How International Breweries Forced Nigerian Breweries, Guinness to Halt Price Hike

By Dipo Olowookere

Before now, the Nigerian beer market had always been dominated by Nigerian Breweries and Guinness Nigeria. However, that seems to be changing gradually with the growing presence of International Breweries in the market.

Earlier this year, when federal government announced that it would increase excise duty rates for alcoholic beverages, tobacco and others, many consumers feared that the additional cost would be passed to them.

But since the new approved excise duty rates came into effect in June 2018, most beer makers have found it difficult to hike the price of their products at the market.

Not many may know that the big players had allegedly planned to raise the price of their products, but International Breweries, which has flagship products like Trophy Lager Beer and Budweiser, the official beer of the 2018 FIFA World Cup in Russia, frustrated this move.

Few months ago, International Breweries officially commissioned its factory in Sagamu, Ogun State and gave it the opportunity to flood the market with its products.

“This boosted supply, constrained volume growth and forced key competitors (Nigerian Breweries (NB) and Guinness), to hold-off plans to pass on the burden of the new fix charge on beer to consumers,” analysts at United Capital Research said.

Business Post reports that the excise duty has continued to affect the performance of brewery companies in the country and Nigerian Breweries even admitted that its revenue dropped because of this.

“The new excise duty regime which came into effect in June and the consequent effect of it, adversely impacted the Third Quarter results,” the Secretary/Legal Adviser of Nigerian Breweries Plc, Mr Uaboi Agbebaku, was recently quoted as saying while reacting to the Q3 results of the brewery giant.

In the results, the firm’s revenue declined by 6.5 percent year-on-year to N238.1 billion, while PAT tumbled 38.4 percent to N14.8 billion.

Notably, Nigerian Breweries reported a negative operating profit of N3.9 billion in Q3-18 amid volume pressures.

Similarly, Guinness Nigeria’s 3-month revenue also weakened 3.3 percent year-on-year to N28.9 billion on weaker volumes, although PAT recovered significantly due to improved finance cost.

On the contrary, International Breweries sustained an aggressive quarter-on-quarter topline growth as its Q3-18 standalone revenue came in higher at N30.2 billion, the highest in the last four quarters.

“Overall, we see further pressure on Nigerian Breweries and Guinness Nigeria’s numbers going forward,” United Capital Research said.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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