Fresh Battle for Beer Market Leadership

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Raheem Akingbolu takes a look at the dynamics in the Nigeria’s beer market and the struggle for leadership among the top three players in the industry

The last few days have thrown up more questions than answers about the happenings in the nation’s beer market. The conversation began with an announcement by a report that International Breweries had taken number two market share from Guinness Plc. The harbinger of the news is a financial resource company based in Nigeria, with special focus on financial literacy and investor advocacy.

The announcement first attracted critics and market analysts, who threw salvos at the promoters of the resource company, and queried the yardsticks used to arrive at their judgement. While the debate continued, a section of the market saw the need to look at the message and ignored the messenger. The fallout from this was that critical analysis of the players and their performances in the last few years surfaced on the front burners. More than other brands, discussions now centers around the major players in the Nigerian beer market; International Breweries (owned by AB InBev), Guinness Nigeria (owned by Diageo) and Nigeria Breweries (partly owned by Heineken).

Beyond other indices used to arrive at the latest conclusion, pundit had earlier argued that the drop in purchasing power of consumers has seen competing beer makers suffer declining bottom lines. A situation that has compelled the spin doctors behind top beer brands to be working with anxiety and panic in order to remain relevant. Perhaps mostly hit are premium brands like Star, Heineken, Gulder and Guinness Stout, that have lost market shares to mid-range brands like Goldberg, 33, Trophy, Hero, Life Beer and other cheaper brands.

But according to report, comparative data from the financial statements of three of the largest beer makers in the country suggest that Guinness Nigeria Plc has lost its place as the second-largest brewery by revenues to International Breweries. According to the findings, as at the half-year ended December 2018, Guinness Nigeria reported revenues of about N67.79 billion, compared to N70.5 billion in the same period a year earlier. International Breweries, on the other hand, was quoted to have reported half-year revenues for the period ended June 2019 of N68.6 billion, slightly overtaking its rival. A situation that has compelled some analysts to conclude that International Breweries poses threat to Nigerian Breweries and may soon unseat the nation’s number one beer maker.

However, few questions are already in the public domain based on the new dynamics. One, some market watchers have wondered if International Breweries has enough product offering to maintain the position. Of course, many have also challenged Guinness on strategies it would embark on to regain its position. Finally, observers are keen about how Nigerian Breweries will consolidate its leadership in the market despite the challenges being faced by some of its brands.

Global Market Trend

Across the globe, sub-Saharan Africa is the fastest growing beer region with an estimated annual growth rate of 5 per cent between 2015 and 2020. In comparison to Asia, Middle East & North Africa and Western Europe which are 3 per cent, 2.8 per cent and less than 1 per cent respectively. Nigeria, which is Africa’s largest population, is the largest beer consuming country in Africa with an annual average per capita consumption of 12.3 liters.

Due to the high consumption levels, Nigeria seems like a no-brainer for brewers. Also, unlike other countries, Nigeria currently does not have strict policies and regulations in regards to production, marketing and consumption of alcohol. Though, it can be argued that the country has the legal drinking age and she has regulations for TV advertisement, but one major challenge is that the country does not have regulations on the quantity purchased.

Emerging Scenario

Until the new findings, Nigerian Breweries and Guinness were the two leading alcoholic and non-alcoholic beverage makers in the country. But in the last two years, it is obvious that they can no more sleep with their two eyes closed as a new entrant -AbInBev Nigeria, seems determined to conquer the market. Eight years ago, AbInBev Nigeria, believed to be one of the biggest beer manufacturers in the world, entered the market and breathed life into Hero and Trophy. The two regional brands, which were until then inactive, quickly gained acceptability and became consumers’ delight.

Guinness and NB are though long-standing rivals, the feud between them heightened with the launch of Legend Extra Stout in 1992 by Nigerian Breweries.

The cold war, could however be dated back to 1962, when Guinness brewery was established in Lagos. Before then, the NBC (which became the Nigeria Brewing Limited, NBL, and now the Nigeria Breweries Plc) was the major manufacturer in the beer sector, while a company was formed to import Guinness extra stout into the country from Ireland.

But since 2011, when AbInBev Nigeria, acquired majority share in the International Breweries Ilesa, manufacturers of Trophy Larger and took control of the ownership of Hero, a popular brand in the Eastern market, the game has changed.

Within short period, Trophy was believed to have moved to the top on the priority list of beer consumers in the South-west while Hero is also performing wonder in The Eastern market, but not without resistance from Goldberg and Life Beer.

Despite the growth recorded with the launch of its Orijin brands few years ago, Guinness was also caught in the web, as sales of Stout also dropped. Left with no option, Guinness had quickly run to the drawing board and introduced a new beer brand –Guinness Gold to tackle Trophy and Goldberg.

for brands like Gulder and Harp, observers have continued to argue that both brands have consistently remained struggling brands and sort of burden on Nigerian Breweries and Guinness respectively. But while Guinness appeared to have given up on Harp, Nigerian Breweries is still making frantic effort through rebranding and activations to boost Gulder, even though the moves appeared not to be making any difference.

