The last few years have seen many Nigerian businesses shut down due to the economic climate. The Manufacturers Association of Nigeria (MAN) revealed that about 767 manufacturing companies shut down operations while 335 experienced distress in 2023. Even the multinationals are not left out. Last year, about five multinationals left the country. Meanwhile, the businesses and companies that endured are left grappling with ongoing losses. Last year, 7 Nigerian companies lost N1.6 trillion over the FX crisis.
For most businesses, surviving the economic weather means calculating the financial toll and strategizing for recovery. This is the case of the Nigerian Breweries, a subsidiary of the Dutch brewing giant Heineken N.V. The company is set to redefine its market presence with the acquisition of an 80% stake in Distell Wines & Spirits Nigeria Limited. Distell Nigeria is involved in the local production of wines and ciders under license from Heineken Beverages. This strategic move by the Nigerian Breweries marks a departure from its traditional focus on beer and shows a calculated response to Nigeria’s market dynamics. Last year, during Nigeria’s cash crisis, the company experienced its worst February in 15 years. The company’s revenue dropped by 15.6%. In February, the company records showed that its losses from last year came up to N106.3 billion. Two weeks ago, the company suspended operations in two of its nine production plants.
According to Hans Essaadi, the Managing Director/CEO of Nigerian Breweries, the move to acquire Distell Wines and Spirits Nig. Ltd is to complement the company’s existing beer portfolio with a multi-category offering. By strengthening its market position and diversifying its product range, the company hopes to future-proof its business model and enhance long-term profitability.
The company has made strategic moves in the past to diversify its product portfolio and explore opportunities beyond its core beer business. In 2006, the company decided to diversify its product offerings with a range of non-alcoholic soft drinks, with the launch of Fayrouz. Over the years, it has added more products including malt beverages, soft drinks, and energy drinks. This move allowed us to cater to a broader audience and capture additional market share. In 2010, its return on equity went up by 60%.
Auspiciously, Nigeria has a big wine and spirits market. In 2022, Nigerians spent N2.18 trillion on alcoholic beverages. Currently, beer is the most widely consumed alcoholic beverage with a 55% market share, followed by spirits (30%) and wine(15%). However, wines serve as a comfortable entry point for new alcoholic beverages consumers. Moreover, with increasing disposable incomes, particularly among urban dwellers, there has been a higher demand for premium alcoholic drinks. However, this trend towards premiumization has also led to a rise in imported luxury brands. In 2022, Nigeria imported over $104 million worth of wine from the US alone, with significant imports also coming from France, South Africa, and Spain. This demand has also fueled the rise of fake alcohol drinks in the last few years. The Nigerian Breweries can capitalize on this trend and carve out a significant share of the market by leveraging its brand reputation and distribution network. Also, Nigerian Breweries has cemented its position as a leader in the Nigerian alcoholic beverage industry. It is currently the largest brewery in Nigeria, dominating the industry with a market share of 60.0 percent.
The Nigerian Breweries/Distell Wines & Spirits Nigeria Limited’s deal is expected to be finalized by the end of the first half of the year. According to Statista, the volume of wine consumption in Nigeria is expected to reach 44.82 million liters by 2027. Nigeria offers ample opportunities for Nigerian Breweries to capitalize on.
*This article was originally published by Ventures Africa.
