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Alcohol Taxes: Heineken may need to shelve plan to increase beer prices

The plans to increase prices of its products was disclosed by the the top management of Nigerian Breweries Plc, the company that manufacturers and markets Heineken in Nigeria. 

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Nigerian Breweries acquisition and merger, Heineken may raise prices of Beer, as uncertainty surrounds tax increase

Dutch brewing giant, Heineken Nigerian unit is reportedly planning to raise prices of its product in the second half of 2019, as the company prepares for the second phase increased Government taxes on alcoholic beverages.

The plan to increase the brand’s price was disclosed by the top management of Nigerian Breweries Plc, the company that manufacturers and markets Heineken in Nigeria.

“We need to increase prices to compensate for inflation pressure and the impacts of excise tax.”

According to the company’s Chairman of board, Kolawole Jamodu, brewers expect a jump in excise duties by 67 percent to N35 ($0.10) per liter in the second half of the year, as the Government enters the second phase of tax increases on alcoholic beverages.

Recap on Nigeria’s excise duty on alcohol – Back in June 2018, the Federal Government of Nigeria under the leadership of President Mohammadu Buhari, approved new excise duty rates for the alcoholic beverages in Nigeria.

In line wirh the new excise duty, the Government maintains the former ad-valorem rate of 20 percent and introduce additional specific rates with the implementation to be spread over a three-year period to also reasonably reduce the impact on prices.

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while FG granted a 90 days ultimatum before the commencement of the newly implemented taxes, the duty rates were planned to spread for three phases from 2018-2020.

According to the former Minister of Finance, Mrs. Kemi Adeosun, the upward review of the excise duty rates for alcoholic beverages and tobacco was not targeted at local manufacturers, but aimed at achieving a dual benefit of raising the Government’s fiscal revenues and reducing the health hazards associated with tobacco consumption and alcohol abuse.

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The second phase of taxes is still uncertain – From the look of things, big brands in the alcohol industry such as Heineken, are anticipating the implementation of the second phase of the excise taxes as structured by the government. However, it is still uncertain if the Nigerian government would proceed with the periodic increase in alcohol taxes.

Nairametrics had earlier reported that the FG is set to embark on a downward review of 2018 excise duties imposed on products made by brewing companies in Nigeria.

The purported downward review of the taxes by FG was to improve sales of the main alcoholic beverage producers in Nigeria. Some of the brewers are said to havd struggle with sales due to the contraction witnessed in the economy since 2016.

[Also Read: FG to review taxes on tobacco and alcohol, as brewers suffer loss]

In an email response to questions received from Paul Abechi (the spoke person for the Finance Minister) in April, it was disclosed that the difficulty witnessed by the alcoholic beverage companies is now forcing the Government to rethink the taxes earlier imposed.

“FOLLOWING CONTINUED CONSULTATION BY THE GOVERNMENT, IT HAS BEEN DECIDED AND APPROVED THAT THE EXCISE DUTIES ON WINES AND SPIRIT SHOULD BE REVIEWED. THE PROCESS HAS BEEN SET IN MOTION THROUGH THE RELEVANT DEPARTMENTS AND INTER-MINISTERIAL COMMITTEES AND IT WILL SOON RESOLVE THE MATTER IN A MUTUALLY BENEFITING WAY.”

Despite this, Heineken is preparing itself and has announced the impending move to drive prices up in order to cover for the taxes

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Can Heineken afford to increase beer prices? Just a month after the implementation of the excise duty in 2018, Heineken posted a profit of .1 percent to €950 million ($1.1 billion) from January to June 2018, while revenue hit €10.8 billion, up 4.2 percent from the same period last year.

Overall, Nigerian Breweries Plc, the maker of Heineken, posted a 22% decline in profit for half year 2018. The N19.4 billion Profit after Tax in 2018 recorded by the company during the period under review, was lower than the N31.6 billion recorded in 2017; thereby representing a 41 percent profit decline.

According to the company, the new excise duty regime and higher tariff rate were responsible for the poor half-year financial report. Hence, another price increase could potentially drive down sales and further affect the company’s revenue and profit.

Heineken is arguably one of the world’s top beer brands. However, the brand continues to face tough challenges in Nigeria due to competition from other brands and the slow growth in the economy.

Nairametrics earlier reported a 1 percent decline in the consumption of Heineken in Nigeria in half of 2018 due to increased competition in the beer market.

