Nigeria’s downturn leading to value brand switch, warns Heineken
Heineken said on Tuesday that the current economic slump in Nigeria is making beer drinkers switch to cheaper brands. “Nigerian consumers are still drinking beer,” the brewer acknowledged, but is concerned many are moving away from premium to value brands as families struggle in the face of a slowing economy and recovering from the effects of the recent currency devaluation.
Nigeria accounts for almost half of Heineken’s sales in Africa/Middle East, but a shift away by consumers to value brands is increasingly putting pressure on margins, the company said this week. Heineken is the majority shareholder in Nigerian Breweries, Nigeria’s largest brewer.
Heineken said that despite the current economic situation in the country that led to the switching of policies by the nation’s central bank to a flexible exchange rate system, the company has seen overall beer volumes in the country rise in the first-half.
“As for consumers in Nigeria, the good news is that they keep drinking beer,” Heineken CFO Laurence Debroux said on Tuesday. After a first-half of 2015 where we were a bit worried about volumes, now this is back, but [consumers are] definitely trading down to more value and lower mainstream brands, which are actually flying in volumes.”
Nigeria is in the midst of one of the worst economic slowdowns in decades, fueled by a drop in oil price. On June 20, the Central Bank of Nigeria made a policy shift by moving away from a fixed exchange rate system to a flexible exchange rate, prompting the naira to plunge by as much as 40%. Heineken said this week it lost €24m because of the devaluation; however, it is now easier to take money out of the country. The brewer had previously warned in the first quarter that currency extraction was getting “more difficult but not impossible”.
Speaking on the economic situation in Nigeria, Heineken CEO Jean-Francois van Boxmeer said the company will “need to do some pricing over there because otherwise you might risk your business going really down”.