Retail

Nigerian consumers shift focus from alcoholic drinks

by David Ibemere & Micheal Ani

February 22, 2018 | 12:45 am
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Heineken has announced a drop in the volume of sales in Nigeria, as Nigerians shifted their preferences from top-notch alcoholic drinks to cheaper ones as high inflation rate alongside low minimum wage makes fewer funds available.

Heineken N.V reported a 5.37 percent (5per cent organic) rise in revenue to €21.9bn its full-year results for 2017, showing profits in the same period jumped 7.1per cent to €2.2bn from €2.09bn in 2016, however posted a negative result in Nigeria and Democratic Republic of Congo.

Last year, the Nigerian economy, experienced an eight consecutive decline in its inflation rate to 15.91 percent still, is below the central bank’s 6 per cent and 9 per cent target.

The country’s minimum wage of N18,000 ($59), which has been stagnant for a period of two years, raises concerns about the ability of consumers to cope with increase in the price of liquor as producers shift the higher costs of production to consumers.

Commenting on the results, Jean-Francois van Boxmeer, chief executive officer, Heineken NV said, “We delivered strong results in 2017, with all regions contributing to organic growth in volume, revenue and Operating Profit.”

It notes that negative currency movements in Nigeria, the DRC and Egypt erased €567m off the company’s revenues and €116m off Operating Profits.

In Nigeria the company reported that its premiumising efforts are not cutting through as “value brands continued to outperform the rest of the portfolio”. Also, consumer confidence remains low due to cost inflation and continued weak economic growth. Beer volume fell to the mid-single-digit with slightly improved trends in the second-half.

Regionally, the company said that the Africa, Middle East & Eastern Europe region saw increased organic volume growth of 4.8per cent, with strong growth coming in the second-half in Ethiopia, South Africa, Russia and Ivory Coast offsetting weaker volume in Nigeria, the Democratic Republic of Congo (DRC) and Egypt, countries which are still experiencing weak consumer demand due to lingering recession.

South Africa and Ethiopia posted double-digit volume growth in its premium segment – Heineken, Amstel, Sol and Windhoek, while Egypt declined double-digit, negatively impacted by VAT increase and the negative effects of the Egyptian Pound devaluation in 2017.

Similarly, beer volumes in the DRC fell in the high single-digit due to the recent price increase is taken to mitigate rising input costs following the currency devaluation.

Beer volumes grew 3per cent, with the “Heineken” brand recording a growth of 4.5per cent per hectoliter. The company said that revenue per hectoliter in all regions improved except for the Asia Pacific due to negative mix effects.

The giant brewer confirmed its continued investment in key developing markets with increased production capacity in Mexico, Cambodia, Vietnam, Ethiopia and Haiti. The report also stressed on the opening of a new brewery in Ivory Coast and the start of construction of a new brewery in Mozambique.

With respect to the company’s 2018 goals, Van Boxmeer said, barring any unforeseen macroeconomic and political developments, they hope to deliver an Operating Profit margin expansion of around 25 basis points.

A research conducted by a Nigerian-based marketing research company, MRIC in November 2015, indicated that most alcohol consumers in the Nigeria are now switching to herbal mixed alcoholic drinks.

This trend saw a rise in the alcoholic brand such as Alomo bitters, Origin Zero and Origin, Star herbal and many other brands in this category

David Ibemere & Micheal Ani


by David Ibemere & Micheal Ani

February 22, 2018 | 12:45 am
12893  |   93   |   0  |   Start Conversation

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