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Nigeria’s triangular beer war on the rise with the arrival of Budweiser

Africa is the fastest growing region for beer consumption.

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According to a report by a market research group, Global Data, Africa is the fastest growing region for beer consumption. Nigeria, however, leads the pack of 10 biggest beer drinking countries on the continent. Beer brands make up just 16 percent of alcohol consumption in the country, while other drinks (spirits and locally brewed drinks) make up 84 percent.

Until recently, the race for the biggest beer market share in the country was a two-horse race between Heineken N.V., owners of Nigerian Breweries Plc and Diageo, owners of Guinness Nigeria.

The narrative seems to have changed with the recent introduction of new products such as Budweiser, dubbed as the king of beers, from the stables of AB InBev, the parent company of International Breweries, into the Nigerian market. The battle now seems to be among three international players, which many have termed as the “Triangular Beer War”.

This article seeks to examine how major players in the beer business are handling the stiff competition and get a feel of consumers’ pulse about the new beer product, Budweiser.

The race for expansion and market share

The year 2011 ushered in a disruption in the beer market with the arrival of SABMiller, which was then the world’s second-largest brewer, into the country, and its acquisition of majority shares in International Breweries Plc, makers of Trophy Beer, located in Ilesa, Osun-State.

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However, in 2017, AB InBev acquired 72.17% of SABMiller’s shares in International Breweries Plc, in a series of transactions which resulted in AB InBev acquiring controlling interests in the company.

After the acquisition, a merger arrangement was later consummated with International Breweries Plc and two other local brewers: Intafact Beverages Limited, makers of Hero beer which is popular in the South-Eastern part of Nigeria, located in Onitsha Anambra State, and Pabod Breweries Limited, makers of Grand Lager, located in Port-Harcourt. All are now controlled by AB InBev.

In a swift response to AB InBev’s entry into the Nigerian market, Nigerian Breweries Plc also acquired breweries across the country. The company recently introduced the Tiger Beer brand into the Nigerian market.

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The company acquired a controlling interest in Sona Group in January 2011 and also merged with Consolidated Breweries Plc, thereby adding its three breweries in Ijebu-Ode, Awo-Omama, and Makurdi to the Nigerian Breweries.

The last but not least in the triangular war, Guinness Nigeria Plc, acquired the rights to distribute McDowell’s, a mainstream spirits brand of United Spirits Limited in Nigeria. It also recently introduced the Orijin brand into the Nigerian market apart from its Guinness stout brand.

Budweiser in the market mix

The recent introduction of American lager, Budweiser, into the Nigerian market is seen as another masterstroke from AB InBev to take on Heineken’s Star, Heineken itself, and Guinness Foreign Extra Stout.

Heineken Nigerian Breweries and Diageo Guinness are far from being mere pushovers in the beer market. They are still the market leaders, with AB InBev having less than 20% of the market share.

With several decades of market knowledge, access to huge cash stockpile (debt raising or reserves) and stronger trade leverage; the new beer brand, Budweiser will be in the ring with two formidable fighters who know the Nigerian terrain quite well.

On the media side of things, Budweiser picked up the exclusive broadcast sponsorship rights for the FIFA World Cup Russia 2018 with DSTV, Nigeria’s largest pay-TV platform. The move is a strategy to put the new beer, Budweiser, right in the face of Nigerians and also leverage on the popularity of the game in the country.

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Nigeria Breweries have responded in kind with their own massive media blitz! Just as Budweiser was introduced in the country they also launched the Stellar brand to compete directly with Budweiser.

Guinness doubled down on their popular Orijin drink launching it in new per bottles.

What consumers think about the new Budweiser beer

In a product review by Nairametrics, consumers expressed divergent opinions on the taste and the acceptability of the new brand in the Nigerian market.

According to a respondent, Darlington Oleru, the beer is yet to get local acceptance from consumers. This, he noted, will come with time.

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Another respondent who spoke with Nairametrics revealed that he took the beer once during the world cup matches as a promo drink, but noted that there is nothing extraordinary about it.

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According to him:

“It is just there. I expected that with the amount they must have pushed into promotion, they would have done something different. Nothing moves the market like a new concept.”

However, most of the respondents noted that the beer is too light and urged the brewers of the beer to make it stronger to maintain the buzz gotten from the world cup adverts.

The verdict

Without question, the billion dollar beer market in Nigeria is facing challenges from the changing taste of Nigerians, however, it is only likely to grow as billions in ad revenue spend refocus the interest of Nigerians.

The emergence of a triangular beer war in the country is good for consumers, as they now have various brands to select from with prices expected to remain stable if not lower.

The three big operators are on their toes to ensure that they maintain, if not improve their market share, voice, and visibility on store shelves.

Whether AB Inbev’s huge bet with Budweiser’s introduction into the Nigerian market would succeed is hard to predict.

