The brewery industry cash cows at war
Ajose Sehindemi is Businessamlive Reporter.
You can contact him on ajose.sehindemi@businessamlive.com with stories and commentary.
Ade Olawale, a consultant, and businessman is a loyal customer of the Nigerian Breweries premium brand, Heineken, which has been his companion since his days in the University, almost 15 years ago. He refused to change his brand as Heineken, aside from being a social class drink due to its higher price when compared to other beer brands, appeals to him, though he usually goes for other brands when his preferred choice is not available at the liquor center he frequents.
Aside from being at ease with the price, the light taste of the brand, he said was what got him addicted in the first place as he said he has a light brain and couldn’t cope with others. So it was a thing of shock when he tasted the improved Trophy, after the acquisition of the brewer, International Brewery Limited (IBL) by SABMiller, one of the largest brewers in the world. The taste was similar, light in the mouth, it also has the lowest sugar content compared to the other brands and with the economic situation in the country, which affected consumers purchasing power, the huge price difference between Heineken and Trophy decided the contest for him.
Olawale couldn’t believe his luck as he can purchase more bottles of Trophy, compared to Heineken, which made him to change his brand and eschew loyalty for the moment.
The same situation applies to Eme- ka Okafor, a local businessman with not much economic capital at his disposal to increase his spend. His addiction used to be Star, but Trophy’s price mechanism approach got him hooked to the drink when he went on a 3-month job transfer to Ede in Osun state.
Trophy was sold at N180 compared to Star’s N250.
Coming back to Lagos hasn’t changed his desire as Trophy to him has displaced Star, even though both products are now sold at the same price in Lagos at the cool spot he patronises.
Star lager beer used to be one of the products that determine the profitability of NB for very long as it was the most priced cash cow for it, hence the various shifts in strategy and marketing approach to let the brand retain the youth population, which Gulder, as a brand, hasn’t been able to achieve with perception placing it to be for middle-aged men and the elderly. NB later took some initiatives to change the perception of the youth population to it by sponsoring events that appeal to them.
Gulder delivers its own quota for the leading Nigerian brewer but Star is the market leader.
For very long, Harp, produced by Diageo Guinness Nigeria has been trying to displace Star; and the introduction of the Origin brand was seen to shake NB for a while, which led it to produce ACE Roots to rival Origin. But this was to no avail as its advertising spend looks like a scratch of the bite out of the country’s N837 billion or $2.7 billion beer market, according to Euromonitor Research, the International marketing research group. Nigeria’s beer market represents nine percent of the global market share, which makes the country to be rated one of the 10 fastest grow- ing beer markets in the world.
The battle has always been between NB and Diageo Guinness Nigeria but it all changed in 2011 when SABMiller acquired majority shares in the IBI and in 2012, SAB- Miller established a $100 million brewery in Onitsha, which brews Hero lager for those in the Eastern part of the country.
The beer market is a goldmine that any brewer will not want to miss having a bite of. This has led to SABMiller, second largest beer producer in the world, been taken over by Anheuser-Busch InBev NV (ABinBev), the world’s largest beer producer in a $108 billion take- over in October 2016.
The merger meant that one in three beers that are consumed comes from the giant brewer. The merger also resulted in ABInBev taking over the business of SAB- Miller in Nigeria and this has resulted in the merger between International Breweries Ilesha, Intafact Breweries Ltd, based in Onitsha, and Pabod Breweries Ltd, based in Port Harcourt, makers of Grand lager beer, forming a company finally known as International Breweries Plc.
Despite the economic challenges in Africa’s most populous country and largest economy by GDP, ABInBev’s business in the country recorded a double-digit growth over the last quarter of 2017. According to data seen by business a.m., International Breweries shares jumped 161 percent in 2017; Guinness Nigeria shares were up 19.79 percent, while NB’s shares were up a mere 0.98 percent.
