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Nigeria Food and Drink Report Q2 2010
Business Monitor International, April 2010, Pages: 43
The Nigeria Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Nigeria's food and drink industry.
Despite the economic downturn and the negative impact this has had on consumer confidence, the Nigerian drinks industry continues to churn out encouraging news. As discussed in BMI’s recently published Nigeria Food & Drink Report for Q210, a number of key players in the drinks industry have recently reported strong turnover results, reflecting the fact that in the face of the current period of economic turbulence, the Nigerian drinks industry is still living up to its strong potential.
In January, PepsiCo franchise bottler Seven-Up Bottling Company (SBC) reported promising first half results, particularly in turnover growth. The company’s turnover grew by 17% year-on-year (y-o-y) to NGN17.85bn (US$118.2mn), while pre-tax income increased 2% y-o-y to NGN1bn (US$6.66mn). Moving forward, we expect that SBC is likely to place a greater emphasis on cost saving through fiscal H2. While turnover growth in H1 was particularly impressive, SBC will likely look to strengthen pre-tax earnings growth, which of course is easier said than done in the high cost and unpredictable Nigerian market. SBC faces stiff competition in Nigeria from Coca-Cola Hellenic’s Nigerian unit Nigerian Bottling Company, which dominates the local market with an estimated 75% market share in the carbonates category. Nevertheless, we believe that SBC is still well placed enough to continue pursuing expansions to take advantage of an expected strengthening in the industry over the coming years. This was followed by strong news from the country’s bullish beer sector. While market leader Nigerian Breweries announced that it expects a pre-tax drop in profit paired with a rise in turnover for Q110, competitor Guinness Nigeria also reported a drop in pre-tax profits. Guinness Nigeria, a division of alcoholic drinks group Diageo, posted a 10% y-o-y drop in pre-tax profit to NGN10.53bn (US$70mn) for its first half to the end of December 2009, while turnover rose by close to one-quarter. This followed the November 2009 report by Guinness Nigeria that its pre-tax profit fell by 34% y-o-y to NGN2.56bn (US$17mn) for the quarter ending September 30. However, the company also reported a rise in turnover of 22% y-o-y to NGN20.62bn (US$136.93mn) for this period.
Guinness attributed this fall in profit to its heavy investments in its brand portfolio and capacity expansions as well as cost pressures. Indeed, all brewers present in Nigeria’s beer sector will have to invest heavily in expansions in order to hold on to their market share. Nigeria is considered one of the most attractive beer markets in Africa and is one of the few African beer markets to have attracted more than two major multinational brewers, which has in turn ensured that competition levels and product innovation remain high. With beer volume sales expected to grow by an impressive 49.9% to 2.34bn litres and value sales to soar by 171.3% to NGN1,084bn between 2009 and 2014, it is easy to see why such international majors are hustling for a piece of this potentially lucrative market.
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