• Friday, May 17, 2024
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BusinessDay

Beer market: Guinness retraces steps to push up profitability

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Guinness Nigeria Plc which is facing stiff challenges from the competition appears to have woken up to some realities as it begins to tweak marketing strategies which contributed to pushing its profit down by as much as 19 percent last financial year.

The company’s performance last financial year showed revenue declining by 11 percent, while profit went down by 19 percent.

One of the decisions on the reverse, described by an analyst as dinning with the competition, include reduction in price increase on some of the company’s products.
“In October 2013, we increased the prices of most of our brands. This is what players in the industry do once in a year to account for inflation. Each time we do this, the other players in the industry would follow. But for the first time since 2004, we increased price but our biggest competitor did not follow suit”, Sesan Sobowale, the company secretary, told BusinessDay.

The consequence of this was that consumers noticed the increase in price and moved in droves to cheaper brands. This reduced sales and affected Guinness bottom-line.
Describing the price increase to account for inflation as probably not in line with the mood of the market, Sesan said the price reversal will mean reduced profitability overall. “The situation means that given the economic realities, the business today will probably be less profitable than it was two years ago when we could freely adjust prices for inflation”.

But according to him, the company is hoping to do more volume of sales, especially in its high margin brands, following the price correction.

In addition to the effects of finance cost and investment in expanding capacity, the company had distribution challenges nationwide. Presently it has started to address this aggressively, as it is deepening its market push.

“On distribution, we have a route to consumer project that is currently on-going, where we are supported by executives from Diageo and we are working with consultants to improve our route to consumer around Nigeria.

“We have finished our pilot in Lagos and this has resulted in to a slight increase in our market share”.

The company profitability must have also been affected, as it has few brands in the fastest growing segment in the beer industry, where Dubic and Satzenbrau play. While this value segment will sell for N150, the mainstream brands like Harp and others will sell at N200.

“In the value segment, whave two offerings – Dubic and Satzenbrau but they are relatively small brands compared to others”, Sesan said.

He further said the company was not restructuring its marketing team. However, it has redeployed Austin Ufomba as marketing director to another commercial area of the business. He is now the trade development director who is looking at issues around distribution and new channels. Garvin Pike takes his job as marketing and innovation director.

In an effort to recruit more adorers to its flagship brand, Guinness which recently came up with Origin product that resonated well with consumers, launched Made of Black campaign to excite the youth. “Our target now is to make Guinness Stout more relevant to the youthful population. We are now doing certain exciting things that will resonate with the youth”.