Mr. Seni Adetu
Managing Director/Chief Executive, Guinness Nigeria Plc, Mr. Seni Adetu, in this interview with Festus Akanbi speaks on a wide range of business and economic-related issues including the effects of the fall of consumers’ discretionary income on alcoholic beverage consumption
How does it feel being the first Nigerian CEO of Guinness Nigeria in almost 20 years?
I feel privileged leading one of Nigeria’s foremost companies, a highly reputable company with rich heritage and a strong track record of performance. The stakes are high leading a company that has enriched the lives of its stakeholders such as consumers, shareholders and host communities in the country for several years. I have so much respect for the office, and this is always playing on my mind; so for me, being a Nigerian in the role places that much more responsibility on me. As they say, as a leader, the camera is on you 24 hours daily. I am fully conscious of that. Also, I see myself as a role model to many Nigerians. For that reason, I am especially intent on modeling the values of integrity, accountability and good governance that are considered ‘un-African’ in some quarters.
That leads me to an experience I had when I resumed office. I got a call from no less a person than Dr. Michael Omolayole and he said to me that he had an organization that seeks to promote the re-Nigerianisation of very seniors CEO roles in Nigeria, the type of role that I fortunately occupy. Therefore when he was told that a Nigerian had taken over at Guinness Nigeria, he was very excited and he invited me to lunch at the Metropolitan Club. At the time he invited me, I thought it was a lunch for two of us. But when I got there, I saw Dr. Michael Omolayole, Mr. Felix Ohiwerei, Chief Ernest Shonekan, Mr. Makinde and so on. You know what, people say I am a very bold man but that day I was intimidated! The point being that those Senior CEOs made it clear to me that the job was about me but at the same time, it was much more than me. So, sitting in as MD of Guinness Nigeria, I was representing generations of Nigerians yet unborn who would aspire to enrich their lives through the corporate ladder.
Each time I remember that, it strikes a nerve in me in a way that tells me I have a burden of responsibility.
Diageo, which is your parent company, is the number one drinks company in the world with a strong portfolio of brands across spirits and beer. How would you assess Guinness Nigeria’s drive to become the leading drinks company in Nigeria given its present position?
Truly, Diageo, the parent company of Guinness Nigeria is the world’s undisputed leader in the premium alcohol beverage sector. It is the world’s largest producer of spirits and a major producer of beer and wines. Diageo brands include Smirnoff - the world’s best-selling vodka, Johnnie Walker - the world’s best-selling blended Scotch whisky, Baileys - the world’s best-selling cream liqueur, and Guinness - the world’s best-selling stout, which are available as market leaders in over 180 countries.
The story of Guinness Nigeria is not any different. We have strong portfolio diversity including beer, Ready-To-Drinks and non-alcoholic beverages such as Malta Guinness and the portfolio covers a wide range of consumer segments. In the main, these brands such as Guinness Foreign Extra Stout, Harp Lager Beer, Malta Guinness, Smirnoff Ice and Snapp are iconic and are adored by consumers in the country. Our present position is that of market leadership in most of the categories in which we compete. We are also growing market share assiduously to overtake competition in the categories in which we are contenders like the lager segment.
We are in a good position on the journey to market leadership. As you may be aware, we are the largest Guinness market by net sales globally and have leveraged innovation and the strong equities of our consumer brands to double this business in the past four years. To meet market needs, we are also building capacity. We are confident that our proven business model and innovation capability will serve us well competitively in the future.
Talking about your last reported financial results, revenue went up but profit declined when you compare it with what you recorded in the corresponding year. Can you put this in the proper perspective for us?
The results reflect what we are seeing in the market. There are reasons to believe that the consumer’s discretionary income is under pressure despite the GDP growth we are seeing. As a result of that, we have seen a softening of the beer market. We would like to emphasize that our key brands like Guinness Foreign Extra Stout, Harp Lager and Malta Guinness are growing in brand equity and, supported by our recent innovations of Snapp, Dubic and Malta Guinness Low Sugar, we have cause for belief.
