Lever of brand value in NB, CB merger

The merger between Nigerian Breweries (NB) plc and Consolidated Breweries (CB) plc, two leaders in the Nigerian brewery industry with Heineken International as majority shareholder in the organisations, is expected to jolt the market.

This is as the two organisations consolidate to leverage each other’s brand value in the competitive brewery industry to push their products to the market under a single management – Nigerian Breweries.

According to observers, the merger will also enable the firms to align their long-term stra­tegic interests to enhance op­erational efficiencies thereby maximis­ing value for all shareholders. “This marriage would likely reduce overheads, but would enhance shareholder value as the organisations exploit various operational synergies. This will result in improved revenues, cost savings and operational efficiencies in the enlarged Nigerian Breweries,” according to the observers.

After the merger, the NB is now bigger and stronger with more products. NB is now the owner of all the brands and the activities of the former CB, and will continue except that there is now one management team headed by NB, an analyst says.

Under the marriage of convenience, the NB’s might and brand value, which is a strategic marketing asset, is expected to rub off on former CB brands as the NB is also anticipated to extend its colourful marketing strategy to its now extended brands.

Consolidated Breweries produces ‘33’ Export, Turbo King, Williams Dark Ale, Hi Malt, More Lager Beer, and Maltex, which will now be produced and marketed under Nigerian Breweries as the parent body in Nigeria.This has increased Nigerian Breweries brands portfolio to 19.

Marketing analsysts say the merger would create value in the market for consumers and shareholders as the fused organisation will likely deepen its distribution network and offer consumers more choices. “Under Nigerian Breweries, the products produced by Consolidated Breweries, especially 33 Export, will now be products of choice,” a marketing analyst says.

During Nigerian Breweries management visit to the Nigerian Stock Exchange recently to intimate the exchange on the merger, Kolawole Jamodu, chairman of the board of directors of NB, talked about the company’s resolve to increase wealth for shareholders and other stakeholders.

“This is expected to be achieved through major cost savings in the areas of interest expenses, distribution/administrative cost among other operating activities where duplication will be eliminated. Expenses such as annual general meetings, board of directors’ fees and communication expenses to shareholders will be reduced,” he said.

Other major benefits accruable from the merger also include cost saving from the consolidation of supply and distribution networks of both companies as a result of improved operational efficiencies arising from integrated operations. The products of both companies will be manufactured more efficiently through their combined operational capacities.

Significant cost saving is targeted by distributing products and selling the enlarged product portfolio of the new company across the entire combined sales and distribution network of the enlarged company. The enlarged company is expected to extend market leadership, accelerate revenue growth and expand profit capacity.

The legacy companies have maintained stable growth in sales revenue and profitability in the past five years. The merger is also a boost to the equities market, as former shareholders of Consolidated Breweries, which was not listed on the Nigerian Stock Exchange (NSE), now have the opportunity to trade their shares on the floor of NSE. This will improve the liquidity of the stocks and increase market capitalisation of the exchange.