Nigeria’s top brewers are considering increasing the prices of their products in a bid to survive. This comes as these companies’ earnings reports for the nine months ended September 2019 showed generally underwhelming performance, no thanks to rising operating costs. However, there is the question of whether the move is coming at the right time, especially considering the economic difficulties consumers in Nigeria are currently facing.
Reacting to this, a Macro-Economic Strategist at Afrinvest, Adebayo Kakare, argued that the move is necessary even though it’s not coming at the right time. Bakare, who spoke with CNBC Africa’s Market Watch host, Esther Awoniyi, also explained that increasing the price would help to alleviate some of the pressures already being faced by the companies. In other words, the brewers are expected to record better performances after they increase their prices.
Still on whether the move will impact negatively on patronage, Bakare admitted that these companies’ products are somewhat “elastic”. However, there are consumers who can afford to tolerate any price increase because of their loyalty towards these brands.
“Guinness and Nigerian Breweries (which are the market leaders) have come out to say that in order to protect margins at this point, they have to review prices… It’s definitely not good timing. But they are basically between a rock and a hard place.
“For most of the companies like Nigerian Breweries, we expect that to an extent, increasing prices would alleviate some of the pressures they’ve faced.”
Note that reduced earnings and high costs of sales are two of the major factors mitigating against these brewers. In June 2018, the Nigerian brewery industry witnessed an increase in excise duty, a development that contributed immensely to the problem.
You may watch the full interview with Adebayo Bakare by clicking the link here.