Trophy vs. Goldber

Trophy Lager Beer was launched in 1978 by International Breweries; in 2011 it was taken over by SABMiller (now ABInBev). While Goldberg Lager Beer was acquired by Nigerian Breweries and re-launched in 2012. Trophy and Goldberg are popular and battling for market share mainly in the South Western part of Nigeria, (Osun, Oyo, Ondo and Ekiti states). Both brands can be found in other South Western states, but Goldberg has better distribution in the South-west and South-east. Mainly because of their production capacity as well as the fact that over the past 72 years Nigerian Breweries has been able to build their distribution network

Both brands are using folklore and tradition to grow their brands. Trophy has been synonymous with the tagline ‘Honorable’ – a brand fit for an Honorable. The face behind this Honorable was initially Femi Adebayo, an actor, until recently when two others, Joseph Yobo and Falz were appointed as ambassadors to join Adebayo. While Goldberg has been synonymous with the tagline ‘Your Excellency’ – a brand that is suitable for His Excellency. The face behind this Excellency is Odunlade Adekola, also an actor with huge followers. Aside this, there is also a subtle war between ABInBev’s Budweiser and Nigerian Breweries’ Heineken

Final Showdown

It is important to note that Guinness reports its full-year results ended June 30th every year, while International breweries adopt a full year-end date of December 31st every year. In the quarter ended March 2019, Guinness reported revenues of N33.6 billion compared to International Breweries’ revenues of N33.5 billion. In the quarter ended September 2018, Guinness posted revenues of N28 billion compared to International Breweries N30.2 billion.

Also, in the quarter ended December 31, 2018, Guinness and International Breweries reported revenues of N39.7billion and N32.7 billion respectively. Guinness is yet to release its June 30th, 2019, audited results.

Guinness typically post strong revenues in the quarter between April 1st and June 30th. Both companies do not publish their volumes.

But with a half-year (January to June 2019) revenues of N170.1 billion, Nigerian Breweries clearly leads the duo of Guinness and International Breweries.

Experts who work closely both on the agency and client side of the beer heavyweights vehemently disagree with the above figures. While they admit that Nigerian Breweries is leading the pack, International Breweries’ reported second position is untenable to them.

Though those who share the above sentiment, admit that the report is helpful, they argue that every other thing was based on the said companies’ financial statements which could be disproved. They believe that only the sales volume of each brewer could enable analysts to come up with accurate data.

Experts’ views

Speaking to THISDAY on the recent development, a strategy and brand enthusiast with wide experience in the marketing and public relations terrain, Mr. Bolaji Okusaga, agreed that in the mid-market, Trophy has garnered huge market share essentially against Star and other lagers in its category. He argued that Budweiser is also competing strongly in the premium segment against Heineken with Guinness Gold as distant third.

In the budget category, Okusaga also pointed out that, “Hero has taken the East and is out-performing budget brands such as 33 lager. Guinness has only been able to maintain its lead in the Stout category and that lead is shrinking.

Last year, Nigeria Breweries reported a 35 per cent drop in its profit and Guinness is confronting same scenario as International Breweries, the Nigerian subsidiary of ABInbev continues to reshape dynamics in Nigeria’s beer market.

“A lot will depend on product innovation, marketing and distribution strategy. What ABInbev is pursuing is an encirclement strategy rather than going head-to-head with Nigerian Breweries. They first captured the Eastern market with Hero – a local product that taps into the Biafran narrative and upgraded Trophy in terms of quality – moving it from a budget brand to a mid-market brand – and pitching it against star lager in the West. Again, they introduced Budweiser in the premium category and are competing comfortably with Heineken. They have a good spread in terms of distribution and a very strong marketing strategy which has so far worked well. As for sustaining their advantage long-term? That will be difficult because the other players are not sleeping,” he said.

With a population of almost 200 million people with 70 per cent below 40 years, the expert said it has been difficult for the old brands to maintain their age-old equity because the core of their adorers are aging, and given that demographic realities which favours younger drinkers, he maintained that the field is open for an audacious competitor.

“The greatest strength of ABInbev is their strength in product innovation and their unconventional approach to marketing. What matters is that they are able to maximise their reach while minimising their spend – achieving so much with little. It is a fast-transforming landscape and promises to remain ferociously competitive for a long time. The opportunities are boundless given the young population and a vibrant social scene with increasing broadband penetration. The Nigerian beer market is the place to be for audacious players at this point,” he added.

A brand analyst and co-founder of Radi8 Ltd, a marketing communications firm, Mr. Toni Kan, though admitted that strong competition exists in the beer market, pointed out that the market was still active and commanded huge potential.

He said: “In any competitive market, it is natural for players to deplore strategies that can connect with consumers. Much as I agree that there is unrest among the players, I don’t agree totally with the belief that beer consumption has dropped.

“To me, what happened is that consumers have shifted from some brands to another set of brands. It used to be Heineken, Stout and Star, but the paradigm seems to have shifted to mid-range and regional brands like Trophy, Goldberg, Life and Hero.

“No doubts, the premium brands are challenged but their promoters were smart enough to quickly key in and offer products that could compete well with those in high demand. That explains why Guinness recently launched Gold while Nigerian Breweries continue to make waves with Goldberg, 33 and Life,” Kan stated.

Much as it is difficult to take the recent revelation hook, line and sinker, it is also difficult to dismiss that there is no uphill in the market.