With all these in perspective, it may be a wrong timing for any upward review of prices for a product facing such stiff competitions in the market.

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. Juddy

    May 9, 2019 at 10:42 am

    To be honest. this news pleases me. because it speaks to the revival of many beer factories that has been closed for decades. Sorry Heineken. Time to evolve

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Coronavirus

COVID-19 Update in Nigeria

On the 18th of September 2020, 221 new confirmed cases and 1 death were recorded in Nigeria.

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 56,956 confirmed cases.

On the 18th of September 2020, 221 new confirmed cases and 1 death were recorded in Nigeria, having carried out a total daily test of 2,609 samples across the country.

To date, 56,956 cases have been confirmed, 48,305 cases have been discharged and 1,094 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 482,321  tests have been carried out as of September 18th, 2020 compared to 479,712 tests a day earlier.

COVID-19 Case Updates- 18th September 2020,

  • Total Number of Cases – 56,956
  • Total Number Discharged – 48,305
  • Total Deaths – 1,094
  • Total Tests Carried out – 482,321

According to the NCDC, the 221 new cases were reported from 18 states- Lagos (59), Abia (46), FCT (22), Gombe (20), Plateau (17), Rivers (11), Bauchi (7), Benue (6), Ekiti (6), Imo (6), Kaduna (4), Kwara (4), Ondo (4), Ogun (3), Osun (3), Bayelsa (1), Edo (1), Kano (1)

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 18,827, followed by Abuja (5,526), Oyo (3,226), Plateau (3,192), Edo (2,611), Kaduna (2,326), Rivers (2,220), Delta (1,799), Ogun (1,758), Kano (1,734), Ondo (1,594), Enugu (1,234), Ebonyi (1,035), Kwara (1,013), Abia (881), Katsina (845), Osun (810), Gombe (799), Borno (741), and Bauchi (689).

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Imo State has recorded 557 cases, Benue (473), Nasarawa (447), Bayelsa (394),  Jigawa (322), Ekiti (313), Akwa Ibom (288), Niger (250), Anambra (232), Adamawa (230), Sokoto (161), Taraba (95), Kebbi (93), Cross River (85), Zamfara (78), Yobe (73), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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Business

BREAKING: Fire guts fuel tanker, vehicles at Anthony, Lagos

The tanker conveying PMS lost control while in motion and subsequently fell sideways.

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NNPC reacts to Lagos pipeline explosion

There is a fire outbreak, which has gutted a fuel tanker, at Anthony inward Gbagada, Lagos State.

This was disclosed by the Federal Fire Service via its Twitter handle on Friday evening. The incident, which occurred around 10 pm, has razed at least two vehicles.

The agency urged road users to avoid the area and take alternative routes.

Also, the Director-General of the Lagos State Emergency Agency, Dr Olufemi Oke-Osanyintolu, confirmed the incident.

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He said, “The Agency responded to distress calls and upon arrival at the scene of incident, it was discovered that a tanker with unknown registration number conveying PMS lost control while in motion and subsequently fell sideways.

“This led to an explosion in which two unidentified vehicles were burnt.”

A joint team of responders led by the Federal Fire Service, LASEMA, LASG fire service, LRU fire unit, Nigeria Police and LASTMA are working together to curb the inferno from escalating further.

Details soon …

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Tech News

Facebook to open Lagos office in 2021

When the social media giant comes to Nigeria, it will be its second office on the African continent.

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Facebook set to award $3 million in Community Accelerator program, Facebook to invest $100 million in media houses as coronavirus crashes their revenue, Facebook to expand Coronavirus Information Centre to Nigeria, 16 other African countries

Social Media giant, Facebook announced it would open an office in Lagos in 2021, its second office in the continent and the first in Africa to house software engineers.

This was announced by Facebook Program Manager, Chimdindu Aneke on social media. “We are opening a Facebook office in Lagos, Nigeria later in 2021,” he said.

He added that the office would be the first in Africa by Facebook for the purpose of engineering and “building for the future of Africa and beyond”.

Media aide to the Presidency, Tolu Ogunlesi quoted Facebook saying, “As part of its continued commitment and ongoing investment in Africa, Facebook today announced it will be opening an office in Lagos, Nigeria – its second office on the African continent.”

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In 2019, Facebook’s biggest market in Africa was Nigeria with 33 million monthly active users.

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