In terms of sales, the beer market is one of the biggest in the world. With plans to sustain the growth, despite market volatility, the industry is set to witness the first global beer festival next year, which could impact on other sectors of the economy, writes ADEDEJI ADEMIGBUJI.
Next year, it will be about beer marketing. In a market still inundated by volatility, brewers have been able to get out of recession by recording positive growth like the telecoms sector, which is insulated from the hues and cries of the economic crisis.
However, to retain the trend and act as a buffer to the economic downturn, the industry is set to witness Africa’s biggest beer festival, where brewers will forget about competition, demarketing, and that make them stiff competitors and collaborate to make a success of the event.
Setting the greviances behind them is necessary, especially when no one knows what next year holds in stock. For some, the outgoing year was bad -little ads, low sales and the difficulty to match competing brands as a result of macro and micro-economic harsh realities.
According to a report by United States (US) marketing intelligence, A Medium, consumption pattern of beer consumers changed during the year with many switching to affordable alternatives, leaving premium brands in the lurch.
While the gainers of the new trend are the low-value beer brands, the premium brands bled from the economic squeeze. The major factors that drove the change in beer consumption are rising cost of living and consumers’ decrease in purchasing power driven by the economic recession which had an industry-wide impact on the beer market.
The latest financial results from the two major brewers in the country indicated a general lull in the brewery industry. Guinness Nigeria Q3 2015/2016 financial results showed a 33 per cent decline in Profit Before Tax (PBT) from N29.5 billion in the previous period to N19.8 billion. Similarly, Nigerian Breweries Q2 2016 result showed a 36 per cent decline in its profit before tax (PBT) to N10.5 billion, an indication that the company would miss its N56.8 billion PBT forecast for 2016.
With a tight budget and limited logistics, the smaller brewers were forced to play at regional markets to survive. For instance, Old Consolidated and International Breweries, played in the Southwest and Champion Breweries in the Southsouth, before they were acquired by the industry’s big boys.
However, the entrance of the South African brewer, Sabmiller in 2012 with its value-for-money beer offerings; Hero Lager and Castle Milk Stout, changed the topography of the market and upstaged the competition.
While NB responded to the Sabmiller challenge and in so doing repositioned to maintain its leading position in the lager beer market with the acquisition of small-time brewers, Guinness has been slow in reacting to the change, a development market watchers blamed for its declining fortunes in recent years. Bar and hotel owners confirmed the lull in sales of premium beers.
As a result, there are concerted plans by some key players in the industry to align the market with global trend. One way to get out of the recession, which is likely to continue next year, is a plan to stage Nigeria’s first beer festival in Lagos.
Despite that the beer market is the biggest in Africa, it shocked global players that it has not held any global beer festival. Investigation has shown that Beer Festivals around the world have grown to become major tourism events, with countries, such as Germany attracting well over 50,000 tourists to its yearly “oktoberfest” beer festival. Other countries are Czech Republic, Canada, Durham, Columbia, Britain and Belgium, among others.
“The Nigeria Beer Festival will be a week-long carnival-like funfair, combining entertainment, sales and marketing, with the idea to gather the largest community of beer consumers from across the country and beyond, resulting in economic value for the brands and the economy.
“Each of the participating brands has the opportunity to own particular days during the week to entertain the teeming visitors at the festival.Various beer brands will be available for tasting and purchasing in a carnival-like atmosphere,” one of the organisers who pleaded anonymity told The Nation.
While the aim of the festival is to build brand engagement for beer brands, it is also expected to boost other sectors, such as entertainment, food, tourism and the fashion industry.
An industry analyst, Dr. Ken Olakunle, who manages BrandSpeak Africa, the festival is projected to pump over N100 billion within a week into the economy as other global brands not present in market, are also expected to use the festival as a window for entry into the market.
During the festival, a select top artistes will perform daily. Fashion show, music concerts, fireworks’display, carnival, lifestyle, barbeque, asun, and beer will beautify the atmosphere at the Tafawa Balewa Square, Lagos, the proposed venue. Notably, the festival will serve as an umbrella for other sectors to display their products and services which will attract business networking.
To achieve first-class standards, the festival organisers with reputable and qualified architects in Poland and Spain, have designed a modula stand to fit into any shape or style desired by exhibitors.
