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The Nigerian Brewing Industry is a highly active sector. Players in the sector are engaged in the brewing, bottling, sales and distribution of alcoholic and non alcoholic beverages such as stout, beers and malt drinks amongst others and in some cases, soft drinks.

There are seven listed Companies in the highly concentrated Sector with the leaders, controlling circa 85 per cent of the Sector‟s production volumes.

However, there also exist several unlisted brewers operating in Nigeria such as Consolidated Breweries and Sona Breweries amongst others resulting in about 11 brewers in all. Of the listed players, besides NB, Guinness and International Breweries, the other brewers have failed to regularly publish performance scorecards and have lagged behind their peers in this regard.

The Brewing process is highly technical and hugely capital intensive, and has benefitted from significant foreign direct investment inflows in recent times. This has to a large extent ensured that the volumes and thus market share has remained with the most technologically advanced manufacturers with cutting edge technology and up to date expertise.

Owing to the highly asset intensive with heavy economies of scale alongside the aforementioned, new entrants and small firms oftentimes find themselves highly disadvantaged. The growth of the sector over the years has been flexible, predicated on economic conditions, improved product quality and the marketing activities of manufacturers. Worthy of note is the defensive nature of the Brewing Industry‟s products viz its ability to grow sales volumes despite over riding economic considerations. The resilient and largely inelastic demand profile of the Sector‟s products inspires volume growth irrespective of the economic climate. The perception is that in times of depression, consumers drink to drown their fears and anxieties and in times of excitement, they also drink to express their joy (Equity research 2014).

58 Nigeria has moved from a duopoly beer industry, to an oligopoly one. There are seven quoted breweries company on the Nigerian stock exchange. These include Nigerian Breweries Plc (NB), Guinness Nigeria Plc (GUINNESS), International Breweries Plc (INTBREW), which are the three largest in terms of market capitalization. Others include Champion breweries Plc.

(CHAMPION), Jos Breweries (JOSBREW), Golden Guinea Breweries Plc (GOLDBREW) and Premier breweries (PREMBREW). All together, the seven listed beer producers have a total market capitalization of NGN1.75trillion representing 12.36 per cent of the NSE market capitalization.

The aforementioned breweries were further categorized into Large Cap (market capitalization of NGN100bn and above), Mid Cap (Market capitalization between NGN1bn to NGN100bn) and Small Cap (Market Capitalization less than NGN100bn)brewers, based on market capitalization of these company. Based on this classification, we classify NB and GUINNESS as large cap, INTBREW, CHAMPION and JOSBREW fell within the Mid Cap criteria while PREMBREW and GOLDBREW are grouped as the Small Cap beer makers (Equity research 2014).

Table 2.4: Quoted Breweries Firms Ticker Share

Outstanding (bn)

Mkt. Price Mkt. Cap (bn’NGN’)

Mkt. Cap (%)

Rating

Large Cap

NB 7.56 178.20 1,347.19 77.04% HOLD

GUINNESS 1.51 198 298.98 17.10% HOLD

Mid Cap

INTBREW 3.26 28.05 91.44 5.23% SELL

CHAMPION 0.9 9.67 8.70 0.50% UNRATED

JOSBREW 0.56 2.58 1.44 0.08% UNRATED

Small Cap

GOLDBREW 0.27 0.71 0.19 0.01% UNRATED

PREMBREW 0.98 0.77 0.75 0.04% UNRATED

1,748.71 100.00%

Source: NSE (2015)

59 2.4.4 The Nigerian Beverage Market

Nigerian beverages market is heavily driven by the Beer and Carbonated Soft drink (CSD) with both controlling about 87 per cent of beverages consumption. Packaged Juice, Spirit, Wine and Other „Ready-to-drink‟ beverages (RTDs) cover the remainder. Report by Heineken quoted CSP magazine and indicated that, of the total beverage volume in Nigeria, 45.29 per cent is attributed to the beer segment, 42.06 per cent goes to CSDs, Packaged Juice takes 10.29 per cent whilst Spirit, Wine and RTDs takes the remaining 2.35 per cent in 2010 (Vetiva 2010)

The Soft Drink Market: The CSD segment of the market is dominated by the Nigerian bottling company (NBC- bottles Coca-Cola and Fanta brands 7UP Plc

(PepsiCo franchise bottler) in conjunction with a rising number of fringe players. Notable among the domestic players is the La Casera Co, Ltd (formerly known as Classic Beverages Nigeria Ltd)the producer of the La Casera brand, with innovative marketing strategy such as beauty contests (Miss La Casera) continue to gain a distinct proportion of the market. The company recently introduced the first sugar-free carbonate with real fruit, Latina. According to Euro-monitor, the company was one of the first to use PET (Polyethylene Terephthalate) bottles and has introduced a new 'Ice Feel' bottle to raise the stakes. Brewers are increasingly exploring the soft drink market by enlarging their product portfolios, through their non-alcoholic product variants and capturing an increasing share of consumers‟ discretionary spending. A classic instance is the drive of NB toward product portfolio optimization by the introduction of the Fayrouz brand to its product kit. Being a non-alcoholic brand, such products have a strong potential to permeate a broader market (breaking religion boundaries – a key factor in the Nigerian brewery market) and pose good competition to the key CSD producers.

The Packaged Juice segment: Awareness about Health and Nutritional balance (better education about nutrition and risk factor embedded in high sugar consumption which may lead to diabetes, obesity and hypertension) is growing amongst Nigerians. This has so far led to a sustained growth in the fruit juice consumption as against CSDs. Other notable factors include busier life style amongst the rising middle class has left majority with less time to prepare balance nutrition for their family hence juice consumption is resorted to as a suitable way of ensuring the intake of essential nutrients.

60 Also, the sophisticated social life style and the value Nigerians placed on social occasions also serve as contributory factor driving the growth of juice consumption amongst Nigerians. Hence, more consumers generally favour packaged juice to CSDs. Chi Nigeria Ltd (45 per cent volume share) dominates the segment with varieties of the Chivita brand, ahead of NBC‟s 5-Alive brand (35 per cent volume share). Other players in the segment include GlaxoSmithKline Nigeria Plc, Dansa Foods, Cway Food & Beverages Co Nig Ltd, Frutta Juice & Services Ltd and Fumman Foods Industries Nigeria Ltd.

The Spirit and Wine Segment: A phenomenal game changer in the spirit segment of the alcoholic drink market was the introduction of Alomo bitters in 2010, an alcoholic herbal drink that challenged the dominance of all other alcoholic drinks (other spirit) including beer. The product was favoured by the majority as a result of the perceived medicinal benefits and virility in men accorded to herbal products.

The product is inexpensive (NGN180 to NGN250) compared to other spirits and Lagers. Growth in consumption of Alomo was partly responsible for the drag in the performance of beer in 2012 according to Euro-monitor. As a result of this trend, Guinness Nigeria Plc (a subsidiary of the Diageo group with key strength in the spirit segment in Africa) recently launched „Orijin bitters‟, a blend of herbs and fruits with bitter-sweet flavor to challenge the dominance of Alomo bitters in the segment. Spirits, the key strength of the Diageo Group (the parent Company of the second largest Nigerian brewer - Guinness), is still a very shallow market in Nigeria as it remains unappealing in aggregate consumption basket. However its stout brand remains a market favorite, with Nigeria ranking as the second largest market for the Guinness Stout brand world-wide.

61 Figure 7: Nigeria Beverage Market Volume Share

Source: Researcher’s Construction (2015)