Mr. Nicolaas Vervelde, Managing Director/CEO Nigerian Breweries Plc addressed a press conference at a pre-Annual General Meeting recently, where he spoke on plans to reposition the company, among other issues. Bukola Aroloye was there.
Tell us the percentage of local content in your raw materials.
Two, three years ago, we were close to about 47.5 percent and hopefully by 2018 we should be able to achieve a benchmark of 60 percent and Heineken, our parent company has a commitment that by 2020 we should be able to attain 99 percent local sourcing of raw materials.
Every year we improve on our local content inputs so we are making progress. We are also making progress in sorghums, cassava, etc. Thankfully, with the help of our partners –International Fertilizer Development Centre, IFDC, and Psaltry International, a local processing company on value extraction from cassava. We are also making progress in the development of new hybrid Sorghum varieties with the potential of increasing yield for sorghum farmers as well as improving the quality of sorghum malt which is a raw material input in our operations. So I’m very optimistic that in the coming years at least 60 percent of our local sourcing of raw materials will be achieved.
Most businesses today suffer the burden of challenging operating environment. What specific areas do you want the government to look at with a view to help corporate entities like yours to remain competitive?
I’m not sure am in a position to give advice to the government on what to do to mitigate the tough operating business environment. Nevertheless, we have to consider the effect of the global economy is playing out; especially the decline in oil prices was due to global recession, worries about China and oil supply countries like the Organisation of Petroleum Exporting Countries (OPEC) reducing prices with increase outputs.
All these have effects and we also know that Nigeria to a very large extent is dependent on oil revenues and this is affecting the salaries of civil servants in both the states and local level. Of course, if there is improved revenue, it will also help in relieving the forex situation. Let also hope that with the passage of the budget, it will boost spending on infrastructures development.
It is now very clear that other brands of beer are coming into the market in the third quarter of the year. How prepared are you to take the heat that will break in the aftermath of their entry into market?
We agree there is going to be increased competition and over the last few years we have been working on a competing portfolio and on a far more diverse group of consumers and their needs. Today we have portfolios with 20 brands in different segments. And having been operating in the market for 70 years, we have very strong position in the market to weather competitions and instead of down trading, we will grow big in our offerings with the supports of Heineken, which is clearly an international brand.
70 years is the life of an organisation is no mean feat. Do you have plans to start growing some of the raw materials locally? Secondly, what are the main challenges of breweries in Nigeria compared to the global market?
First of all, I can say that Nigeria Breweries has always been committed to backward integration. Our first backward integration started in the 80s during the Structural Adjustment Programmes. At that time forex were not available for much of what we buy, and then NB with the support of technology from Heineken started developing beers brewed with corn.
In 2006, due to investments made by NB, we have been able to invest in two varieties of Sorghums and now harvesting four tonnes per hectare from one tonnes per hectare.
Today we have created jobs for over 250,000 farmers through our investments in sorghums and cassava farming. Our target is to make it commercial and we have signed a Memorandum of Understanding with the Federal Ministry of Agriculture to upscale it in the next two to three years and then make it commercially available.
We have been working on this for five years because the point is; backward integration only makes sense if it is commercially sustainable. If it becomes a subsidised system, the more the funds are there and the subsidy is accessed, the business is gone. Backward integration is a long term commitment before you see the results. As such, it demands long years of hard work.
What is the level of the consumption of beer in Nigeria compared to other countries, and what is NB doing to increase the percentage of beer drinking in Nigeria?
Although 23 percent of Nigeria population is middle class, yet per capita consumption of beer is low compared to markets across the globe. In Nigeria with a population of over 170 million, per capita consumption of beer is 11 litres whereas in Brazil with 200 million population, per capita consumption of beer is 70 litres. In Russia it’s 64 litres, Mexico 60 litres and in South Africa it is 60 litres per person; Burundi 40 litres, Cameroun 40 litres and in other sub-Saharan Africa countries it’s 17litres. The last time Nigeria had high per capita consumption of beer was 1984, and it was 17 litres per person.
First of all, there are many ways companies like Nigerian Breweries can increase per capita consumption of beer. One of it is road to markets, by making sure that the brands is always there, not only in the urban areas but in the rural areas which is not a small part given the huge landmark of Nigeria. The other one is to try to address all the consumer needs including pricing. Over the last few years, we have seen that per capita consumption is beginning to go down. If you look at the statistics, the average income of workers decreased mainly due to inflation and devaluation of the naira.
What is the company doing to sustain consumer bonding?
As we speak, the company has strengthened consumer bonding and engagement and activities through forms of activations and activities. For instance, Gulder consumers were rewarded with various prizes in the Gulder Ultimate Promotion. The company also achieved a milestone when it launched the Gulder’s World’s largest Poster in Enugu. Also, consumers across the country were treated to the biggest and the best of Nigerian music stars as well as upcoming ones in the 2015 edition of Star Music.
The company equally promoted indigenous arts, culture and heritage via the sponsorships of the Umu Oganiru Cannival by Life Continental Beer, the Osun Osogbo Festival by Golberg lager and the Ojude Oba Festival by Golberg and Maltina.
It might also interest you to know that our modest efforts at engaging and bonding with the consumers have not gone unnoticed thus far. The excellent performance of the brands came with harvest of laurels in 2015. For Instance, Star was voted the “Brand of the Year at the Brand as King Award. Golberg, Life Continental and Star each received the seal of quality at the prestigious “Monde Selection (Quality) ceremonies.
In the2014, we were recognised as the most philanthropic corporate entity in Nigeria. We won the prize for being the Most Active Company in CSR Activities of the Year. We also won the award for Best Company in Infrastructure and Best Company in Supply Chain of the Year.
Besides we were also recognised as the CSR Practitioner of the Year and the overall Most Active Company in CSR Activities of the Year thus making us the most socially responsible corporate citizen in Nigeria. The list is endless.
How was the brewed products market last year and what are your projections for this year?
The overall performance of the brewed products market mirrored the general performance of the economy. Indications are that the sector in Nigeria has been undergoing slow growth for four consecutive years. The sector grew by 1 percent last year compared to 9-10 percent recorded in the years before 2010. The slight growth recorded by operators in the sector was in the area of products innovation and expansions of beer plants driven by acquisition. Nigerian Breweries controls about two thirds of the lager market in Nigeria. Our products are distributed across the country through seven major cities: Lagos, Abuja, Enugu, Ibadan, Kaduna, Aba and Benin. Among the players in the industry, Nigerian Breweries alone has 20 products category, 11 beer plants and two malt plants in Aba and Kaduna.
