Guinness Nigeria outlines strategy for growth

Guinness Nigeria Plc said it has adopted a strategy to broaden its portfolio base to enable it serve a wider range of consumers both from price and segment point of view as it awaits a full recovery of the economy.

In a wide ranging interview with FEYISAYO POPOOLA of the Punch Newspapers, the Managing Director/Chief Executive Officer of Guinness Nigeria Plc, Mr Baker Magunda, said that the economic recovery has been very fragile. He lists some of the challenges manufacturers still face.

Magunda said that inflation is still running at double digits, albeit at a lower rate than before. While the currency volatility has stabilized, he notes that it is still quite high. Also, there is strong competition in the market and consumers are price sensitive.

The brewing and spirits industry took an excise tax increase in June from the government but has been unable to pass-on the higher cost to consumers.

To counter these challenges, he said the firm has adopted a strategy to broaden its portfolio base to enable it serve a wider range of consumers.

He feels confident that the company will ride out the rough times.

He said that the company had a lot to celebrate in the 2018 financial year which ended on June 30. For starts, the company recorded 14% sales growth and gave back N4bn to shareholders in the form of dividends. The company was able to tighten its cost structure amid rising inflation, high cost of materials and excise duty increase. The restructuring, it notes was necessary for the company to remain competitive.

Further listing some of its accomplishments for the year, Magunda said that the company kept true to its commitment to the community – delivering water to communities, working with farmers to supply goods, doing eye care treatments for people, among others.

Within the organization, lots of people were promoted and new sets of people were brought in. He added that the company has seen real improvement in its gender balance, which is running at 50-50 male to female ratio. It has also exported a lot of talent to other countries.

To achieve high sales growth in 2018 and increase in dividend, he said the company expanded its portfolio (beer & spirits) and offered better price structure since having moved into local production of spirits. It also expanded its route to consumers.

He noted that technology have had a pivotal role in its performance in the 2018 financial year and its growth strategy for the future. For instance, it upgraded its brewing equipment, spending £2.5m in a new PET bottle production line which eliminated a lot of manual processes, thus removing risk of human accident, delivering consistency in quality and improving global standards of brands.

The firm said that finance and process roles have also been fully automated. And as it ramps up local sourcing of raw materials, it has to find new ways of using those materials to get the same results and quality. So it invested a lot of money in equipment to be able to handle these products, like sorghum for example, or maize.

Further explaining the role and impact technology has played in its business, the MD pointed out that most people don’t see Guinness ads on billboards anymore, not because the company stopped advertising, but because it changed the way it interacts with consumers by shifting to more digital platforms.

Shift to local sourcing of Raw materials

Magunda said that the company’s shift to local sourcing of raw materials has many benefits for both the company and the country. Citing examples, he said that local sourcing creates more jobs. The jobs that would have been created for farmers in the United States have now been given to farmers in Nigeria.

Giving other examples, he said that the company now buys bottles locally, thereby creating jobs for those companies.

Also, local sourcing reduces pressure and demand for foreign exchange. It also moderates inflation because when a firm imports materials, they also import some inflation.

Explaining further, he said that local sourcing relieves pressure on port facilities and roads leading to the ports. It gives the government an opportunity to focus on building more roads connecting farmers and manufacturers. That way, the country is more connected.

Buying locally also formalizes local businesses that would create more taxes for the government.

In all, the company feels that the shift to local sourcing is the right thing. The impact on communities is positive and it believes it is in the country’s best interest and will go a long way to boosting the Gross Domestic Product (GDP) of the country.

Logistics

The MD said logistics is a big challenge for the company as there is intense pressure on distribution and warehousing costs. Transporters charge more and infrastructure outside of main cities are really expensive.

Some of the company’s materials such as returnable glass bottles cost more to move around the country.

He noted that the firm has been working hard to increase the number of customers it serves directly and that has almost doubled within the last few months. It gets the company closer to the market and gives it more insight into the products that are working in the region.

He added that the company has restructured its commercial team to reflect an end-to-end business team per region so that decisions are made at regional levels.

Explaining further, he said the company has moved a lot of its products into one-way packs to access locations where people are on the go.

In addition, there has been a re-arrangement in processes. For instance, if the company has one truck that only carries 10 tonnes of Johnnie Walker, the value are the same as carrying 40 tonnes of beer.

So the company has adopted a strategy that allows it to manage the cost to serve. Some of its products are not available in some areas because it has seen it is better and more profitable to market other products in those areas.

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