• Thursday, March 28, 2024
businessday logo

BusinessDay

Beer drinkers downgrade to cheap brands as economic woes bite

Beer-bottles

She scampered into the empty hall with a scowl on her face. Madam Elizabeth Johnson has every reason to be unhappy as her beer parlor has been as calm as a grave yard since last year.

The 51 year old seller said she struggles to sell a cartoon a day and she has asked her staff to leave since their wage bills was becoming an unbearable liability.

Six years ago, her joint was so busy that one would have to squeeze himself to pass through and the spacious bar was so full that white plastic chairs had to be arranged outside for thirsty customers to sit and drink.

“ l feel sad watching my business crumble before me. Times are hard and a lot my customers have lost their jobs while the traders are complaining of slow business activities,” said Johnson.

It is not surprising that Madam Elizabeth knows when workers salaries are paid. This is because the Maya man (a popular name for lovers of alcohol) can be chatty under the intoxication of liquor, and where more than two, three, and four meet every day, there exist a fellowship.

One beer to rule them all, one beer to find them, one beer to bring them all and in the darkness they shall find themselves.

Madam Johnson is one out of thousands of beer parlous operators hit by low patronage as consumer spending continues to dwindle, forcing many Nigerians to switch to affordable alternatives like local sachet  alcoholic drinks.

The local alcoholic producers are Intercontinental Distillers Limited, IDL, makers of Eagle Schnapps, Chelsea Dry Gin, Action Bitters, and Bull London Dry Gin, Grand Oak Limited, marketers of the Lord’s Dry Gin and Regal Dry Gin, Euro Foods and Distillers Limited, producers of Sabrina.    

The economy hasn’t recovered from the precipitous drop in crude oil price of mid 2014 that stoked a severe dollar scarcity that paralyzed business activities and tipped the country in its first recession in 25 years.

“Our macro-economic research suggests that upper middle-class earnings are falling in real terms and that there is downward pressure on private sector wages generally,” said analysts at Coronation Merchant Bank Limited in a recent not to client.

“Price is the key battle ground and companies with the lowest price points are prospering,” said analysts at Coronation Merchant Bank.

While the combination of the introduction of a new foreign exchange policy by the central bank and the rebound in oil price and output helped the country exit recession in 2017, economic growth has been sluggish as more people have become more miserable.

Over 50 percent of a population of 200 million lives on less than $1.90 a day, while unemployment rate is at all time high of 23 percent; little wonder the country displaced India to be become World’s poorest country.

Gross domestic product expanded by 2.01 percent in the three months through March from a year earlier that compares with 2.4 percent expansion in the fourth quarter.

Inflation increased to 11.40 per cent (year-on-year) in May from 11.37 per cent recorded in April.

Brewers are the hardest hit from a harsh and unpredictable macroeconomic environment as revenues have continued to recede while margins have been beaten down, resulting in weak valuation.

To further exacerbate the already anaemic position of these firms the security situation in the middle-belt of the country that disrupted the supply of raw material components such as barley, sorghum, maize, rice and wheat.

For the first three months through March 2019, Guinness Nigeria’s revenue dipped by 3.78 percent to N33.60 billion while net income fell by 44.02 percent; net profit margin, a measure of efficiency, reduced to 5.15 percent in March 2019 from 9.25 percent the previous year.

International Breweries recorded its worst results in 3 years as it posted a loss after tax of N3.98 billion in the first quarter of 2019, brought on by high cost of production.

Nigerian Breweries’ net margins reduced to 10.52 percent in the period under review from 21.15 percent as at March 2018.

 

BALA AUGIE