• Monday, March 04, 2024
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How far can Guinness’ strategies go?

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Guinness Nigeria, a subsidiary of Diageo plc, has remained an iconic African company, renowned internationally for its brands of unmatched quality. It has popular brands such as Guinness Stout, Guinness Extra Stout and Extra Smooth, Harp, Malta Guinness and Smirnoff, among others.

Findings show the firm has gained about 27 percent market share in the highly fragmented and competitive Nigerian beer market.

But it still faces a fierce battle, with the market leader, Nigeria Breweries (NB) plc, having about 61 percent share, analysts say. Apart from NB, Consolidated Breweries still boasts of 10 percent share, implying that, by extension, Heineken, the parent company of both NB and Consolidated Breweries, has 71 percent total market share in the Nigerian beer market.

Further research shows South African Breweries Miller, popularly called SABMiller, is emerging as a serious market bully with its premium brand called “Hero.” The 21 percent profit of its subsidiary, International Breweries, the highest in the industry by September 2013, as well as recent acquisition of Pabod Breweries located in Port Harcourt, makes it an emerging serious competitor.

Recent financial statement released by Guinness of six months ending December 31, 2013, showed there was a 13.3 percent decline of revenue when compared with what was obtained in the corresponding period of 2012, as revenue fell to N52.8 billion, from N60.9 billion.

The situation was also palpable in the three months ending December 31, 2013, as revenue/sales fell 18.4 percent to N30.3 billion, from N37.2 billion reported in 2012.

Pre-tax fell 32 percent to N6.41 billion, from N9.44 billion in 2012. Three months ending December 31, 2013, recorded a 33 percent decline to N4.54 billion, from N 6.8 billion recorded in the same period in 2012.

Six months to December 31, 2013, taxation fell by 53 percent to N1.42 billion, from N3 billion reported in the same period of 2012. For three months ending December 31, 2013, taxation decreased by 40.4 percent to N1.3 billion, from N2.2 billion reported in the same period in 2012.

Eventually, profit for the six months period ending December 31, 2013, fell by 22.2 percent to approximately N5 billion, from N6.4 billion recorded in the same period in 2012. Profit from the three months period ending December 31, 2013, in the same vein, fell 29.4 percent to N3.3 billion, from

N4.6 billion reported in the same period of 2012.

There was also 22 percent decline in earnings per share in the six months ending December 31, 2013, falling to N332, from N426 in the corresponding period of 2012. Three months ending December 31, 2013, recorded a 29.4 percent decline to N216, from N306 reported in the same period of 2012.

Guinness has developed strategies in recent times to deal with the dwindling revenue and share in the country’s beer market. A new CEO, Seni Adetu, was appointed in the last 18 months to drive the company.

So far, Guinness Stout, Harp and Guinness Malt are being strengthened market-wise, with a view to establishing them as strong brands, analysts say. The reach is being widened, through re-engineering of the distribution network, especially third-party distribution network, to deal with availability challenges of brands in some parts of the country, they add.

Some market watchers say the trend is promising but the firm must be resolute on establishing a premium brand that can be likened to NB’s Heineken. Others add that creating variety will improve the fortunes of the firm.

“Variety across the beer market is a necessity,’’ said Mark Akachukwu, market analyst in Abuja, in a chat.

Market watchers are insistent that the firm has struggled to play in the premium and mainstream market in recent years, and has failed to build scale in the value segment where competitors have found advantage.

“This is inevitably one of the reasons for its unimpressive performance. There is still a visibility problem,” said Nonso Iheoma, an economist.

The price challenges are still there, say analysts, as there have been agitations by consumers for low-price brands at this point when consumer purchasing power is dwindling.

There has been a response on this. New brands “Dubic, Snapp, and Alvaro’’ have been introduced, with a view to ensuring affordability by the class of consumers that cannot pay as high as N200 or more for popular brands. But acceptability challenge is still there, thereby beckoning on strong marketing drive to push them. But market watchers are waiting to see the results of these strategies.

By: ODINAKA ANUDU