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Home Opinions Blurb

Nigerian Breweries goes to the retail lab

Onome Ohwovoriole by Onome Ohwovoriole
February 17, 2020
in Blurb, Company Results, Spotlight
To protect margins, Nigeria’s top brewers are set to increase prices , Nigerian Breweries, Economy: Local corporates taking advantage of the low yield environment , Nigerian Breweries goes to the retail lab, Analysis: Nigeria Breweries, the glory days are gone
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Last Thursday, Nigerian Breweries released its audited results for the 2019 financial year. As expected, there was a slight dip in both topline and bottom line.

  • Net revenue declined by 0.4% from N324 billion in 2018 to N323 billion in 2019.
  • Profit before tax fell by 20.5% from N29.3 billion in 2018 to N23.3 billion in 2019.
  • Profit after tax dipped from N19.4 billion in 2018 to N16.1 billion in 2019, down 17% year on year.
  • The company declared a final dividend of N1.51, bringing total dividend payout for the 2019 financial year to N2.01.
  • The brewer has thus paid out its entire earnings.
Corruption, Vervelde, Nigerian Breweries, Nigerian Breweries mentioned in corruption case, company reacts , Nigerian Breweries Plc announces dividend payout for 2019 
Nicolaas Vervelde

The company attributed the poor results to the increase in excise duties, as well as the challenging operating environment.

For every N131 it made as gross profit, 74.7% or N97.9 went to marketing, distribution and administrative expenses. Finance costs accounted for 34.3% or N12.1 billion of the N35.2 billion it made as operating profit in 2019.

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Parent company, Heineken also seems to be at wits end, going by comments made by the Chief Executive Officer, Jean-François Boxmeer during a conference call following the release of its 2019 results.

“Nigeria is my most difficult thing for the moment, to be honest. It is a listed company so you can follow it. The market is growing better, so that is the good news. Pricing is not going anywhere. We have increased last year our prices in November if I recall well, and we just did it again in January but that is because of a VAT increase. Our bigger competitor in the world … recently announced that it will not increase the prices before March. It remains a very tense competitive environment. I do not know where we are going there. We hold up our share. We are still the market leader.”

[READ MORE: Analysis: Sterling Bank, where are the returns?)

The experiment

Perhaps as a means of countering this, the company has decided to set up its own distribution chain. Tucked in the annual report was a note about 234 stores. According to the firm:

234 Stores Limited is a subsidiary of the Company which was incorporated to explore opportunities in the route-to-market. The subsidiary was run during the year under review as a pilot scheme. 

Further down in the statements, the firm states that N100 million was invested.

Possible reasons behind the move

Competition in the brewery space has been stiff with the reinvigoration of International Breweries. Many distributors tend to stock all three products. Carving out its own distribution chain gives it some form of exclusivity.

The move could also lead to higher margins, for the firm, as it would be cutting off distributors who are in the middle. Margins have been squeezed in the beer space, due to the higher excise duties, and intense competition which has made it difficult to raise prices. 

Who blinks next?

International Breweries and Guinness Nigeria would be paying close attention to this experiment. If it gains significant mileage, they could decide to replicate. 

[READ ALSO: Economy: Local corporates taking advantage of the low yield environment)

Nigerian Breweries goes to the retail lab
Jean-françois Van Boxmeer, Heineken

Early days yet

So how did the experiment fare? Figures from Nigerian Breweries income statement show that 234 and Benue Bottling Company Limited’s earnings are grouped together. BBCL is inactive, so one can safely assume that the numbers are for 234 stores.

It made net revenue of N24.3 million and a profit after tax of N1.1 million, due to finance income. On an operating level, it made a N49 million loss, due to operating expenses.

NB will also need to devote more funds to this, as well as grapple with the infrastructural issues distributors face in the country. The investor call should shed more light on this.


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Tags: Guinness NigeriaHeinekenJean-François BoxmeerNigerian Breweries
Onome Ohwovoriole

Onome Ohwovoriole

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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Comments 1

  1. EJIKE KENNETH NNADI says:
    April 30, 2021 at 5:15 pm

    With due respect and honour am here to apply as one of the 234 agent in my area location..

    Reply

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