The impending arrival of a fourth brewery to be completed this year for ABInBev, estimated to be worth over $250 million, cited in Sagamu and the largest brewery in Africa outside South Africa, strategically planned to serve the company’s target of increasing production lines at existing breweries, was to avoid the new prohibitive tax placed on the importation of beer as the company wants to have their global brands produced locally from the plant in Sagamu and other plants. The company said it will not only continue to support the growth of the local brands but also enable their global brands to be present in the Nigerian market.
The Trophy brand also witnessed incredible growth in equity and volume as since 2010 it has risen from the production level of just about 300 hectolitres to over 1,000 hectolitres. It has also grown from one 60cl SKU to now four: 60cl RGB, 45cl RGB, 33cl Can and 50cl Can and it has also moved from a beer consumed on the fringes of Ilesha to the favourite beer across Nigeria, felt more in the Western part.
The push made by Trophy has been of huge concern to the market traditional leaders. For NB, it has not seen such a push in its over 60 years of operation in Nigeria.
Trophy: Inroad on the leaders
The focus on low to middle-class consumers opened up the market for Trophy and Hero to dominate, as those classes, called the value segment, are the largest segment of beer consumers in the country.
Another key move was the regionalization of the brands. Trophy is being brewed in the West while Hero is produced in the East, although both are being sold across the nation.
This sent handlers of the exist- ing market leaders back to their drawing boards for strategies that could help them control their slowing market share.
NB’s response was to also find a brand that appealed to the low to the middle class of consumers, and this led to Life beer, sold majorly in the Eastern part of the country, in addition to other brands of NB.
Considering the level of the competition, Heineken N.V, NB’s parent company, acquired breweries across the country.
In October 2011, it acquired majority equity interests in Sona Systems Associates Business Management Limited, (Sona Systems) and Life Breweries Limited from Heineken N.V.
This followed Heineken’s acquisition of controlling interests in five breweries in Nigeria from Sona Group in January 2011. Sona Systems’ two breweries in Ota and Kaduna and Life Breweries in Onitsha have now become part of Nigerian Breweries Plc, together with the three brands: Goldberg lager, Malta Gold, and Life Continental lager.
In 2014, NB also merged with Consolidated Breweries Plc which added the three breweries in Ijebu- ode, Awo-Omama, and Makurdi to the company. The additional brands include 33 Export Lager, Williams Dark Ale, Turbo King Stout, More Lager, Breezer, Hi-malt, and Maltex.
Not one to be caught sleeping, Guinness Nigeria, in 2017 acquired the right to distribute McDowell’s, a mainstream spirits brand of United Spirits Limited, in Nigeria. USL is an Indian mainstream spirits business which is also a subsidiary of Diageo Plc.
Guinness Nigeria also commissioned a local spirits line at its Benin brewery to produce brands like Smirnoff XI intense chocolate vodka, Smirnoff Extra Smooth Vodka, Gordon’s Dry Gin, Moringa Citrus Blend, McDowell’s No. 1 Reserved Whisky, McDowell’s VSOP and Royal Challenge Finest Premium Whisky.
Similarly, two years ago, same Guinness acquired the distribution rights to Diageo’s international spirits brands like Johnnie Walker, Baileys, and Cîroc, which are for high-value consumers.
The battle has moved to the marketing angle with Nigerian beer enthusiasts daily bombarded with different campaigns, which analysts have estimated to have cost N4.6 billion in 2015, but reduced in 2016 and 2017. Media- facts, the Nigerian advertising and marketing research book notes that beer manufacturers in Nigeria spent N1 billion on TV ads, N0.6 billion on radio and N3.0 billion on out-of-home to outsmart each other.
But to return to Olawale; the shift he has made to Trophy is now being threatened on the home front because his wife now complains about the beer smell that follows him home, something that didn’t use to happen when he was a patron of Heineken.
Like other brands from Nigerian Breweries and Guinness Nigeria, AbInBev Nigeria brands such as Trophy, Hero, Grand, Castle Milk Stout, Castle, Eagle, Redds and non-alcoholic malt beverages, Grand Malt, Beta Malt and others have become forces to be reckoned with and they have found their ways into the heart of consumers.