Nigeria Breweries propelled above sector rivals by intense promotion, handsome dividends

• Adds 10% market share in 7 years
• As brewery sector races towards oligopoly

Kelvin Umweni
Nigerian Breweries (NB), a leading brewing giant, has grown its market share of the brewery industry in Africa’s largest economy by 10 percentage points between 2010 and 2016, according to a report from the BusinessDay Research and Intelligence Unit (BRIU).
The BRIU entitled ‘The Nigerian Brewery Industry Snapshot’ revealed that while NB’s share of the market grew from 63 per cent in 2010 to 73 per cent in 2016 as the market share of Guinness Nigeria Plc, its biggest rival, declined from 37 per cent in 2010 to 23 per cent in 2016.
The country’s brewery industry has been dominated by the two giants for more than two decades. This situation is set to change, however, with the entrance of SABMiller, a South Africa-based brewer.

“SABMiller has been performing relatively better since its advent into the Nigeria brewery sector in 2009, having shown doggedness to grab an increasing share of the market” said the BRIU report. “Guinness appears to be losing steam in the fight for market dominance in the brewery scene.”
The Brewery Snapshot by BRIU sought to x-ray major growth drivers of firms in the beer brewery sector through the analysis of their financials, and ascertain the drivers of the performance of the industry players.

According to BRIU, NB has been gaining in the fight for market share through various promotional and customer-bonding activities that it has introduced for its brands, which appears to have consummated its consumer loyalty and enhanced market penetration. Guinness and SABMiller have less of these activities geared towards building brand image and loyalty.

While NB has created social and promotional activities around almost all its brands, Guinness has fallen short, with promotional activities floated around just a few of their brands. For SABMiller, their major promotional activities include a partnership deal between Castle Milk Stout and the football giant, FC Barcelona, and Beta Malt Sponsorship of Senior Secondary School debate and the execution of the ‘’Kick Start’’ initiative.
The report says that the Nigerian beer market is buoyed by the fact that it boasts of youthful population and a growing middle-class which helps to drive growth in the brewery industry.

While it may not be said that market share impacted on the profitability of these firms, the NB on the average had a higher profitability compared to Guinness and SABMiller. The gross profit margin of both firms showed impressive performances with NB recording a margin of over 50 per cent in 2007, 2011, 2012, 2013 and 2014 and sliding to 49 per cent and 48 per cent in 2008 and 2009 respectively. The high input cost however ate deep into its margin as it slumped further in 2016.

The report also noted that the brewing giants returned different proportions of their income to investors as dividend, between 2007 and 2016. NB had a higher dividend payout ratio than Guinness from 2007 to 2009. However, Guinness’ dividend payout ratio caught up with that of NB in 2010 (at 88 per cent), and subsequently overtook the payout of the latter in 2011.
“Apparently NB started conserving funds to take advantage of investment opportunities,” the BRIU Brewery Industry Snapshot said, citing the acquisition of Sona Systems Associates Business Management limited and Life Breweries.