But why a beer festival? The organisers said Nigeria has the largest population in Africa, a growing middle class and a large number of consumers continue to emerge. Again, Nigeria is the second largest alcohol market in Africa, with an expected total of 15.2m hectolitres per year.
“So, drinking alcohol is a social activity in Nigeria, as 80 per cent of the country’s alcohol sales are on-trade. Beer is the most popular alcoholic drink in the country, making up the larger percentage of all alcohol sales. Therefore, this event will be an organised platform to showcase and market the various beer brands and other alcoholic drinks in Nigeria with reference to business, lifestyle, culture, tradition and social economic benefits in a carnival-like atmosphere. The organisers also make bold to say that this festival is for adults who are advised to drink reasonably, saying further that beer festival will not admit persons below 18 years,” said Olakunle.
A Lagos-based Public Relations (PR) Consultant, Mrs. Hastrup Cole-Denrinmade, said a festival has fast grown to become major tourism event across the globe with countries, such as Germany attracting well over 50,000 tourists, adding its being hosted in Lagos means that over 50,000 tourists are expected to come to Nigeria to boost the economy yearning for growth.
“To my knowledge, the beer festival will partner the Federal Ministry of Culture and Tourism to drive this noble idea. It will hold in Lagos, the headquarters of all the major beer brands, and touted as the entertainment hub of Nigeria and by extention, Africa,” she said.
Meanwhile, a new report by Canadean Market Report, expects more Africans to enter the beer market from the home brew sector, while commercial beer and premium brands forge ahead in the exploding African beer market.
According to the report, the African beer market is the fastest growing global beer market with a yearly average growth rate of five percent between 2013 and next year. This means the African beer market growth will beat that of Asia and Latin America, projected to witness a growth rate of four percent and three percent. South Africa is the biggest market in Africa, with an expected total volume of 30,921th hectolitre (hl) in 2014, followed by Nigeria with 15,200th hl and Angola with 12,790th hl.
Account Director, Canadean Market Report, Kevin Baker, said: “Africa has seen inflation fall, foreign debt shrink and GDP rise in the last few years. Moreover, population growth – once feared as a major contributor to poverty – is now perceived as an asset, with the working age population set to outgrow that of China and India.”
Beer Growth Rates
Canadean survey found that more African consumers will change their home brewed drinks for commercially brewed ones over the coming years.
“At the moment, homemade alcohol products still dominate theAfrican market, but they pose a significant health risk. This is an incentive for consumers to move away from ‘home brews’and instead turn to commercial beer,” says Baker.
Protecting under-age from the beer festival
According to Cole-Denrinmade, the festival will not allow an under-age. “In fact, there are mechanisms that will be used to check this and the event will also be used to preach responsible drinking among adults,” she said.
How beer can contribute to economy
The beer industry is a large segment of the food and beverages sub-sector. It constitutes the non-oil sector where Nigeria is leveraging on to drive her economic diversification programme.
Having evolved from bottling to a diversified industry involved in the production of canned drinks and the use of tetra pack, the sector accounted for 35.9 per cent of the growth in the industrial sector, which grew in 2014 by 6.41 per cent as against 0.87 per cent in 2013.
NB PLC has the largest coverage, with about eight breweries located across the country and estimated yearly capacity of 13.5 million hectoliters (mn hl).
Guinness operates four breweries with a total yearly capacity of 7.5mn hl by 2014. SABM has built up its capacity (by acquisition) to about 1.8mn hl, which includes Pabod Breweries in Port Harcourt, International Breweries in Ilesa and Onitsha.
Experts say the beer sector is very well positioned to galvanise the economy through industrialisation. Brewery companies, whose principal activities include the production, packaging and sales of alcoholic and malt beverages, employ close to one million people.
They also have about 50,000 distribution outlets in the country made up of wholesalers, hotels and clubs. For instance, NBs’operations alone support indirectly 586,000 jobs, which represent 0.64 per cent of the total work force, of which 54,000 are within its Sorghum Value Chain.
The company’s operations also have a value added impact of N243 billion on the economy, which represents 0.65 per cent of the nation’s GDP. The beer industry is also a significant driver of tax revenues. In 2011 alone, N87 billion was paid as taxes by NB. This represented 4.02 per cent of the country’s non-oil revenue.
