NB seeks to expand leadership in premium lager, scale-up mainstream and drive malt growth

Nigerian Breweries Plc (“NB Plc”), the country’s largest brewer by volume and sales has set a goal to expand its leadership in premium lager, build scale in mainstream segment (formerly value segment) and drive malt growth as it counters stiff competition from rivals – International Breweries Plc, a subsidiary of AB InBev and Guinness Nigeria Plc.

The company laid out its strategy during its annual ‘Financial Market Forum’ held at the company’s headquarters in Iganmu, Lagos. The company’s Managing Director/CEO, Jordi Borrut Bel and Finance Director, Rob Kleinjan held a briefing of the company’s business with analysts and took them on a tour of an open market to demonstrate how the company wants to build stronger partnerships with retailers and distributors.

Macro Economy Overview

The firm points out that the Nigerian market remains very attractive, stating that 70% of the population is under 29 years, with increasing urbanization. The firm notes that inflation has declined to 11% albeit still high but a huge improvement compared to previous years. It also points out that the exchange rate has stabilized, with oil prices back to pre-recession level and GDP growth rate out from the negative territory to nearly 2% at the end of Q1 2018.

The brewer said that digitization is now playing an increasing role on how consumers interact with the brands as well as how it interacts with consumers as nearly 95 million Nigerians out of a population of 193.4 million are internet users.

Beer consumption

The firm notes that beer consumption in Nigeria continues to lag at nine litres per capita when compared to an African average of 22 litres per capita. However, the low figure presents room for growth.

According to the company, lager is expected to remain the bulk of the category at about 82% in 2017 and declining marginally to 81% by 2020. It points out that consumers have been down trading to cheaper brands which is a new reality.

The company said that Stout makes up 10% of its portfolio. Other categories make up the rest.

The brewer notes that its profit pool has been under short term pressure, driven by consumer down trading, currency devaluation and material cost inflation. It is a trend it sees continuing through 2018.

PRICE LADDER IN LAGER

CATEGORY 2012 2018
PREMIUM Heineken – ₦300 Heineken – ₦300
Tiger – ₦200
NATIONAL PREMIUM Gulder – ₦210
Star – ₦200
Gulder – ₦250
Star – ₦230
MAINSTREAM Goldberg, Life & “33” Export – ₦200
ECONOMY Goldberg, Life, & “33” Export – ₦150
More – ₦130
More – ₦150

PRICE LADDER IN STOUT

CATEGORY 2012 2018
MAINSTREAM Legend – ₦200
Turbo King & Williams Dark Ale – ₦180
Legend – ₦250
Turbo King & Williams Dark Ale – ₦230

PRICE LADDER IN MALT

CATEGORY 2012 2018
MAINSTREAM Amstel Malta & Maltina – ₦100 Amstel Malta & Maltina – ₦150
ECONOMY Malta Gold, Hi Malt & Champ Malta – ₦80 Malta Gold & Hi Malt  – ₦120
Champ Malta – ₦100

The market remains increasingly competitive.

Strategy to win

To remain the leading brewer in the country, the company said it needs to expand leadership in premium lager, build scale in mainstream lager and drive malt growth.

Premium Segment

In the premium segment, Heineken brand is at the core and continues to grow at double digits. NB wants to accelerate the brand expansion by making it easily accessible to consumers. To accomplish that, it wants to leverage some of the platforms it has such as the UEFA Champions league, Formula 1, Fashion & Design and James Bond.

It notes that the roll out of Tiger brand, the new premium brand that was launched earlier this year is continuing. At the current time, it is only available in Lagos but roll out will continue across the country.

Build Scale in Mainstream

The company said that the core of the market remains mainstream. The firm covers different price points. To win in the mainstream category, the company wants to excite Nigerians with strong portfolio of national and regional brands. It also wants to lead in innovation and digital activations to better connect with the dynamic Nigerian millenials.

Non-alcoholic Malt category

The company said it still leads in this category with its Maltina and Amstel Malta brands, though it has suffered in the last few years due to the economy.

The firm wants to lead in this category through innovations with nourishments, energy and health.

It also wants to drive affordability in core non-alcoholic channels.

NB wants to innovate in packaging and recipes to nourish more Nigerians and excite with local foods/fruits that are heath friendly.

Building winning route-to-market

NB said to build a winning route-to-market, it would need to increase its proximity to retailers, build strong partnerships with distributors and ensure win-win incentives for distributors.

The company wants to provide its sales force the ability to make quick decisions at point-of-sale.

Improve End-to-End Productivity

Other measures the brewer would like to implement includes improving end-to-end productivity, which are classified in three segments:

Revenue Management: which includes promotion optimization, discounts and trade terms and brand portfolio and mix management.

Consumer Value Engineering: This involves packaging optimization and Trade Marketing / POS rationalization.

Cost Optimisation: It means implementing synergies from mergers of previous years to save cost, managing fleet effectively; having a financial / funding strategy and ICT cost license and infrastructure.

Sustainability

Sustainability is at the heart of the company’s strategy to win. It listed some of its achievements, and goals for the future to include willingness to reduce water consumption by recycling water back to the environment; reduce the use of Co2 by 2020; growing with communities. It points out that it has built over 68 schools over the years; the company employs over 250,000 farmers; promotes health and safety; Building high performing teams to develop great business leaders, grow its talent pipeline at all levels, build critical capabilities and strengthen functional excellence and leverage diversity and culture.

Excise Duty

NB notes that the new excise duty that came into force in June has provided transparency and a level playing field. It favours it over the previous ad valorem tax. The company can now plan ahead.

During Q & A

Tiger premium Lager was first launched in Lagos earlier this year to test its performance. According to the brewer, the brand is doing well. The bottle size is 45cl instead of the standard 60cl. The plan is to eventually roll it out nationally. Management notes that it now has the Heineken brand and Tiger as premium brands. It does not rule out the introduction of other premium brands in the future.

On the new premium Stella lager that was launched last year, the company states that it is generally happy with its performance in the test phase. However, it is now trying to understand what to do with it, whether to launch it regionally or nationally.

Spirits

NB has no plans to go into spirits. The company’s focus is on beer.

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