It is an interesting story that brings to limelight local brews that are back benchers in the market. These local brews are today fortunate recipients of the rebranding exercise of our modern brewers. This analysis, sourced from Archives Siaka Momoh, was first published in RealSectorNow Magazine in June 2014.
Beefing up beer concoctions is good for Nigeria; it is good for the economy. After all, this is the promotion of local content in our manufacturing that we have been singing about all long. So let the Nigerian Breweries and the Guinness, as well as the SABMiller of this world, continue to flex muscles over who should have dominance in the beer market. The more they flex their competitive muscles, the better for Nigeria’s economy.
It is an interesting story that is bringing to limelight local brews that are back benchers in the market. These local brews are today fortunate recipients of the rebranding exercise of our modern brewers.
According to Euromonitor, concoction beers, or cheap beers are growing in popularity as the alcoholic drink of choice for many low-income sub-Saharan African consumers. These products, says the report, are relatively affordable partly due to the use of low-cost and locally grown fermentable starches such as sorghum, cassava and millet.
“These concoctions, however, are increasingly becoming a modern business, involving major global brewers such as SABMiller and Diageo. Such companies are using factory lines, thus replacing homemade traditional wooden drums with brick liquid carton packaging and focusing on rural-centric distribution networks,” it explains.
Although, according to Euromonitor International, volume growth of sorghum beers in South Africa began to slow towards 2 per cent in 2013, there remains potential for further growth beyond this market in the rest of Africa. As the illegal or untaxed trade of alcohol remains prominent in many African markets, companies like SABMiller are seeking to commercialize concoctions and expand affordability to low-income consumers.
Diageo’s attempt has worked well as a result of the use of transactional packaging to reduce costs; such an example can be seen in Kenya where the Senator Keg brand is sold in large returnable containers suitable only for communal consumption.
Diageo’s Guinness Nigeria Plc currently has Orijin, a spirit drink with herbal extracts in the Nigerian market. This appears to be part of the answer to SABMiller’s challenge. It may however be one that is meant to compete with Alumo Bitters, a popular spirit drink in the market.
It is not clear, what specific cheap beer concoctions Heineken’s Nigeria Breweries Plc and Guinness will introduce into the Nigerian market. They have cassava as raw material to work on and Pito and Burukutu to add value to. It took SABMiller a long time to introduce Impala – cassava beer – into Mozambique.
“SABMiller has commercialized opaque beer variant Chibuku Shake-Shake to undercut unbranded concoctions. Yet, regardless of such innovative attempts to bring illicit trade to the fore by investing in commercializing traditional concoctions, there still remain limitations to their future success,” it says.
The battle for share of Nigeria’s robust beer market kick-started by the entry of SABMiller of South Africa is raging. A report from Imara, a pan-African financial services group, revealed reasons why beer giants in the industry, local and international, are at war over who controls this African important liquor market. The beer market is growing by around 7 per cent in volume terms a year yet consumption per capita remains low in comparison to many international markets, suggesting continued growth is in prospect, says the Imara report.
Imara’s team of investment researchers stay close to developments in the West African nation as a dedicated Nigerian equities portfolio features strongly in the group’s suite of internationally marketed sub-Saharan investment funds. Jonathan Chew, manager of the Imara Nigeria Fund, reports that SABMiller is about to disturb “what was a cozy duopoly” by entering a Nigerian brewing industry that has been dominated for years by Guinness and Nigerian Breweries. “The beer market is growing by around 7 percent in volume terms a year. Yet consumption per capita remains low in comparison to many international markets, suggesting continued growth is in prospect,” according to Imara analysts.
SABMiller
It would be recalled that SABMiller, South African world brewing giant, in 2009, bought Pabod Breweries, Port Harcourt where it owns 57 per cent and Voltic Nigeria Limited (Voltic produces tablewater), Lagos owning 80 per cent of the company, and Standard Breweries in Ibadan, using these companies for soft landing in Nigeria. For over five years or thereabout, this world number two brewer tried to open shop in Nigeria. In its quest to tap a $3 billion (N45.9 billion) informal market, the giant brewer is encouraging farmers to raise cassava and barley for its new discount beers.
Nigerian Breweries
But in an apparent response to SABMiller’s entry into the Nigerian market, Heineken N.V., Nigerian Breweries Plc parent company stepped up the struggle for domination of the Nigerian beer market in Nigeria with its acquisition of two holding companies from the Sona Group which has controlling interests in five breweries in Nigeria.
Heineken’s buying of Sona Group’s Sona Breweries PLC, Sango Ota, Ogun State, International Beer & Beverages Ind. Ltd., Kaduna State, Champion Breweries PLC, Uyo, Akwa-Ibom State, Life Breweries Co. Ltd, Onitsha, Anambra State, Benue Brewery Ltd, Makurdi, Benue State, is seen by industry players as a move to strengthen Nigerian Breweries position in the Nigerian beer market and further response to SABMiller’s entry into Nigerian market. Of the five breweries being acquired, Champion Breweries is listed.
The acquisition provides Heineken with an additional technical capacity of 3.7 million hectolitres, helping to alleviate the company’s current capacity constraints in the market and improving the geographic location of its breweries.
And interestingly, this Heineken’s move is clearly a smooth move to puncture SABMiller’s soft-landing strategy – entry into the Nigerian beer market from the fringes, what with acquiring breweries in Onitsha, Uyo, and Makurdi. SABMiller is currently operating from Port Harcourt, moved Voltic Nigeria Limited from Lagos to the South East, and has set up brewing plant in Onitsha. Heineken is taking the battle to them.
This will enable Heineken to take advantage of the attractive future growth opportunities that exist in different regions of the country. The acquisition has been funded from existing resources. The acquired breweries will continue to provide and expand contract brewing services to Nigerian Breweries and Consolidated Breweries for the meantime, while continuing to own, brew and support the Goldberg, Williams Dark Ale and Malta Gold brands as well as various smaller regional brands.
Guinness’ response
And Guinness Nigeria Plc, the local unit of Diageo Plc (DGE), heightened the ongoing beer war tempo by announcing plans to spend 52 billion naira ($335.8 million) on expanding brewing capacity in the country. The Guinness move, was no doubt, an apparent response to the Heineken N.V.’s acquisition of two holding companies from the Sona Group, which has controlling interests in five breweries in Nigeria, and SABMiller Africa’s entry into Nigeria.
According to our investigations, with the current expansion in the nation’s brewery sector, firms in the sector will benefit from economies of scale and huge volume of Foreign Direct Investment, innovations and its attendant healthy competition.
Africa’s beer market
Brewers operating in the African market still have a lot of room for future growth as beer consumption on the continent is still far from saturation levels.
Imara Africa Securities says in a new research report that although Africa is the sixth largest beer producer by volume, producing 4.8 percent of global beer after China (23 percent), USA (13 percent), Russia (6 percent), Brazil (6 percent) and Germany (5 percent), it has one of the lowest global per-capita consumption rates due to the meagre purchasing power of consumers.
Average annual per capita beer consumption in Africa is 6 litres, the lowest of all regions, with the exception of the Middle East, which is significantly lower owing to its large Islamic population. “There exists significant headroom for growth in sales volumes and profit margins for African brewers,” said Imara. “Only Namibia, Botswana and South Africa have made headway in increasing per capita consumption to near saturation levels.”
Enterprise IssuesWith Siaka Momoh
