Reviews
Who’s winning the bitters brand battle in Nigeria’s bitter-sweet consumer market?
The market for bitters is gradually heating up in the Nigerian beverage market.
The market for bitters is gradually heating up in the Nigerian beverage market. There has been an increase in the number of brands making entry into the bitters market, recently, and this is boosted by the rising change in the tastes of consumers, who believe that bitters contain body purifiers, anti-malaria components, and ingredients that strengthen the virility of men.
Bitters made its entry into the Nigerian market about 10 years ago, and since then it has gained acceptance among all classes of consumers in the country. It is no longer strange in Nigeria to see young men, even the smartly dressed ones, hurriedly buying bottles of bitters early in the morning before heading off for the day’s work. As of 2014, the bitters market was said to be worth about N32.2 billion and still growing.
Bitters are flavoured extracts made from infusing herbs, seeds, bark, roots, flowers, and berries with alcohol.
On this week’s edition of product review, a weekly analysis where Nairametrics features products contending for leadership and prominence in Nigeria’s Red Ocean consumer market, we are looking at the various bitters brands and how they are competing for profitability and visibility in the market space.
Brands in the market
In the past, Swedish and German bitters were scarcely marketed in the country and because of the limited distribution line, there was not much awareness. Also, some consumers who would have possibly used the Swedish and German products believed that they were for the rich and perhaps, not affordable by the common man.
However, in 2011, Kasapreko Company Limited of Ghana led the revolution of new players in the market with its Alomo Bitters brand, while Intercontinental Distillers Limited (IDL), another major player in the Nigerian beverages segment, joined much later with its Action Bitters.
The introduction of Alomo Bitters into the market space came with an aura of class, however, the entrance of another brand, Orijin Bitters from the stables of the giant breweries, Guinness, became the game changer. Noticing the acceptance of bitters, Nigerian Breweries also came out with Ace Roots.
Since the Kasapreko Alomo’s entrance into the market, brands like Erujeje, Black Wood, Bajinotu Poka, Kerewa, Koboko, Kogbebe, Dadubule, Baby Oku, Pasa, Goko Bitters, etc., have also emerged to command significant market presence, eroding the market shares of both the traditional brands and those of the established big players and multinationals in the Nigerian beverages market.
Other brands that continue to play on the fringes include Yem Kem Nigeria’s Yoyo cleanser Bitters and Ruzu Bitters among others.
Today, most beer parlors, lounges and roadside liquor spots are filled with all sorts of alcoholic bitters of various brands that are nothing but aphrodisiacs, while in highbrow restaurants and lounges, you can only get Orijin, Ace Roots and Alomo brands.
The Alomo Brand battling against fake products
Interestingly, Alomo Bitters received immediate consumer acceptance among Nigerian consumers, away from malt and beer beverages which dominated the market then. When the product officially entered Nigeria, distributors also jumped at it, which created the visibility that helped the product boom.
Between 2011 and 2012, Alomo bitters’ market share hovered around 80 percent of the bitters market. But its dominance in the market was soon weakened, as adulteration of the product became popular a situation, where registered and unregistered bitters products and fake Alomo brands entered the Nigerian market unfettered.
Orijin Bitters reshaped the market
Many consumers were taken aback when Guinness Nigeria Plc entered a market that most people would readily dismiss as boring for such a premium institution.
According to consumers, the critical driver in the sales of Orijin can be attributed to the positioning of the brand. Several consumers, who feel that Alomo Bitters and other brands are too common, have since taken flight to the new brand from Guinness, just to stand out from the crowd. Compared to others, Orijin is also premium priced — while some bitters can be gotten for as low as N100, Orijin Bitters, which is available as Orijin in 30cl and 75cl bottles, and Orijin Bitters, in 20cl and 75cl bottles, go for as much as N500 to N700 and N300 to N1,000 respectively — a major attraction for those who want to be different. With Orijin, classy men and women could drink their herbal bitters openly and fashionably.
