on Thursday 10th August 2023.”
With inflation reaching 22.79 percent in June and the managed float of the forex market leading to the naira exchanging for as high as N869/$ at the I&E window last week Thursday, companies like NB PLC have faced significant challenges.
In their half-year financial results, Nigerian Breweries reported N70.6 billion in forex losses as of June 30, 2023. Coupled with rising production costs and the ever-increasing cost of raw materials, this has created a challenging financial environment for the brewing giant.
“Nigeria’s alcohol landscape has expanded, and Nigerians have shown an increasing interest in exploring a wider range of spirits – from gin to cognac and whisky,” Clifford Egbomeade, an analyst in Nigeria’s beer industry said.
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Nigerian Breweries’ net loss on foreign exchange transactions stands at N85.26 billion which has pulled the firm to a loss, BusinessDay analysis showed.
On a quarter-on-quarter basis, the net loss on foreign exchange transactions stood at N70.62 billion from N5.4 billion.
Further analysis reveals that net loss on foreign exchange transactions spiked by 1071% to N85.26 billion in the first half of 2023 as FX scarcity and unification policy made companies revalue their FX liability positions which comes at a huge loss due to Naira depreciation.
“The second quarter of 2023 was significantly impacted by various factors including the effect of fuel subsidy removal on consumers, naira devaluation, and its effect on input cost, and mostly the revaluation of foreign exchange obligations,” Nigerian Breweries said in its financial highlight half year 2023.
It said together with the cash crunch which materially impacted the first quarter, the company’s net loss was escalated in the first of 2023.
“Despite these challenges, we see a positive trend in the results from operating activities (operating profit) which improved by more than 100 percent in the second quarter versus the same quarter in 2022, driven by pricing, premiumisation, and strong cost management,” Nigerian Breweries said.
The firm slipped to an N47.6 billion loss in the first half of 2023 from a profit of N18.74 billion in the corresponding period of 2022.
However, on a quarter-on-quarter basis, revenue growth was 25 percent in the second quarter of 2023 to N154.11 billion from N123.31 billion recorded in the first quarter of 2023.
“We opine that the weakened consumer purchasing power dragged sales volumes as consumers continue to adjust their expenditure pattern in favor of most contingent and basic needs,” analysts at CSL Research said in a note.
