Value beer growth levels to remain robust amid lower margins

Brewers’ efforts to push up the value segment or brands will continue to yield positive growth results, though the revenue and profit margins could remain lower than those of the mainstream brands.

“We expect the value segment will continue to experience higher growth levels vs mainstream beers, but the margins for this segment are lower,” says Renaissance Capital (RenCap), in its recent report.

According to the report, the value segment has grown above 20 percent in the last two years, while the mainstream segment has only seen a low single-digit volume growth. Hence, the value segment provides enormous opportunities for brewers amid intense competition by players to outdo one

another, analysts say.

Value or low-cost beer brands are those that are cheaper and can mainly be afforded by the low-income consumers. On the other hand, mainstream beer brands are those that are readily available and appealing to the general public, as opposed to being of interest only to a very specific subset of

the public, says the Business Dictionary.

For instance, Life and Goldberg produced by Nigerian Breweries (NB) plc are often seen as value brands. Similarly, Dubic and Snapp of Guinness plc are value or low-cost brands just as Consolidated Breweries’ ‘’33’’ Export and Williams. Another example of this segment is the SABMiller’s ‘Hero.’

NB’s Gulder, Star and Legend, among others, belong to the mainstream brands as Guinness plc’s Stout and Harp. Sometimes, mainstream brands are regarded as premium brands, research has shown. But by strict technical explanation, premium brands often carry tangible or imaginary surplus value in the upper-mid to high-price range. They often target high income customer group, who are usually referred to as “premium” and are designed to convey an impression of exclusiveness, especially in the mass markets.

Typical premium brands include NB’s Heineken and Guinness’ Stout, experts say.

Beer consumption worldwide is influenced by economic growth, affordability, availability as well as cultural and religious factors.

RenCap recently conducted a beer price survey across more than 40 markets to determine how affordable beer was for consumers. On the average, it was found that consumers needed to work for 35 minutes to afford a 500-ml of beer. However, this was materially cheaper for consumers in developed

markets, requiring only six minutes of work, as against 54 minutes in emerging markets (EM) like Nigeria.

Stakeholders say this indicates that pricing or price elasticity (response) has become a key issue for brewers and has informed the decision of many consumers to move into the value segment.

“There is a bit of down-trading in the industry whereby you see the consumers moving away from the premium or mainstream brands to the lower price brands. Our previous brands have been Guinness and Harp. So, we now have a new brand – Dubic brand – in the value segment to allow us compete

favourably against our competitors within that segment,’’ said Seni Adetu, managing director, Guinness Nigeria, in an interview with BusinessDay.

“We are not trying to be brand-centric, but more consumer-centric. In other words, we give consumers what they really want,’’ he said, adding that some competitors were able to have impressive top-line performances due to value brands.

Odinaka Anudu