Guinness, in reshaping the market, also discovered that consumers at the top of the marketing pyramid, who were major consumers of Alomo Bitters, may have not felt comfortable sharing the same space with every other Tom, Dick, and Harry in the market. They needed ‘class’. This they responded to by creating a brand to take this space and appeal to those who want to stand out from the ‘Alomo crowd’.
Another magic wand by Guinness was the introduction of a herbal blend that gives a better taste and feeling of bitters and at the same time makes for pleasurable drinking, thus eliminating the ‘ugly’ taste of Alomo Bitters which was seen as a turn off for many consumers.
Here comes ACE
Few months after the introduction of Orijin into the market space, another brewer, Nigerian Breweries (NB) introduced its bitters brand, ACE, into the Nigerian market. ACE Roots was unveiled to the Nigerian market in February 2015 and comes with low sugar and a delightful flavour for health-conscious Nigerians.
What consumers are saying
Findings by Nairametrics reveal that one unique proposition for most bitters brands is the belief that it increases libido for men. Majority of the consumers of these bitters no longer drink them for their purported medicinal value but the alleged fact that it can enhance men’s prowess in bed. Even the manufacturers are promoting the drinks for its aphrodisiac powers.
Mrs. Kafayat, a seller at Ikeja bus stop, noted that men who drink Herbal Bitters can never disappoint their women in bed.
At a bar in Ogba, Mrs. Ngozi said that men drink herbs for general body cleansing, though adding, “When your body is clean of all toxins, your body will perform well.”
Asking another seller at the popular African Shrine Ikeja, about which bitters sells most and why people buy them, she said: “Baby Oku, Alomo, Orijin, Opa Eyin, all of them sell well.” She added that ‘Scoogies’, which is prepared by sellers, is more popular when compared with other bitters.
The owner of another popular bar at Agege explained that, “…these drinks do a lot to people’s bodies, so it is the one their body can take they will buy. But some people like to flirt and some say it cures waist pain and it is for cleansing the system.”
Another consumer, who simply gave his name as Afis, a Road Transport Employers Association of Nigeria (RTEAN) member at Ogba bus-stop, said,
“Orijin, Alomo, and Ace Root cannot be found on the heads of hawkers any longer, we don’t have time to begin to look for where to buy them. It is only the rich who go to restaurants to have chilled Orijin, Ace Root or Alomo, we don’t. We are on the move. Ace Root is not in sachets. With N50 to N150, I can drink a sachet or small plastic bottle from other producers.”
Verdict
In a Twitter poll conducted by Nairametrics, Orijin Bitters got 46%, Alomo got 26% while Action Bitters got 16%.
OPINION POLL: Which Bitters Drink is your favorite? Retweet and comment with #nairametricspolls
— Nairametrics (@Nairametrics) November 20, 2018
The result clearly shows Orijin Bitters leading the battle in the bitters market. However, the proliferation of adulterated brands is eating deep into the profit of major manufacturers.
This is also reflected in the comments of some of our respondents who are not on Twitter. The ones who prefer ‘Scoogies’ and brands in sachets of N50 might not really care if they are consuming adulterated versions, as long as they are affordable and make them “perform well”.
Regulatory agencies such as NAFDAC and SON must double down on their efforts to rid the Nigerian consumer market of unlicensed herbal bitter drinks that may be injurious to unsuspecting members of the public. Also, the big brands could try and package some affordable products to truly gain market share from all classes.
Blurb
Buy what? Dangote vs BUA Cement
Dangote Cement has a market capitalization of N3.65 trillion, while BUA posts a N2.49 trillion capitalization, but does size win?
I want to review the performance of the largest quoted companies in Nigeria.
On the Nigerian Stock Exchange, they don’t come any bigger than Dangote Cement (Dangote) and BUA Cement (BUA). Only MTNN stands with both cement companies in terms of market capitalization. Dangote and BUA are both blue-chip companies, in the same sector and both enjoy federal import protection, they also both serve a local market with huge demand for cement.
