The planned ban of alcoholic beverages in sachets and small plastic bottles could hurt firms producing them, according to analysts.
Most of the firms are small, and implementation of a ban could push them out of business, they said.
The Federal Government had earlier in September issued directives targeted at phasing out the sale and consumption of alcohol in sachets and polyethylene terephthalate (PET) bottles.
Mojisola Adeyeye, director-general, National Agency for Foods and Drugs Administration and Control (NAFDAC), disclosed in a statement that the uncontrolled access and availability of high concentration alcohol in sachet and small volume PET or glass bottles contribute to substance and alcohol abuse in Nigeria.
Though substance abuse is a critical issue in Nigeria, the analysts say the country must tread softly as the firms producing alcohol in sachets employ people, pay taxes, and contribute to the economy.
The firms have a major part of their production in distilled spirit (liquor that contains no added sugar and has at least 20 percent alcohol by volume) and could see negative top- and bottom-lines with the implementation of the ban, they said.
Ban the big bottles too
Ayorinde Akinloye, a consumer and brewery analyst at CSL Stockbrokers, said the ban is not justifiable because they are not illegal products.
He said if a ban is placed on the sale of alcohol in sachets and small bottles, it should as well be placed on others in bigger bottles such as Vodka, Johnnie Walker, among others.
“It is going to impact negatively on their revenues, making them go under because the biggest portion of their sales comes from the small-sized bottles and sachets,” Akinloye said.
He noted that alcohol in sachets serves as an alternative for an average consumer, explaining that if the industries start producing in bigger bottles, they will be more expensive, thereby making them hard to reach their market.
The alcohol industry
Nigeria’s alcoholic beverage sector is an increasingly lucrative industry. According to AsokoInsight market data, beer is the most widely consumed alcoholic beverage with a 55 percent market share, followed by spirits (30 percent) and wine (15 percent). Spirits are gaining traction, with Guinness Nigeria now focusing attention on the segment.
There are three major companies that produce distilled spirits: Intercontinental Distillers, Nigeria Distilleries and Stellar Beverages.
Sachet alcohol drinks such as Chelsea London Dry Gin, DeRok Chocolate Liqueur, Squadron Blended Dark Rum, Eagle Aromatic Schnapps Action Bitters, Bull London Dry Gin, and De Rock are made by Intercontinental Distillers. On the other hand, Big Ben London Dry Gin, Captain Jack, and Royal Standard are made by Stellar Beverages, while Seaman’s Schnapps is made by Nigeria Distilleries.
Euromonitor, a global market intelligence platform, states that the growth in sales of mainstream and lower-priced spirits faces a threat from the possible introduction of the ban on sales of spirits in sachets and small plastic bottles.
Economic squeeze
Nigeria’s stunted economic growth has been squeezing the wallets of consumers, paving way for the ‘sachet economy’ to expand at a pace faster than the country’s gross domestic product (GDP).
A survey by BusinessDay revealed that since the 2016 recession, Fast Moving Consumer Goods (FMCG) companies have been rolling out sachet products to enable them to penetrate the larger low-income market, which has been hit by the harsh contraction breeze.
Data from the National Bureau of Statistics (NBS) on GDP by Income and Expenditure approach at 2010 purchaser’s values show that consumption expenditure of households has been declining at varying pace since it rose by 1.5 percent in 2015. Also, the per capita income in Nigeria has declined to $2,049 in 2018 from $3,268 in 2014, according to the International Monetary Fund (IMF).
A 2018 Global status report on alcohol and health by the World Health Organisation (WHO) showed Nigeria had high total per capita alcohol consumption at 25.5 litres in 2016.
Need for regulation
Substance experts describe alcohol as a depressant due to its slowing effects on the nervous system. Though it is a legal drug, it is abused by the under-aged. In Nigeria, children of 12 to 16 years abuse alcohol in sachets due to its affordability. Experts see affordability as an issue because it is now readily available for a population that is ready to experiment.
“There is a need for the government to regulate these products due to the harmful effects they have on human life. So, I think this is one of those sensitive products that capitalists and moralists always tend to contend, but I think at the end of the day, the moralist will tend to win this,” Abiodun Keripe, head of research at Afrinvest Limited, said.
“The companies have to just be creative and start to repackage some of their products and make them inaccessible to classes of the population that are not meant to have access to them, but at the same time, they still want to appeal to a certain class of consumers at the very bottom of the pyramid,” Keripe further said.
The National Bureau of Statistics (NBS) and the Centre for Research and Information on Substance Abuse said in a report in 2019 that nearly 15 percent of the adult population in Nigeria (around 14.3 million people) used some level of psychoactive drug substances, from 5.6 percent in 2016.
The situation has worsened among the young population who abuse substances from hemp to shoe polish.
Out of the four major big alcohol companies listed on the Nigerian Stock Exchange, Guinness received approval from its board of directors to import, market, distribute, sell and later on manufacture locally the International Premium Spirit brands of Diageo plc.
According to WHO’s ‘Global Status Report: Alcohol Policy’, most countries have restrictions on alcohol consumption in different environments and these regulations are targeted either at the general population or at specific target groups.
“There are many ways in which countries may seek to restrict the sale of alcoholic beverages, besides monopolies and licensing. The most prominent are restrictions on hours, days and places of sale, and the density and location of outlets,” the report further stated.
