Thursday 12 April 2018 36 BUSINESS DAY C002D5556 RESEARCH & INSIGHT A WEEKLY PUBLICATION OF BUSINESSDAY RESEARCH & INTELLIGENCE UNIT(BRIU) email@example.com 08106395676 Nigerian brewers: Battling for dominance in troubled terrain KELVIN UMWENI Nigeria, Africa’s economic powerhouse, is the second largest beer market in the continent. With an annual beer consumption of about 16 million hectolitres according to Morgan Stanley, a foremost investment firm, Nigeria’s per capita beer consumption is about 10 litres per annum compared to a global average of 35 – 40 litres. For more than two decades, the country’s brewery landscape has been dominated by Nigeria Breweries (NB), a subsidiary of Heineken, the Dutch brewery giant, and Guinness Nigeria Plc, a subsidiary of Diageo. Other brewers such as International Breweries, Intafact Brewery, Champions Brewery, and Pabod Brewery are also looking to have a share of the industry’s action. The combined market capitalization of NB, Guinness and International Breweries on the Nigeria Stock Exchange (NSE) as at 9th April 2018 stood at N1,678 billion. The push for Brand Presence: riding the boat of Marketing Expenses Performance in the brewery industry has mirrored occurrences in the macroeconomic space. For instance, the recession that hit the country in 2016 had a debilitating hit on the brewery industry as the ensuing liquidity crunch led to sharp drop in the disposable income of consumers who reduced patronage for their favourite beer brands, or shifted their love to more pocket-friendly substitutes. Following the exit of the country’s economy from recession in second quarters of 2017, brewers intensified their scramble for consumers’ loyalty and increased market visibility via strong marketing campaigns and expanded distribution outlets. In 2017 alone, a total of N97.3 billion was spent on marketing and distribution by the three major brewers; this amount was 8.4 per cent more than the N89.8 billion the brewers expended in the preceding year. While Nigeria Breweries spent 19.4 per cent of total revenue (N66.9 billion) on marketing and distribution expenses, Guinness Plc. spent N25.3billion, 20 per cent of total revenue. To further deepen market penetration through increased distribution channels, Guinness added 5 more outlets, bringing their distribution outlets to 66 at year end 2017. International Breweries also increased their marketing and distribution expenses from N3.4 billion in 2016 to N5.1 billion in 2017; this represented 15.6 per cent of total revenue earned for the period under review. Who is winning the battle for market share? A report published in December 2017 by the BRIU titled “The Nigeria Brewery Industry Snapshot”, noted that the industry has revealed a somewhat zero-sum scenario in the last five years, as Nigerian Breweries (NB) has continued to grow market share each year. On the other hand, Guinness recorded shrinking market share as International Breweries trailed behind them. According to BRIU analysis, NB shed 3 percentage points as its market share declined from 71.5 per cent in 2016 to 68.5 per cent in 2017, suggesting a waning position as the undisputed industry leader. Guinness Nigeria’s market share was 25 per cent in 2017 compared to 23.2 per cent in 2016, while that for AB InBev’s International Brewery stood at 6.5 per cent, up 1.2 percentage points relative to 2016. Revenue Profile of Brewers The available financial metrics put NB way ahead of its rivals. The revenue figure for NB Plc. at year end 2017 stood at N344,563 million, up by 9.8 per cent to N313,743 million in the preceding financial year. This is attributable to increased sales volume in the economy or value brands. Expenses propped up Year-on-Year (YoY) by 10.8 per cent to N289,660 million compared to N261,456 million in 2016. The expansion in expenses account of NB was majorly due to an increase in the cost of raw materials and consumables which spiked by 13.4 per cent to N128,857 million in 2017. Most of the raw materials and consumables such as barley and sorghums needed for the running of breweries are sourced internally with attendant price increase shooting up cost. According to Beverage Industry News, an indigenous online repository of trade news about the Nigerian beverage industry, NB aims to source 60 per cent of its raw materials locally by 2020 in a strategic move to boost local raw material production and more importantly reduce the volume and bourgeoning value of imported raw materials. Guinness Nigeria rebounded with a YoY revenue growth of 23.5 per cent from N101,973 million in 2016 to N125,919 million in 2017. The year was equally a cheerful one for the brewer