In that context, the revenue growth was in the single digit. The loss of gearing between the net sales and profit has to do with two things: First is the depreciation that is going in on account of the new manufacturing assets that we have just acquired – the N55billion I talked about and the second is the finance charge that is coming through from our borrowings in support of the investment. If you discount those, in the circumstances of a challenged market, this is an encouraging performance.
Would you say the economic situation in the country is impacting on the beer market and consumption?
That would be my guess. In the past we would say that GDP growth determines the volume growth in the beer industry. In other words, GDP and volume growths tend to be at par. But we are seeing a different scenario in Nigeria because right now, GDP is growing at 6 to 7 percent but the beer market is actually is in a single digit decline, we believe.
The reality is that there are other factors at play, one being the impact of the removal of the fuel subsidy. More of the consumers’ resources now go into transportation. Additionally, as a result of inflation, people now spend more on feeding. We also have information that accommodation cost has gone up. These are elements that are classified as essentials to the consumers which they have to tick in the box before they tick alcoholic beverage consumption. What that indicates is that there is apparently a de-prioritization of alcoholic beverage consumption. The good thing is that the consumer economy for Nigeria portends a great prospect. The fundamentals of Guinness Nigeria Plc are very strong, so at the end of the day, I would expect to see a turnaround in the near future.
Given the overall decline of the local beer and malt market, would you say the premium positioning of your brands is really delivering dividends based on the growth of the country’s middle class?
I am incredibly delighted that we have premium brands like Guinness in our portfolio which is positioned as a premium brand. People tend to talk about high prices only when it comes to premium branding, but the consumer’s choice decision is not just based on absolute pricing. There is correlation between the price and what the consumer gets from the pricing – in other words, the age-long brand value equation - at play. The consumer is thinking about the reputation, the image and the quality that is gotten from the product. Therefore, even in a depressed economy, it is not impossible to see premium brands growing. So we don’t have any cause to change our strategy around brands that are premium brands - Guinness, Smirnoff Ice, Snap. Within the context of our price per centilitres and the beer industry, they are doing very well as premium brands.
Now it is an interesting dynamics that we are seeing. There seems to be a bit of upward trading by some consumers to premium and this appears to be the emerging middle class who are coming up because they are getting new jobs, getting more money in their pockets; but there also seems to be some down-trading into emerging or value for money brands by consumers who are having less money in their pockets. It would appear that it is the mainstream that is feeling squeezed but that is not to say that the mainstream is not going to survive the squeezing. In short, the fact that an economy is bad or challenged does not necessarily suggest that a premium brand will crash.
I have listened to you and you come across as someone who understands the industry and has huge confidence in the survival of the beer industry. What are the bases for your assumption?
The long-term prospects of the consumer economy remain encouraging. If you look at the growth trajectory of the beer industry you would notice that it has gone through these ups and downs in the past. You could call this a phase when it is a little bit down and you can imagine that over time it is going to come back up.
Another reason is that Nigeria’s record of alcoholic beverage consumption is still relatively low compared with records from other African countries. Africa contributes close to 5.0% to global beer production and in that Nigeria accounts for less than 1.0%. Per capita consumption in Nigeria is one of the lowest in Africa.
The big players in the industry are companies that know the terrain so well, have international backing and have invested in the industry either by expansion or acquisition. So the combination of the capacity they have put in place, the marketing resources at their disposal and the competitiveness that these new entrants bring into the market will only grow the pie. For us at Guinness Nigeria, we are particularly blessed to have such strong brands, highly talented people, a proven business model and the Diageo expertise to leverage.
With the high cost of raw materials, not just in your industry but in the entire manufacturing sector, are you contemplating reflecting same on the price of your brands?
It is no secret that operating costs are going up and moderating costs in this kind of environment is almost as important as driving sales. We have to be efficient in the way we manage our operations. Because of that, we spend a lot of time looking at our cost structure, and making sure that we are low with our cost as much as possible without affecting quality because there is limit to what you can pass on to the consumer. If the consumer is skinned to the bone economically, you cannot add to it due to your inefficiencies.
Talking about running a business especially in the manufacturing sector and borrowings from banks, today the CBN decided to retain the MPC, what is your view about this?
