Amid several industry challenges faced by beer makers in the country such as stiff competition making it difficult for a price increase, sluggish economic growth which has left consumers cash-strapped, and increase in excise duties, Nigerian Breweries, Nigeria’s largest brewer has deployed measures to hedge against some of these industry challenges.
The beer-maker is not leaving any stone unturned as it has decided to explore opportunities in the route-to-market. The distribution subsidiary named 234 Stores Limited commenced under a pilot scheme in 2019.
Carving its own distribution chain could lead to higher margins for the beer maker as it would cut off distributors who are in the middle as margins continue to be pressured.
Figures from the 2019 full-year result for the period ended 31 December shows that a total N100 million have so far been spent on the new distribution chain.
Heineken, Nigerian Breweries parent company said its premium portfolio increased double-digit with a strong performance by Nigeria, Russia, South Africa, and Ethiopia. Organic net revenue growth was up 8.9percent with Nigeria flat despite an increase in excise duty.
Jean–François van Boxmeer,CEO, Heineken, in a conference call noted the difficult operating environment in Nigeria.
“Nigeria is my most difficult thing for the moment, to be honest; it is a listed company so you can follow it. The market is growing better so that is the good news; pricing is not going anywhere,” he said.
“We have increased last year our prices in November, if I recall well, and we just did it again in January but that is because of a VAT increase, Our bigger competitor in the world smaller recently announced that it will not increase the prices before March, it remains a very tense competitive environment, I do not know where we are going there. We hold up our share. We are still the market leader,” he said.
According to Boxmeer, beer is suffering more in terms of share, if you will, but it remains a pain point.
“I went there late last year; they have done a tremendous job in terms of productivity in reengineering the business for operating at structurally much lower prices than we had five years ago. That job has been done and it is currently still being done. On the other hand, the good news out of Nigeria is that the premium end of the portfolio is building up. However, the overall pricing is still lagging behind,” he said.