after it posted a profit after tax of N1,923 million following a loss of N2,015 million a in 2016. International breweries equally had a stellar performance with a bourgeoning revenue of N32,711 billion in 2017 compared to N23,269 billion in 2016. At year-end 2017, the earnings per share (EPS) of NB hit N4.13k from N3.58k in 2016 indicating that the company is making more profit per its outstanding common stock. Guinness on the other hand has an EPS of N1.28k, up from a negative N1.34k in 2016. International brewery’s EPS decline to 31k from 81k in the preceding year. . . . As AB InBev’s attempts uncommon disruption AB InBev seeks to seize the greatest share of the industry and end Nigeria Breweries’ close-to-a-decade industry dominance. With the recent merger of International, Intafact and Pabod breweries under the trading name of “International Brewery Plc”, the world’s largest brewer who eventually became the indirect parent company of the three aforementioned brewers, is almost certain to achieve its aim. Prior to AB Inbev takeover of the three Nigerian brewers, SABMiller was the parent company of International Breweries, intafact Breweries, and Pabod breweries. According to Chukwu, the consolidation is to allow for operational efficiency, which is expected to increase AB InBev’s profitability in the industry. Global brands as weapons of market control In the fight for increased market presence, the brewers introduced new internationally recognized brands their respective parent companies. In December 2017 for instance, NB introduced the Stellar Beer, a global brand of Heineken. “This had an encouraging initial feedback,” affirmed NB management. Guinness on its part equally commissioned a £12million production line in its Benin plant for local production of some of Diageo’s international brands such as McDowell’s VSOP, Smirnoff X1 Intense Chocolate Vodka, and Gordon’s Dry Gin. Aside the multi-million dollar plant they are currently constructing in Sagamu, Ogun state, Anheuser- Busch (AB) InBev (which recently acquired Internatiuonal Brewery), plans to hit the Nigerian beer market soon with its two major global brands: Budweiser and Beck’s. The introduction of Budweiser and Beck’s will set off a competition in the high end of the market in which NB’s Heineken and Guinness’s Foreign Extra Stout already hold sway. “One in almost every five beers sold in the United States today is a Budweiser,” RateBeer.com, an online beer-rating site said. Analysts expect that this will have far-reaching effects on the scramble for dominance given its popularity in its present market. “Budweiser will definitely have a market for itself in Nigeria and may aid AB InBev to chop off a sizable market share for itself” affirmed Johnson Chukwu, Managing Director of Cowry Asset Management who spoke to Businessday Research and Intelligence Unit (BRIU) via telephone. Similarly, Beck’s is the world’s number one German brand with presence in over 85 countries. Considering that Nigerians always like to try out new things, especially one with international affiliation, and given the instability in consumers’ disposable income, the stage appears set for a fierce fight by the brewery giants in 2018.
Thursday 12 April 2018 BusinessDay launches TV app BusinessDay videos are now available to smartphone users with the launch of the BusinessDay TV App. The app is available to download from Google Play Store. The app shows the latest BusinessDay videos, including high-quality analysis and coverage of the leading stories and issues in politics, business and finance. It also broadcasts culture and lifestyle features and a text scroller of the latest BusinessDay news headlines. According to Frank Aigbogun, publisher of BusinessDay, “We see great demand for our video content on Businessdayonline.com, YouTube and through our mobile apps – video views in 2017 were up 11 percent. Mobile app extends our journalism to the ‘digital living room,’ further demonstrating our commitment LCCI celebrates business excellence at 2018 commerce, industry awards Lagos Chamber of Commerce and Industry (LCCI) has concluded plans to honour excellence in business at its 2018 Commerce/Industry Awards holding May 1, in Lagos. This year’s edition, the fifth in the series, promises to be an improved edition and hopes to attract major players in the various sectors of the Nigerian economy. Muda Yusuf, director-general, LCCI, said: “The objective of the annual awards is to recognise, celebrate and promote private and public institutions that have exhibited the core values of best business practices, growth through innovations, business sustainability and have positively impacted