Clearly, I cannot formulate policies for the Central Bank of Nigeria, but what I do know is that under normal circumstances, relatively low interest rates do stimulate the economy. This helps the small and medium scale businesses to pick up. The government cannot be the sole employer of all the employable citizens; neither can the big manufacturing businesses have the capacity to employ all the young ones coming out of the universities.
What makes an economy tick is the infrastructure and environment that is put in place by policy makers. The higher the interest rates, the more difficult it is to create independence within the employable adult population.
A couple of recent media reports indicated that the Advertising Practitioners Council of Nigeria (APCON) sanctioned your company for breach of the Code of Advertising Practice and Sales Promotion. Can you shed some light on this?
The starting point is to emphasize that we are a highly reputable and law-abiding organization. It is a fact that we are at the forefront of good corporate governance and it is no surprise that we have won many awards over the years as a result of that. We have operated in Nigeria for over 60 years with an unblemished reputation, and are part of the global, well acclaimed Diageo Plc, the world’s largest premium drinks company with well-defined governance codes, policies and standards.
That said, the issue of APCON is an issue we would like to see to a conclusive end. We are uneasy about three things:
The first is that after the differences in the interpretation of the APCON Code of Advertising Practice which was said to be breached, it became obvious that APCON had stuck to their position and even denied us a moratorium to complete the television sponsorship of the English Premiership league - which was the subject matter of the dispute – for the current season. We pulled out the advertising communication that they complained about and replaced it with that of a non-alcoholic beverage, Malta Guinness Low Sugar. So we were surprised by the fact that several weeks after we had pulled out the advert, APCON called out a sanction on Guinness Nigeria Plc.
Secondly, it would appear that at the time we were being sanctioned, competitors was having a beer commercial in a similar environment. We were disappointed that the rule that they have applied on Guinness Nigeria Plc did not seem to have been applied to our competitors.
The third issue is that, at the time that the recommendation was made by the Advertising Standards Panel (ASP) to the APCON Council to rescind the decision, there was a meeting between my team and the leadership of APCON and there was an understanding that because there was no breach at the time that sanction was applied there was not going to be a press release going out to the media. It was agreed that there will be no press involvement. They gave all these assurances and we left the meeting feeling satisfied that the issue has been satisfactorily resolved from the perspectives of both sides only for us to wake up the following Monday to find out that the news had been sent to the press by the same APCON officials who gave the assurances.
We have lodged a formal complaint with APCON and we are expecting that they will look at the processes and see what the issues are.
What is your vision for the company and how do you intend to actualise this?
It is to make Guinness Nigeria the most iconic and admired consumer goods company in Nigeria. In service of that, I intend to uplift Guinness Nigeria to be a clear employer of choice in this market, a company that consistently delivers superior shareholder returns and a company that is most reputed in the community. I see business like a tripod consisting of people, performance and reputation; and all three have to work in sync – and that’s my focus for Guinness Nigeria.
What are the learnings from Diageo that Guinness Nigeria have been able to leverage in terms of innovation and global best practices for the benefit of its Nigerian stakeholders such as consumers and shareholders?
Our partnership with Diageo gives us access to expertise and support. Guinness Nigeria does not only discuss new brands in the boardroom, we get them out there in the bars for people to try. Diageo is well known for stepping boldly into uncharted territories to gain strong competitive advantage. Innovation has been a key growth driver for Diageo, and same approach to business has been adopted here in Nigeria.
Just like Diageo, our innovation projects are also intrinsically tied to the commercial priorities of our market. As such, Guinness Nigeria has been at the forefront of creating new products that appeal to Nigerian tastes such as Snapp, Malta Guinness Low Sugar, Dubic, Harp Lime, and Guinness Extra Smooth. The point being that we have enjoyed good success with our innovation.
Equally in the area of global best practices, Guinness Nigeria has exploited its relationship with Diageo, Britain’s Most Admired Company 2012, to operate on the same pedestal in the areas of corporate governance, values, strategy, codes and compliance. By this, I mean we are aligned and conducting our business according to the highest governance standards which is the only acceptable way of doing business within Diageo.
So how prepared is Guinness Nigeria for the leadership position it is expected to play in the brewing market?
