In this interview with journalists, the Managing Director, International Breweries Plc, Mrs. Annabelle Degroot spoke on the company’s plan to open a $250 million mega plant in Shagamu, among others issues. Nume Ekeghe presents the excerpts:
What is AbInbev’s plan for its Nigerian unit and what brought about this merger?
We are committed to long-term investment in Nigeria. So, the business here is on the spotlight and AbInbev Global Corporation believes there are lots of opportunities just as many companies do believe in Nigeria. Already, we are investing in the fourth and largest brewery outside Lagos, in Shagamu that would come online next year and it is our largest brewery in Africa outside of South Africa. That shows the commitment of the group to the country and the level of investment for that brewery is over $250 million.
We have decided that running these three companies individually has not been as efficient as it can. We have reached a size where it makes sense now for us to merge these companies together and act as one larger corporation in Nigeria. It is welcomed by the board of Intafact and the other two companies. AbInbev would have the majority shareholding so we would have over 70 per cent of the shares and all companies would merge into international breweries.
In Nigeria, we have three companies -International Breweries, IntafactBeverages based in Onitsha and PabodBreweries in Port Harcourt. International breweries Plc is our listed company founded in 1971 and listed on theNigerian Stock Exchange in 1995 and commenced production in 1978 with trophy larger. We have a capacity of 1.5 million hectolitre. So, it’s a large brewery and this would be the surviving entity of the merger. Also, Intafact has a capacity of 2.7 million hectolitre which is the biggest brewery based in Onitsha
How do you intend to compete with the big existing beer brands in Nigeria?
The good news is that we are not new to the market. We have been competing in this market for eight years now and, so we know our competitors and we know them well. One thing we have done is to take market share from our competitors. So, I do believe we have got very relevant brands that have a great role to play in Nigeria. So, Hero and Trophy will not be new brands and they are doing very well in the country.
The good news now is that with the increased capacity coming, we would be able to get those brands to more consumers. So, now, we do focus our Hero and Trophy beers primarily in the region they are produced. But with the new capacity coming, we can provide that choice to new consumers.
On the values we would bring to consumers, we would bring in choice. So, making our products available to everybody and providing a wider portfolio of products. So, in the core space, we would have Hero and Trophy beers which most of our consumers want to buy. And for more premium products, they would be able to buy Castle Lite, Budweiser and another brand called Eagle which is an affordable product.
We are prepared for the competitors and I guess we are already competing. But the good thing about this merger is that it brings in more products and capacity.
After the merger of three subsidiaries, are you still going to retain the existing local brands?
Absolutely. One of the most important things about ABINBEV is that our beers are local. We always focus in countries on the most important local brands. We then bring in some global brands like Budweiser, Corona, Stella Artois to have some fun for choice but those are never going to be your biggest brands, the local brands would always be the biggest brands.
You mentioned earlier that your firm is building the second largest brewery in Africa, what is the expected capacity?
I am not able to give you the exact capacity because of competitive reasons. But we are spending more than $250 million on it the plant in Shagamu and it is bigger than any of our current brewery. So, it is a large brewery for us.
On listing on the NSE, what level of approvals have been obtained?
The merger is effective; it became effective on the 13th of November. And the requisite approvals from the SEC have been received as well. The stage we are presently is getting the SEC approvals for the issuance of the shares of shareholders of Intafact and Pabod. Following that, the shares would be issued to the requisite shareholders and we expect that latest by the middle of December it should be sorted.
How much raw materials do you source locally and how do you intend to deepen that?
Something I really like about our business in Nigeria is that majority of our raw materials are sourced locally which is great news- all our packaging, bottles, maize and sorghum. The only thing we do not source locally is malt and unfortunately, that is because we do not have a barley industry here in Nigeria. I know a lot of people have looked at in the past and would continue to look at. However, that does not stop us from increasing the local source of content of our beers from things like Sorghum and cassava.
And there are also some opportunities in our beers to do that. We also have good experience in using sorghum and cassava in many of our African countries. So that is a project we are working on.
One thing we always strive to do as ABINBEV is to increase our local sourcing as much as possible but the good news is that we locally source majority of our products here.
After the merger, would there be downsizing of staff?
The position we are in is that because we are in a growth situation and because we are adding a new brewery and expanding, we would have a lot of vacancies in our business both in technical and on the sales front. So, rationalisation is not part of this merging process which is good news.
For International Breweries, there was a spike in operations cost and that led to bad debt in your recent result. What are you doing to address that?
As you know, we have recently been taken over by AbInbev and because of that we have much stricter and more prudent ways of recognising debt (s) that could possibly go bad. So, we provide for it at an earlier stage than we have done in the past. This year, there has been an alignment within our financials to get us in line with our AbInbev global policies.
In merging these companies together and acquisition, how would you asses the ease of doing business in Nigeria?
I haven’t been here for long, so it is difficult to answer that question other than to say that this merger process has been handled very well. I can only say that this is a good experience.
When is the brewery in Shagamu starting operation?
I would say in the second half of next year. It is a large project and as you know with large projects, it can often slip. But we expect in the second half of next year.
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The good news is that we are not new to the market. We have been competing in this market for eight years now and, so we know our competitors and we know them well. One thing we have done is to take market share from our competitors. So, I do believe we have got very relevant brands that have a great role to play in Nigeria. So, Hero and Trophy will not be new brands and they are doing very well in the country. The good news now is that with the increased capacity coming, we would be able to get those brands to more consumers
