Guinness Nigeria Plc, said it plans to increase exports of its iconic stout brand to South Africa and other countries in order to generate needed foreign exchange as it struggles to overcome dwindling sales in its home market.
The company, which is a unit of Diageo Plc said it would consider selling Guinness Stout and Orijin herbal drink to South Africa to increase the proportion of beverages it sells overseas, chief executive officer Peter Ndegwa said on Friday 9, 2016 to Bloomberg. Sale of Guinness products to South Africa will go a long way in helping resolve the company’s shortage of foreign currency in Nigeria, which it needs to pay for imported raw materials.
“With all the challenges we have had with foreign currency availability, we realize that export is a great opportunity to gain foreign exchange and stabilize,” Ndegwa said.
“We have heard a lot of inquiries from South Africa. We are currently in the process of seeing how we can export some of those brands to the country.”
Guinness Nigeria said it would seek to export beer to target Africans living on other continents, Ndegwa said.
The company is seeing beer drinkers downgrade to cheaper brands such as Satzenbrau as disposable incomes decline. Guinness is expanding its range of spirits to increase choice in its more affordable product range.
“We are focused on brands that are lower priced, by either improving distribution or improving awareness,” Ndegwa said.
“We have spirit brands across all categories but the growth is mid-to-lower end.”
Nigeria’s July inflation rate of 17.1%, the highest since October 2005, has increased the cost of doing business, according to Ndegwa. He adds that the company has worked towards increasing the amount of locally sourced raw materials in the past 18 months, to reduce costs and demand for scarce foreign exchange.
Guinness Nigeria plans to spend £12m ($15.9m) to upgrade its Benin City plant so it can begin to manufacture mainstream spirits that can be offered to consumers at lower price points when compared to imported spirits, the MD said. The brewer acquired the distribution rights to Diageo’s International Premium Spirits (IPS) like Johnnie Walker, Ciroc and Baileys in Nigeria and also the rights to distribute McDowell’s whisky, a mainstream spirit brand of United Spirits Limited (USL), a Diageo company in India.
The company saw its revenue decline 18% in the nine-months through March 2016 to N69.6bn ($220m), down from N84.75bn, while profits nosedived 83% to N864m, from N5.216bn in the preceding year. Guinness shares have also not been spared as it is down 17% this year, compared with a 3.7% decline in the Nigerian Stock Exchange All Share Index.
The company said it is committed to Nigeria despite the difficulties, Ndegwa said.
There’s a lot of demand for “great brands offered by companies like ours,” Ndegwa said. “We see opportunities for growth, despite the fact that the economy doesn’t look as attractive.”