We are positioning ourselves ultimately to becoming the number one beer company in Nigeria. About 2 years ago, we announced an investment of about N55 billion that was intended to enable us get the capacity that was needed to meet demand in the medium to the long term. Bear in mind that the biggest challenge we had at Guinness Nigeria in the past was our capacity to meet up with the demand of our consumers. By this investment, we have been able to position ourselves to be able to meet the demands for our products for the next three to four years.
In addition to that, we are working hard to transform our route to consumer, ensuring that by our distribution strategy, we make our products available to every consumer that wants them.
Therefore, the investments that we are making in terms of capacity, the work we are doing on route to consumers, strength of our brands because we are particularly privileged to have brands like Guinness Foreign Extra Stout, Harp lager, Malta Guinness and Smirnoff Ice etc. in our portfolio; the quality of our talent – we have some of the best people around, the Diageo support, and our proven business strategy that is very strong and cash generative all give us the confidence of our ability to be even more competitive in the future.
I am sure your shareholders and other stakeholders would like to know what the N55 billion investments was spread on.
It went into capacity upgrade in our Ogba and Benin Breweries. We have invested in new packaging lines in the two breweries, upgraded the capacity of the brew houses, and put in new canning lines.
This demonstrates that we have a long term perspective to the business and the business environment in Nigeria. We are here to stay and we believe in the long term viability of our business and Nigeria. That’s why we have made those investments.
Let’s look at the Guinness Fly with the Eagles campaign; I want to know how this has translated into share growth for the brand?
I know that Nigerians love Guinness and I know that Nigerians are passionate about football. So as I said before, there is a commonality between football as the number one passion of Nigerians as well as Guinness being the number one beer brand by value in Nigeria.
We’re delighted that we were able to support the Super Eagles to break new grounds by winning the African Cup of Nations again. I am sure a lot of Nigerians will agree that, that was by no small means due to the support and role that Guinness Nigeria played. More importantly, we have given more hope to Nigerian fans on the future of the Super Eagles.
In terms of adding value to our bottom-line, you’ll agree with me that every major investment has a period of gestation. Therefore, it will be very difficult for me to tell you right now how much in terms of Naira and Kobo that investment has yielded.
What we do know is that it generated increased sales for us, particularly for brand Guinness.
Beyond that, there is a metric of brand equity that we usually track and we have seen that since the African Cup of Nations, the brand health of Guinness has grown.
Will there be a sustained investment along those lines?
We would expect to continue to partner with the Super Eagles and the Nigerian Football Federation in enhancing the quality of performance of the Super Eagles. That will however depend on a lot of factors, but it is our intent to continue to support Nigeria football going forward.
Equally, Guinness Nigeria has been the most visible industry player championing the responsible drinking campaign in the country. Don’t you think this campaign will reduce your sales volume?
We have a long and proud tradition of leadership in promoting responsible drinking and fighting alcohol misuse, raising consumer awareness, as well as setting and maintaining world class standards in responsible marketing. We believe this is only way to building a sustainable business.
For us, education is key in promoting informed choices about alcohol. In light of this we have an alcohol educational platform, developed by our parent company Diageo called DRINKIQ, which has a training session and a website. We leverage this platform to engage our employees and partners. Our hope is that this will become a reference point for government, regulators, parents and the general public to obtain relevant information about responsible drinking.
Having presided over multinational businesses outside Nigeria where you had successful tenures, are there issues that you can call out as peculiar challenges of doing business in Nigeria?
The business I managed before this job at East African Breweries was a massive one, and I had the privilege of going there and leading a huge acquisition agenda as Diageo bought a new company in Tanzania. Furthermore, we had a competitive entry in Kenya such that I had to lead the charge around protecting our share position, and had a business in Uganda that I was challenged with up scaling. It was all very exciting.
Nigeria is a different ball game. A one-country market that is so diverse from region to region, and calls for creativity to break-through in performance. Furthermore, coming in at a time that market is soft and I am challenged with sweating the new CAPEX assets.
This is also certainly challenging and exciting. So, either way, I have been blessed to have had these demanding jobs. For me, the highlight was being nominated as a top 3 CEO for the Forbes Business Leader/CEO of the Year award in East Africa last year. I hope I can replicate that in my role in Nigeria sometime soon.