However, one thing is sure, Nigeria Breweries and Guinness are not sitting by and watching. They are fighting back and have the financial resources ad experience to defend market share, even if it means that they all lose and consumers win.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via [email protected]

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Reviews

COVID -19 saving Nigerians millions in wedding and burial costs 

As long as the pandemic persists, the ‘new normal’ is for ceremonies to remain subdued.  

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It was a sunny Saturday in May and like it had been for the better part of 8 weeks, the new normal was in force in Nosa’shousehold. The lockdown induced COVID-19 meant that all the hustle and bustle of giving attention to side hustles on weekends had all evaporated. Now he spent more time with his kids watching TV and playing video games. Whilst he has had to endure multiple weekends of lost revenue, staying indoors meant that his personal finance was still intact. But things would change dramatically this weekend. 

Nosa got a call that he had just lost his aged mother to a brief illness. He had been battling with a terminal illness for years, but things seemed to be under control so her death came as a surprise. Even as he grappled with the thought of losing his mother, Nosa knew that he had to start making preparations for the expenses that are bound to come with burials in an African setting.  

Thanks to the pandemic, and rules that came with it, Nosa ended up spending much less than he would have for his mother’s burial with most of the funds going towards mortuary expenses, transport and the direct cost of the actual burial itself.  

READ ALSO: Post COVID-19: The Challenges Ahead

“This COVID-19 is bad but it has saved me millions of naira that I would have spent in this burial,” he remarked.  

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“I wanted to give my mom a befitting burial but these are hard times and I may have borrowed money just to fund this. But with COVID-19 and social distancing in place I did not have to do any of this,” Nosa informs our reporter.  

Nosa’s gains translate to massive losses for a whole chain of service providers in the event management industry. Similar occurrences over the last few months have resulted in the loss of revenue for such businesses.  

Events in Nigeria often cost anywhere between half a million naira to over N100 million depending on the financial muscle of those spending. Burials, weddings, naming ceremonies and birthday parties, make a burgeoning industry that spans several sectors of the economy.  

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From mortuaries to casket makers, event planners, event Halls rentals, professional mourners, caterers, confectionaries, party rentals, photographers, video editors, tailors, newspapers , etc, its an entire value chain of businesses that provide one service or the other for this industry. 

Each of these events cost millions of naira to organize hosting as many people as the budget can support. According to a CNN article quoting a report from TNS Global, Nigerians spend as much as $9,460 for a wedding ceremony. The report also indicates the party industry could be worth as high as $17 million based on statistics in 2017. 

The math can be easily deducted. Assuming 50,000 ceremonies every weekend at an average cost of N1 million that is a N50 billion per weekend or N2.7 trillion ($6.75 billion) per annum. GDP data from the National Bureau of Statistics indicates sectors that support the ceremonies market in Nigeria, telecoms, transportation, Arts and Entertainment is worth a combined N18.4 trillion. 

Technology Ceremonies 

Chuks, a Partner at a top consulting firm in Nigeria admits were it not for the pandemic his wedding could have cost him about N15 million personally and another N20 million spent by family, friends, colleagues and well-wishers. He is in his forties and his wedding had been much anticipated. He went ahead with his wedding last weekend with less than a dozen people in attendance and over 140 others logging on via Zoom. He claims while he ended up not spending millions on food, drinks, wedding halls and other logistic costs, he still achieved his goal of getting married.  

Necessity they say is the mother of invention and has millions stay locked in their homes, they have resorted to apps such as Zoom, Instagram Live, Microsoft Teams to hold virtual events. These days Zoom themed parties now have their own rules and conventions. Friends from all parts of the world log in with each person taking turns to say nice things about the celebrants. Games are conducted to spice up the event and stories told by the celebrant. Music is also played by the Zoom host with participants dancing and having fun.  

“It is like watching a live movie and also being part of it as the audience and participant” a wedding planner informed Nairametrics. Whilst one cannot underrate the connection physical socializing brings, virtual meetings are gradually becoming a lifestyle and the longer social distancing continues its cultural significance will only continue to increase.  

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AderonkeAdebamibola, CEO of  Unik Ushering Agency, an Event management firm, confirmed to Nairametrics that business has really slowed down in the last few months. “Even though the NCDC has now given rules to guide weddings and other events, the budget now is way less than it used to be due to the cap on numbers of guests” she explained.  

Now, most events are kept within the premises of family residences, depriving hall rentals, the money they could have made from leasing out their halls. Venue decorators also have much less on their hands to do, as they no longer have to decorate big halls.  

According to Adebamibola, every single business in the chain has been affected, from caterers to ushers.  

“Now, we even have to convince them to use one or two ushers for their events because they believe they don’t need ushers for 20 or 30 guests. Caterers cannot even cook a half bag of rice now because of the number of guests. This means that they are also paid less for their services, even if they expend the same energy and time” she said.  

