Despite intensive advertising, International Breweries reported lower revenue and a loss

By all means, International Breweries Plc was very aggressive with its marketing and advertising strategies in 2019. However, it appears that the effort did not quite reflect in the brewer’s bottom line. This is because not only did revenue drop, there was a loss after tax of N9.1 billion in Q4 2019.

International Breweries is the second-largest brewer in Nigeria in terms of market share, having overtaken Guinness Nigeria Plc last year. As you can expect, aggressive advertising has been majorly instrumental in this regard. But advertising can be expensive. In Q4 2019 alone, the company incurred more than N6 billion in advertising costs.

According to information obtained from the company’s unaudited Q4 2019 financial report, advertising expense was 64.9% more than N4.2 billion, which was recorded during the comparable period in 2018.

Money well spent?

The company’s adverts were dropping everywhere throughout last year. Across media platforms such as radio, TV, print, and on the internet, beer drinkers were bombarded with communication messages encouraging them to patronise the brand.

International Breweries also made copious use of celebrity endorsements to push its brands, including Budweiser, which it describes as the “king of beers”.

[READ MORE: International Breweries’ Q4 2019 result shows 5.8% revenue drop, N9.1 billion loss)

At the end of the year, the company did sell its products, but not as much as it expected to. Total revenue for the 3-month period ended December 31^st stood a little bit above N35 billion, indicating a 5.8% decrease when compared to N37.3 billion that was recorded in Q4 2018.

Although the ads were everywhere, very colourful and fascinating as they were, they did not quite translate to more sales, let alone an increase in profit.

What could be responsible for the huge loss

International Breweries Plc has yet to offer an explanation as to what is responsible for the recorded under-performance. Results for the three quarters ended September 2019 showed a loss after tax of N16.4 billion, even as operating expenses grew significantly by 33.1% to N33.1 billion, driven mostly by a surge in marketing promotion expenses and administrative expenses. See here.

Perhaps the company will offer a full explanation when it releases its audited financial statement for full-year 2019.

In the meantime, it should be noted that the company reported net finance costs of N9.2 billion in Q4 2019. The administrative expense for the period stood at N8.2 billion as against N3.7 billion in Q4 2018.

The company’s stock closed Tuesday’s trading on the Nigerian Stock Exchange at a share price of N7.05.