African beer war brewing
Four global companies have 90 percent of Africa’s highly consolidated beer market — SABMiller, Heineken, Castel, and Diageo.
African beer market predicted to grow faster than any other region over the next five years due to urbanization
LAGOS, Nigeria (AFKI) — First quarter results from the world’s third largest brewery, Heineken, show that an African beer war is brewing. Nigerians are consuming more beer than the same period in 2015 despite hard times — or because of them.
Released on Wednesday, the results show that Heineken beer volume consumed in Africa, the Middle East, and Eastern Europe grew by 4.6 percent in the first quarter of 2016, with Nigeria and Ethiopia responsible for most of the increase, according to The Cable.
“Organic consolidated beer volume growth of 4.6 percent was driven by growth in Nigeria and Ethiopia,” the Dutch brewer Heineken said in its first quarter report.
Results for Guinness Nigeria, the country’s second-largest brewer, told a different story based on profits, not volume.
Guinness reported profits fell 83 percent in the nine months through March 2016 during the economic downturn, according to Bloomberg.
Guinness Nigeria’s stock is down 42 percent since the beginning of 2015, compared with 28 percent for the Nigerian All Share Index. Nigerian Breweries, controlled by Heineken — the country’s No. 1 beer maker — saw its stock fall 36 percent in the same period, Bloomberg reported.
Nigeria’s revenue fell in March to its lowest level in more than five years, according to Bloomberg. Oil prices fell 60 percent since mid-2014 to about $45 a barrel. Nigeria’s economy grew 2.8 percent in 2015, the slowest since 1999. It will probably fall further to 2.3 percent in 2016, the International Monetary Fund said.
Foreign investors are avoiding the country’s bonds and stocks until there’s a devaluation while local businesses are struggling to import essential raw materials.
Without Nigeria, beer volume in the first quarter would have been down organically for the region, Heineken reported. “Elsewhere in the region, volume was challenging and remains weak, with both affordability and lower tourism continuing to impact performance.”
Heineken said it still faces challenges in Nigeria, according to Quartz. “Underlying trading conditions remain tough” amid a “weaker consumer environment,” Heineken said.
Access to an international currency like the dollar is restricted. It’s getting more difficult to obtain hard currency “and the uncertainty regarding a possible devaluation of the naira continues to impact the business adversely.”
In January, Beverage Daily reported that Africa’s beer market is predicted to grow faster than any other region over the next five years, thanks to urbanization, increased GDPs and a growing population.
Consumers are turning from traditional home brews to competing products made by multinationals such as SABMiller, Heineken, Castel Group and Diageo.
Beer consumption in Africa grew by 4 percent during from 2012 to 2014 and was expected to grow by 5 percent in 2015.
Beverage market researcher Canadean predicts sub-Saharan African beer consumption growth will grow 5 percent from 2015 to 2020, ahead of Asia the Middle East and North Africa (all 3 percent), and way ahead of more mature markets such as Western and Eastern Europe and North America (1 percent or less), according to Beverage Daily.
Four global companies have 90 percent of Africa’s highly consolidated beer market — SABMiller, Heineken, Castel, and Diageo. “(They) have been effective monopolies,” said Canadean analyst Piyumika Jayasena in a Beverage Daily interview.
“However, these monopolies have been challenged by the emergence of new competitors in several African markets such as Ivory Coast, Kenya, Madagascar, Rwanda, South Africa, and Tanzania.