Anheuser-Busch InBev (AB InBev) is set to make its debut on Tuesday 11th October as a unified company, after closing on the deal to acquire SABMiller a day earlier.

There will be high anxiety and anticipation among investors, market watchers, competitors and beer drinkers around the world to see if this global beer behemoth which will control almost 30% of the world’s beer volumes and nearly half of its profits will succeed. Stakes will be high here in Nigeria also where both the new player and the incumbents have to fight for market share amid a worsening economy and what effect this would have on all participants.

One of the principal reasons for the takeover of SABMiller by AB InBev was to tap into the growth opportunities in the African beer market. According to analysts, beer consumption in the developed world has been on the wane for some time. In the US and Brazil, which accounts for half of AB InBev’s revenue, beer volumes fell 3.9% over the first-half of 2015 to 80.5m barrels, from 83.7m barrels.

According to a report published in January by the Canadean, a market research company, global growth in beer volumes are expected to come from Africa, with a 2.6% rise in 2015, in a continent where SABMiller held 34% market share. Africa’s beer market is expected to grow faster than any other region in the next five years – largely driven by rising population, urbanization and increased GDPs, the report said. But that was in January, before the continent’s macroeconomic environment worsened.

SABMiller’s first quarter financial results (Apr – June) showed revenue decline of 10% to $19.8bn, from $22bn in 2015. Beverage volumes grew 2%, while pre-tax profit fell 16% to $4bn, from $4.8bn in the previous year.

The brewer’s African region saw a 6% rise in revenue, while volumes remained flat. SABMiller, commenting on its first quarter performance noted that “some African markets were impaired by challenging trading and macroeconomic conditions and consumer pricing effects.” It added that local currencies were the subject of “ongoing material depreciation.”
On a country-by- country comparison, the results were a mixed bag. South Africa which is the brewer’s home turf and largest market by volume and sales saw a 6% revenue growth while volumes rose 2%. Nigeria, on the other hand recorded an impressive 36% growth in revenue. However, Angola which is also a major market for SABMiller through its shareholding arrangement with Castel Group, the French beverage company, said it was scaling back its activities in the country due to macroeconomic challenges.

Here in Nigeria, brewers are not finding it easy. Nigerian Breweries Plc, the country’s largest brewer, reported a 2.3% revenue decline in the second quarter (Apr – June) of 2016 to N79.8bn, while profits shrunk even further 24% to N8.6bn, from N11.4bn in 2015.

Guinness Nigeria Plc, the second largest brewer in the country fared even worse, with a declared net loss of N2bn for the full-year ending June 2016. The company cited weak economic environment and foreign currency headwinds as the cause.

While breweries owned by SABMiller have performed better in terms of revenue growth, a look at the most recent financial result (Q1, Apr-June 2016/2017) for International Breweries Plc (IBPLC), a SABMiller company shows how a company, which has shown consistent revenue growth is weighed down by poor macroeconomic fundamentals. IB PLC recorded a net loss of N1.7bn in the first quarter despite posting an impressive 32% rise in revenue to N6.9bn. It cited foreign currency devaluation as the reason for the loss.

Brewers in the country have come to accept that consumers, who are financially squeezed, have taken flight from premium brands to value brands as the economy bites.

AB InBev which is said to have a history of using mergers to raise prices by steering consumers to its premium brands such as Budweiser may have to contend with its value brands such as Hero Lager, Trophy Lager and whatever it brings along. According to the National Bureau of Statistics (NBS), Nigeria’s economy is likely to shrink by -1.3% in 2016, while the International Monetary Fund (IMF) is predicting a more dire contraction of -1.7% – all as a result of low oil price. NBS is also forecasting year end inflation of between 17.1% and 18%.

While we wish all market participants well, the current economic realities in the country shows that it might be a bumpy road ahead before it gets better.