Which is a better investment? Let us assume I have N100,000.00 (One Hundred Thousand Naira,) which should I buy? Let us review both stocks with FY 2020 results they posted. For consistency, I am going to use my trading view terminal numbers.
READ: Dangote Cement joins MTN in the trillion-naira club, as 2020 revenue surpassed N1 trillion
Market Capitalization
First, we talk about capitalization, (Market cap is the number of shares issued x market value of shares ). Dangote Cement has a market capitalization of N3.65 trillion, while BUA posts a N2.49 trillion capitalization. Does size win? Dangote is bigger? Not yet!
Market Price
With N100,000 I can buy about 465 shares of Dangote at N215 a share and 1,360 shares of BUA at N73.50 per share. Is BUA cheaper? do we have a winner? Not quite. Let us dig deeper.
Dangote Cement posted a Net Income figure of N276 billion, if we divide this earning by the number of issued shares which is 17 billion, we get an Earnings Per Share (EPS) of N16.14, so every share of Dangote Cement earns (not pays) the investors N16. Similarly, the Earning Per Share of BUA is N2.0
READ: BUA Cement loses N162 billion in market value in a week
Thus when I buy Dangote Cement N215 per share, I am buying 16 times the earnings of Dangote. We can simplify this by simply comparing the price I pay per share of Dangote to the EPS of Dangote (Price to Earnings Ratio), thus I invest my cash of N215 to buy 16 times the earnings of Dangote, thus the Price to Earnings Ratio of Dangote is 13.31 (P/E). Using the same calculation, the price for each earnings of BUA (the P.E.) is 35.38. This means even though I am paying more cash for each share of Dangote, I am paying less to buy the earnings of Dangote, thus Dangote is cheaper than BUA.
So our first milestone is reached, we have used the Net Income, Market Price, and Number of Issued shared to get the Earnings Per Share, we have then determined what amount of earnings we are buying to determine which stock is at a bargain.
READ: Oba Otudeko’s stakes in Firstbank and Honeywell are worth over N10 billion
What else?
Let us look at the earnings that will be paid in cash. Remember, Earnings, is just the Net Income of Dangote, we as equity holders have the opportunity to share in any portion of the Net Income.
Dangote in 2020 paid out from earnings N272.69 billion as dividends, this translates to about N16 per share or in terms of returns 7.44%. We get this Dividend Yield return by comparing the dividend paid to the market price per share (D/P). BUA also in 2020 paid out N59.26 billion as dividends from earnings, this translates to a dividend yield of 2.81%.
So, if I invested N100,000 in shares of Dangote Cement, I would earn a cash return of 7.44%, if I did the same with BUA I would earn a cash return of 2.81%.
READ: Jumia: In search of the elusive break-even sales
Let us go a bit deeper…
When you buy a stock, you are buying into the earnings and cash flow. Dangote Cement in 2020 earned N276 billion and paid N272 billion as dividends meaning they retained about N3 billion for that FY while generating over N248b in Free Cash Flow. Similarly, BUA earned a net N71.52 billion, paid out N59 billion in dividends, retained N19 billion but posted a negative Free Cash Flow of (N95.49 billion). Should BUA cement have simply used that cash to finance working capital rather than paying it as dividends? Perhaps. Let us speak more of Cash flow.
Cash retained is cash not paid to you the investor. You have to ask how well your company is utilizing that cash retained. Should it all be paid out as dividends? Or retained in the company to fund expansion and growth?
READ: Three things Nigerians can learn from Warren Buffet’s latest letter
Look at it this way, if Federal Government Bonds were offering a Yield of 15% and we see that Dangote is offering a yield of 7.44%, then as shareholders you should demand that Dangote pays more cash to you to allow you to invest in FGN bonds because you get a higher return (at lower risk). The point is any company retaining cash or paying cash at a lower yield than the market is hurting the investors, who are missing the opportunity of investing higher elsewhere.