The new normal in this industry means that the things that used to be prioritized are no longer priorities. Hand sanitisers, face masks and hand washing equipment are now compulsories in events, while the hand-shaking, and hugs that would have characterized such weddings.

READ MORE: Governor David Umahi of Ebonyi tests positive for COVID-19

Due to the nature of the industry, a large percentage of the staff are kept on contract basis, so the reduction has not really translated into lay-offs. However, the industry revenue has been badly hit. A contract staff with NPU Events, who preferred anonymity, noted that in the last three months, she has only been called twice for events.  

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Since this forms a major part of her income, it has caused a major dip in her resources. COVID-19 has brought unwanted hardship to the Nigerian economy with small businesses and workers in the informal sector suffering the most.  

A recent World Bank report indicates the Nigerian economy might contract by as much as 3% in GDP growth rate this year. This informed government’s latest decision to inject about N2.3 trillion into the economy to spur economic growth. The funds will be targeted at small businesses through non-collateralized low-interest loans.  Whilst all these initiatives are geared towards stimulating the economy, the spending power of Nigerians will remain pivotal and as long as the pandemic persists, ceremonies will remain subdued. 

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Business Half Hour

BHH Podcast: What 2020 holds for SMEs (2) – Ugodre

Business Half Hour (BHH) is a weekly podcast targeted at Startups and Entrepreneurs, who are redefining the Nigerian business scene through innovation.

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BHH, Podcast, WAVE, entrepreneurs, business, Nigerian, concept, business, ethics, Goal, Setting, Actualization, Greymate Care, Chika Madubuko,, business ethics Femi Adeyemo, BHH Podcast, Fundall, Swift Medispark, Ugo Nwokoro, technology in healthcare, EazyHire, Data Science, Yvonne Alozie, Gitgirl, Verifi, CAMA and taxes for SMEs, Tayo Lekan-Agbaje, Dclutterng, Business half hour, BHH Podcast, Oluyomi Ojo, Taiwo Obasan, Nigerian shoes business

Business Half Hour (BHH) is a weekly podcast targeted at Startups and Entrepreneurs, who are redefining the Nigerian business scene through innovation.

In this episode of #BHH, Ugodre gave an insight into how business climate would be for SMEs and an overall outlook on the global and national economy. Enjoy!

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Business News

Ikeja Electric, GRA Ikeja residents sign contract to deliver 20 hours daily power supply 

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Ikeja Electric (IE) announced it has signed a Power Purchase Agreement with residents of Ikeja GRA to deliver “up to 24 hours of supply daily”. The company tweeted this on Friday revealing that it is in line with the company’s Bilateral Power Agreement.

However, the company representatives explain that it is a minimum of 20 hours of power supply for residents of the association. Ikeja GRA includes streets like Oduduwa, Isaac John, Joel Ogunaike, Fani Kayode, etc.

In its previous Power Purchase deal with Magodo Residents, it stated that “with the agreement, IE will provide the residents with electricity supply beyond the existing standards, with guaranteed performance levels. In addition, there will also be access to dedicated Customer Care and Technical teams for prompt resolution of queries and/or technical issues within the estate.” 

Also, the Chief Operating Officer, IE, Mrs. Folake Soetan expressed confidence in the success of the trend-setting agreement, which she noted was in line with the Federal Government’s willing seller, willing buyer policy. 

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What this means: The Power Purchase Agreement suggests residents of the Ikeja GRA will enjoy a steady power supply when compared to non-residents. However, they will have to pay tariffs much higher than is provided for in MYTO. Residents in Magodo who currently enjoy a similar arrangement informed Nairametrics that they pay higher tariffs but have enjoyed regular power supply and often go days without a power cut. 

They also explain that even when the power cuts they get messages from Ikeja Electric explaining why the power was cut and indicating when it will return. We understand Ikeja Electric still relies on the grid to deliver this power as such power cuts will still be expected in the transmission and distribution end.

Backstory: In August, Ikeja Electric announced it signed a similar power purchase agreement with residents of Magodo, providing them a power supply of up to 20 hours daily. Residents of Magodo, have enjoyed steady power since then and are thought to be paying about N47 per kilowatt-hour of power compared to the MYTO tariff which is N23.10 for residential customers.

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Sources with knowledge of the transaction indicate Ikeja Electric is likely to extend this arrangement to other estates within Lagos, in a move that disrupts the power sector dynamics. Residents in the Eko Franchise area seeking regular power supply have also demanded a similar deal and are ready to pay for a tariff that is higher than the MYTO approved tariff for general customers.

It is however not clear if the Nigerian Electricity Regulatory Commission, NERC has approved this arrangement.

 

 

 

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