the society.” Yusuf said, “The LCCI Commerce and Industry Awards prides itself as a cred- Obaseki okays construction of 60 roads, Amagba Road for reconstruction Edo State governor, Godwin Obaseki, has approved the construction of 60 roads across the state’s 18 local government areas (LGAs), to bring development closer to the people and open up rural communities for business activities. Obaseki said infrastructural development being pursued by the government would engender job creation and poverty alleviation, as 7,000 youths would be engaged during the road construction. Obaseki, who was represented by his chief of staff, Taiwo Akerele, during the inspection of ongoing road construction at Ogunmwenyin community, Lucky Way, Osayande Ize-Iyamu Drive and Nneka Street in to subscribers by delivering content through new channels. We’re delighted to partner with Kalibrate Africa to bring BusinessDay videos to a wider audience.” Hercules Venter, Kalibrate Africa, co-founder, said, “There is no doubt about the role that video content plays in our lives today. However, the major change is actually reflected in the means to distribute it.” The app is available to download from Google Play Store and access via Progressive Web App direct on mobile, tablet, or desktop at https:// tv.businessdayonline.com. “Progressive Web Apps are multi-platform. They adapt perfectly to any screen they’re used on mobile, tablet, or desktop. They are just as good in terms of design as they are in features.” ible platform where winners emerge through a painstaking selection process supported by robust research and market intelligence. Some of the awards categories to be won at the prestigious event include: Award for Excellence in sectors of the economy such as Banking, Insurance, Health Care, Manufacturing, Real Estate, Aviation, Pharmaceuticals, Education, Media among others. “The LCCI aims to celebrate deserving corporate organisations and public institutions that have made remarkable contribution to the development of commerce and industry, and the economy at large. Good corporate governance is also a major consideration in the evaluation of nominees for the award.” Ugbor Village, said, “The roads to be constructed are semi-rural/urban roads, ranging from 1 to 1.5 kilometres. The effort is geared towards deepening the spread of economic enablers to engender development.” The inspection train also got to Amagba Community, where the governor assured of the re-construction of the road, noting, “We don’t talk too much but we assure you that the construction of Amagba Road will commence soon.” He said, “In road construction, there are procurement processes and procedures that are involved and must be followed. By the time these processes and procedures are completely addressed, the construction of other roads will com- C002D5556 BUSINESS DAY 37 NEWS US calls for greater push in entrepreneurship, sees bright future for Nigeria IGNATIUS CHUKWU United States of America says Nigeria future is bright, and has called for greater push in the direction of entrepreneurship. This is as the US Consulate General in Nigeria says only Nigerians possess the answers they seek in the nation’s problems. These were the highlights at the opening ceremony of a two-day entrepreneurship academy in Port Harcourt, Rivers State, held at the Institute of Petroleum Studies (IPS) in the University of Port Harcourt by the US Consul- General’s office in Lagos, in collaboration with Field of Skills and Dreams (FSD) VTE Academy, which began on Tuesday. In her welcome remarks to usher in the Consul-General, Darcy Zotter, the direc- tor of public affairs section of the US Consulate General in Lagos, sent the eager entrepreneurs on cloud nine when she said, “The future of Nigeria is utmost. People talk of so many problems, power, insecurity, education, poverty, jobs, etc, but does that mean Nigeria has no future? We firmly believe that with the right tools, Nigeria has a bright future.” Zotter went on: “With trained entrepreneurs, Nigeria has a great future. The result of the first workshop in Lagos shows it. The US wants to build wealth creators; we say, look upon entrepreneurship, not always focusing on the negatives such as insecurity, Boko Haram, power failures, education problems, you know them. “Let Nigerian youths look for solutions and answers; you have the answers. If you L-R: Rotimi Fadipe, supply chain director, Honeywell Flour Mills Plc; Salim Saleh Muhammad, national president, Wheat Farmers Association of Nigeria (WFAN); Thabo Mabe, group managing director, Dangote Flour Mills plc; Paul Gbededo, group managing director, Flour Mills of Nigeria plc, and Bolaji