Let us score both company managers by how well they have managed the revenues and capital of the companies
| Return on Assets % | Return on Equity % | Return on Invested Capital % | EBITA Margin % | Net Margin % | Debt to Assets | Long Term Debt to Assets | |
| Dangote Cement | 14.62 | 31.21 | 26.92 | 44.04 | 24.31 | 0.24 | 0.08 |
| BUA Cement | 11.15 | 19.12 | 15.35 | 41.87 | 32.03 | 0.36 | 0.23 |
FY 2020
Across the board, the management of Dangote Cement has done a better job when compared to BUA Cement in managing the assets of the company. Dangote Return on invested capital is higher with a much lower recourse to debt and of course a higher FCF number.
Overall, on Earning, Returns and Efficiency, it appears Dangote Cement posts better fundamentals…
Do follow @FinPlanKaluAja1
This is not investment advice, this is not a recommendation to buy or sell. Past performance is not a guarantee of future performance. Speak with your adviser before investing. Equity is risky.
Reviews
Aigboje Aig-Imoukhuede’s Leaving the Tarmac: Buying a Bank in Africa – A review
This book is a simplified workbook for those of us who would like to go into the very tricky act of revamping a dying or dead brand.
What first catches your attention in this book is its unique title. What has leaving the tarmac got to do with the expected subject of the book or with the personality of its author? Your interest is stimulated nonetheless because you know that there would be some sort of tie.
The straight-to-the-point mannerism of the recollection holds you from the very start with the introduction by former President Olusegun Obasanjo. The influential statesman’s quick question about the accuracy of the book and the affirmative response of the author, which led to Obasanjo assertion that the author must have stepped on some toes since every true story comes with the good, the bad and the ugly, immediately excites your taste buds as you anticipate what the “ugly” in the book might be.
Very early in the book, you begin to link the title to the very core of the story. The author narrates his turmoil in missing his flight back to school due to the endemic corruption and inefficiency that characterized the aviation industry at that time. He states boldly and you will all agree, that this cankerworm permeates the system leading to all sort of dislocation and inefficiencies. The link is cleverly woven into the fabric of this book and his forays in business. At every conjecture, the experience as a young secondary school leaver at the Tarmac is thrown in and used as fuel to ensure that once again, he would not be left at the tarmac.
The challenges that come with operating in a heavily regulated environment controlled by strong forces, in this wise, the Central Bank, the constant struggle to align or at best position a driving personal and corporate vision to the constantly moving pieces that is public policy, especially at the level of fiscal and monetary controls, leaves the reader in awe of the duo who took upon themselves, the herculean task of building an internationally respectable financial brand.
The prose is simple, sweet and engaging. Aig speaks circumspectly and moves from topic to topic with the ease of a ballerina. As he mentions the issues, you are tempted to dig deeper but the mastery of his delivery keeps you flowing along with him as he shares his story.
My most engaging moment was the meeting between Aig, Herbert and their bosses at GTB. I had been anticipating this meeting since I started reading the book. The duo had gone very far in the acquisition process, had raised a considerable amount of money and were coasting to the point of no return when this meeting held. I was expecting more details, more gist but as is his style in this book, the epoch-making meeting was glossed over.
I would have wanted a fly on the wall description of that meeting. Was Aig scared? Was Herbert jittery? Did Fola scream? Did he beg? Were there threats? Was it a shouting match? Did anyone kneel to say, ‘don’t vex?’ I craved that drama from the book and didn’t get it.
Did this book tell us how to buy a bank in Africa or how a bank was even bought in Africa? I will say, not too well. The acquisition of Access Bank was dealt with in a hurry and even the role of BGL, the mercurial Investment Bank led by the late influential Albert Okumagba was also dealt with in a flash. I suspect that BGL people would not find this part very exciting as the story of the acquisition is stuff that is passed down generations in BGL.
