32.2 C
Saturday, March 25, 2023

Brewers Lead the Pack as Innovative Products Underpin Earnings

Must read

Listen now
- Advertisement -
- Advertisement -

It is not surprising that brewers are the best performer in the consumer goods space, overcoming the coronavirus pandemic and a tough and unpredictable macroeconomic environment .

The impressive performance of Nigerian Breweries, Guinness Nigeria, International Brewers, and Champions stems from the strategies put in place by adroit managers who understand Nigeria’s business climate.

According to a latest report by Afrinvest Securities, Nigerian Breweries and Guinness responded to the coronavirus induced crisis by strengthening alliance with leading online shopping platforms such as Jumia and Konga to meet consumers’ demand at the comfort of their homes.

Analysts at the investment house added that saw Guinness leveraged its major distributors across Lagos state to facilitate home delivery services, with flexible payment options.

“Although there are no data on revenue composition by channels to assess the contribution of these online media to brewers’ revenue in 2021, we believe this strategy would be sustained in the coming years, given the take away lessons from the pandemic and the increasing penetration of home delivery services in Nigeria,” said analysts at Afrinvest.

The coronavirus pandemic that killed millions of people across the globe and forced the government to impose lockdown measures to curb the virus tipped economies into a recession.

And Brewers and peer rivals in the consumer goods sectors were not spared the hammer of the crisis that compounded the woes of sector players who had been reeling from a myriad of challenges.

Brewers are able to stay afloat and overcome headwinds, but they capitulated to the 2016 recession brought on by the precipitous drop in crude oil price of mid-2014 that significantly undermined the external reserves and battered government revenue.

Nigerian brewers have been using product innovation and re-branding strategies to magnify their share of the market and underpin revenue, the strategies also helped them to survive competition from unlisted brands who were cannibalising on sales.

On new product innovation, Guinness led with the launch of a can variant of its Guinness Smooth stout, consolidating on the success of the bottled variant earlier launched in the third quarter of 2019.

The brewer also launched two new variants of its Orijin brand – Orijin Tigernut and Orijin Ginger – bringing its Orijin brand variants to six. Relatedly, we saw NB rebrand both its Maltina PET bottle and Star Radler cans (citrus & red fruits) to wear a sleeker and refreshing look.

“As consumers’ preferences and purchasing power evolve, we expect to see more product innovation and brand repackaging in the years ahead, across premium, mainstream, and economy product segments,” said analysts at Afrinvest.

The prognosis is propitious as the country’s young population who crave for consumption means there will be strong demand for alcoholic drinks, but the current spiraling inflation and energy crisis combined with high unemployment rate have weakened consumer spending.

In 2021, the global beer market rebounded from the pandemic-induced contraction in  2020 as revenue and sales volume grew 3.4% y/y and 2.5% y/y respectively to  US$544.0bn and 182,000 kilolitres (kl) according to estimates from Statista and Kirin  Holdings.

Measured by volume of sales, ABInBev, Heineken, and Carlsberg topped the global beer market accounting for 25.7%, 12.2%, and 6.1%  shares respectively in 2021.

Nigerian Breweries, Guinness, International Breweries, and Champion Breweries saw combined average growth rate of 36.67 percent in revenue to N358.05 billion as at March 2022.

Guinness has gained 132.05 percent so far this year, outperforming the ASI Index, which puts it among the top 10 performers of the year.

Analysts at Afrinvest estimate a 12.3% y/y and 8.4% y/y growth in industry revenue and sales volume to N875.7 billion and 19.1mlh respectively.

“We expect this to be driven by the modest economic growth outlook of 2.9%, increased social functions, modest upward price adjustment (especially on non-alcoholic brands), and low COVID-19 risk,” said the analysts.

However brewers are susceptible to the impact of currency devaluation, inflationary pressure, supply chain bottlenecks, energy crisis, and the pass through effect of sugar cane tax.

- Advertisement -
- Advertisement -

More articles


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -

Latest article