How product innovation keeps brewers afloat

Brewers in Nigeria are increasingly innovating new products in the face of stiff competition and rising price-consciousness among consumers. Firms that have succeeded in introducing varieties of products now have increased market share in the segments they play in or higher revenue and profit margins, Real Sector Watch gathers.

Guinness Nigeria (GN) has come up with a number of products, especially in the value and bitters segments. It had long been established that GN’s inability to play in the value segment (low-cost or cheaper beer brands) negatively impacted its top-lines and bottom-lines in the past. Consequently, GN re-launched the Dubic brand in April 2012, with a view to becoming a key player in the value segment. GN’s focus on the brand was limited until 2014, when consumers began to shift away from the premium or mainstream segment (brands that are accessible to all or are target for high-income earners), says Renaissance Capital (RenCap), in its recent report.

Moreover, GN has also been playing in the bitters segment, with its ‘Orijin Bitters’ and ‘Orijin Ready to Drink’ brands. In the course of RenCap’s research, bitters vendors who were interviewed confirmed that Orijin Ready to Drink’ had been the best seller this year. Distributors also confirmed a pick-up in the brand, as the product remained a light, refreshing and orange-tasting alcoholic beverage. But it was also discovered that despite its robust market performance, the management of GN felt the brand had a minimal impact on earnings.

“Volume growth has been 100 percent year-to-date (YtD) in 2014, but the total volumes stand at 40,000 hl, insignificant compared with the c. 8.5mn hl capacity,” says RenCap,

However, GN does not really play in the spirits segment despite making ‘Orijin,’ ‘Smirnoff Ice’ and ‘Snap.’ But GN’s principal, Diageo, has 100 percent ownership of Diageo Brands Nigeria Limited (DBN), which distributes spirits, and shares facilities and personnel with GN, though the latter does not get benefits from the DBN products, says RenCap.

“Today, Guinness derives 6.1 percent of its global income from Nigeria,” Peter Obi, former Anambra State governor, said in 2012, during the commissioning of SABMiller’s plant in the state.

Jude Fejokwu, principal analyst, Thaddeus Africa Independent Research, said Nigeria remained the third largest market for Guinness, behind Great Britain and Ireland which it was ahead of just a few years ago.

As the leader in the industry, the Nigerian Breweries (NB) has also been innovating, albeit slower. In the non-alcoholic segment, NB launched ‘Fayrouz’ in 2012, which picked up significantly in 2013, with volume growth in the mid-double. RenCap sees this as a premium non-alcoholic beverage, which is strongly targeted at women and has become popular with the health-conscious middle-class population. I

n February 2014, NB launched Star Lite, which is a healthier version of the ‘Star’ brand. According to the management of NB, this brand contains 40 percent fewer calories than a regular lager. RenCap says Star Lite is also the first beer bottle in the country with the temperature indicator that will enable the consumer know whether the beer is cold enough to drink or not.

RenCap says NB is dominantly positioned in the value segment, with its brands such as ‘Life’ and ‘Goldberg.’ It further observes that the firm has been able to capture new market share, having already taken some share from GN with its cheaper brand ‘Legend.’

“NB, like Nestle Foods Nigeria, has so far proved able to weather the storm with regard to the constraints facing consumers in Nigeria,” it says.

Consolidated Breweries is not just known for ‘33 Export,’ ‘Hi Malt’ and ‘Maltex’ brands, but is now making ‘Turbo King’ and ‘Williams.’ Consolidated Breweries and NB are to merge, a deal analysts say will consolidate NB’s position as the market leader. Consolidated Breweries is a majorly playing in the value segment.

ODINAKA ANUDU