Anifowose, commercial director, Ola Grains, during the unveiling and presentation of multi-crop Threshers to the Wheat Farmers Association of Nigeria, in Lagos. Pic by Olawale Amoo mence as contractors will be mobilised to site.” The governor explained that the focus on constructing rural roads was to open new areas for enhanced economic activity and improved livelihoods for the people, especially agrarian communities, from whence people need to move agro-produce to cities. “The road construction will reduce the level of poverty in rural areas as the construction of roads will open the areas for economic activities. The roads to be constructed will open up communities outside the state capital to development,” he said. He said the inspection exercise was to ensure that contractors handling the projects work in accordance with specification for the projects, adding, Edo assures of robust healthcare ecosystem with insurance scheme, 500 primary, super tertiary centres As the Edo State government intensifies work on the reform of the health sector, the governor, Godwin Obaseki, has said the soonto-be-unveiled state health insurance scheme and construction of 500 primary healthcare centres (PHCs) across the state will guarantee accessible and affordable healthcare. The governor said there iwa a nexus between the health insurance scheme and the PHCs, as the symbiotic relationship would ensure health needs were met with minimal cost and effort, across the different parts of the state. He stressed that the revamp of the healthcare sector is on course and that government will ensure that relevant institutions and policies are put in place to drive the reforms and sustain gains to be recorded. ask me for solutions to Nigeria, I will say, I do not know; you have the answers. There is no need to run to anywhere else for answers; the US can only help to create the platforms but you have to have the answers.” The CG who declared the workshop open explained that one of the primary goals of the US Mission in Nigeria is to support Nigeria’s economic development. In the Consul-General welcoming remarks, F. John Bray, said one of US Mission Nigeria’s primary goals was to support Nigeria’s economic development. According to Bray, the US Department of State supports entrepreneurs all over the world through training and mentoring, while also working with governments to create enabling environments and entrepreneurial According to Obaseki, “we are undertaking a holistic revamp of the health sector to ensure that the people are best served and that they do not have to spend so much to get quality healthcare. All of these reforms are interconnected and we are doing this because we have a big plan; we won’t do things in tokens. “Every aspect of the health sector is covered. So, much as our focus is on primary healthcare, we are not oblivious of the need for tertiary and specialist care. So, all of these are captured in the reforms we are pursuing.” The governor said that the focus on primary healthcare is responsible for the construction of the 500 Primary Healthcare Centres (PHC) across the state, noting that the state government intends to work with the Federal Ministry of Health through the cultures. He said, “There is growing evidence that entrepreneurs the world over are the drivers of job growth. The United States government is firmly convinced that in addition to creating jobs and expanding economic opportunities, entrepreneurship contributes to political stability and a vibrant civil society.” He said 75 percent of the 16 million businesses in the US were owned by individuals (entrepreneurs). Leading business leaders including Sahara Group cofounder, Tonye Cole, Emzor Pharmaceutical CEO, Stella Okoli, Andela co-founder, Iyin Aboyeji, award-winning designer, Zizi Cardow, and senior executives of prominent commercial banks mentored and trained the participating young entrepreneurs. National Primary Healthcare Development Agency (NPH- DA) in addressing challenges facing primary health care system in the state. “The 500 PHCs will cater to the health care need of those in rural areas, contribute to strengthening the state’s healthcare sector and engender speedy response to health emergencies.” He added that the primary health insurance scheme, the legislation for which has reached advanced stage at the Edo State House of Assembly, would bring succour to our people. “It is a scheme that will be open to all Edo people, as against being just for civil servants. This scheme will ensure that people access health care with minimal cost and even when they get to the health centres, they would be assured of quality health care,” he said.