Aigboje’s mettle is on display immediately after the bank is acquired. His confidence grows as he talks about the value chain strategy. A strategy he attributes the initial success to. From MTN to Dangote, the strategy enabled the nascent bank to capture a huge market share from these conglomerates, stabilizing it and justifying the confidence reposed on both himself and Herbert by critical stakeholder groups. Confidence that the man at the Banking Supervision of the CBN took almost forever to build.
This book is a simplified workbook for those of us who would like to go into the very tricky act of revamping a dying or dead brand. I tried and failed woefully ending up in an EFCC cell. For Aigboje and Herbert to take a run of the mill brand and build it into what it is today is not only remarkable but almost something of a miracle in this terrain. The meat of the book is all about this.
Here Aigboje finds himself as he floats and flies in his descriptive turn. He takes us through it all – visioning, clarity, Board building, risk management, capital management, strategy, human capital and much more importantly, his partnership with Herbert who came out in this book as dependable, bringing tremendous value to the table and making the succession plan almost seamless.
You do not sense any friction between the duo. You sense a clear understanding and mutual respect. You do not sense ambition on the part of Herbert and you see a careful portrayal of the respect Aigboje has for Herbert in this book. This to me is the success of Access Bank far and above every other thing you put in to build the brand.
One thing that kept jumping at me as I read, was the outsider mentality that never left Aigboje as he narrated his experience. The meetings at the CBN where he averred that some people already had an inkling into some of those earth shifting policies, his fear of being left on the tarmac again; but you come out of every summon to the CBN with relief that once again he was prepared. The issue of the clearing bank is an example. You will have to read the book very carefully at this point to understand the details.
Just as you are about to consign yourself to the beauty of the narrative that is the building of a bank, getting to start your review with a harsh critique of the book not being about buying any African bank, you are suddenly dropped at the feet of a second acquisition – that of the Intercontinental Bank.
Here Aigboje has found himself. His experiences during the first acquisition come to the fore. His pen gets stronger as he analyses the reasons behind the acquisition, the process itself, the advisers on the transaction and the post-acquisition challenges – human capital, technology, integration, market perception, and regulatory issues. Here, you find a more than ready Aigboje.
But here too, the story doesn’t do much for an entry-level Investment Banker looking for practical experience on M&A but goes ahead to give a world-class narrative on post-acquisition management of a super complex structure.
He finally closes the book on his thoughts and actions in the area of sustainability. Aigboje has been phenomenal in this area, working assiduously to support, entrench and work with like minds both locally and internationally in ensuring the very best in class push towards sustainability. This, I want to dare say, may have driven his resolve to leave Access Bank at the time he did, which was a clear two years from when he should have.
This book in my estimation cautiously opened Aigboje to his readers. He was careful to keep the reader in the realm he wants them to be which is the topic of the book. Buying a bank and not other more exciting areas like his personal life, his regrets, his family life, etc. Only once was his wife and children mentioned and this was as an illustration in trying to drive home a point during his take on work-life balance.
The only other time was in the first chapter in a discussion with his mother. Aigboje successfully guards his privacy, remaining formal and almost warning the reader to focus on the topic. You will not see Aigboje relax in this book, you will not see him eat at his favourite restaurant or know the kind of music he loves to listen to. In another book which he may write someday, perhaps, but certainly not in this one.
In conclusion, despite my issues with the title, this was a wonderful book. It took me less than 24 hours to finish its 217 pages but another three days to write this review because I was challenged as to what angle to tackle it from.
It was a beautiful read, written with precision, clarity and accuracy that gives it the authenticity it truly deserves.
I give it a five star and would be recommending it not only for budding investment bankers and vision-driven leaders but to the general population as it carefully explains the ethos of what I want to call a followership driven renaissance in our society in the face of the woeful reliance on tepid leadership. A powerful read.
