BREWERY SECTOR: A QUARTER TO FORGET
Beer makers saw revenues plummet in Q2-2020 as the economic shut-down extinguished sales.

The quarter ending June 2020 will be one to forget for Nigeria’s struggling brewery sector. Whilst the negative effect of COVID-19 is still being reported across every sphere of the economy, the brewery sector was always one of those expected to suffer the most. Latest results from 2 industry giants, Nigeria Breweries and International Breweries confirm our worst fears. Combined revenues for both was N93.9 billion, representing 22% drop year on year. Both companies reported revenues of N120.4b in the corresponding quarter of 2019.

Disaggregated, NB Plc reported 21% drop to N68.6b and IB Plc 24% drop to N25.2b. Guinness is yet to release its quarter ending June 2020 results which happens to be its year-end. Ahead its release, the company issued a profit warning as it anticipated the worst. Revenue drop in the Brewery sector is not a surprise. With most parts of the country in complete economic lockdown, beer sales are expected to drop significantly.

As expected, fall in revenues crashed margins significantly. While NB Plc was able to eke out a tiny N70m pre-tax profit, IB Plc lost N4.2b. Nigeria’s Brewers actually fared worse when you consider that they reported N7.9b in 2019 and N12.3b in 2018. Could it get any worse?

Beer companies have always posted some of their best revenues in the 2nd quarter of the year and struggle in the 3rd. With results this bad already in the 2nd, things can only get worse Q3. Though, economic activities are gradually picking up, entertainment life (which it heavily relies on) remains comatose.

The industry has been struggling with dwindling sales and thin margins for years, as younger Nigerians ditch beer for spirits, which are often cheaper, do not bloat the stomach and are quicker to intoxicate. Increase in beer sales is also seemingly positively correlated with uptick in social events such as weddings, parties and birthday ceremonies. Hotels, bars, clubs and most entertainment centres remain shut since March. Some are expected to reopen in coming weeks, as government eases lockdowns. Till then, beer makers are clutching at straws.

COVID-19 could be blamed for the industry’s woes, but a changing demographic still poses an existential threat to the sector. In fact, COVID-19 only showed how urgently they need to pivot away from relying on outdoor events to drive sales. Beer drinking is purely a consumer product and needs to be pitched as such.

Rather than advertise beer as a drink for bars during live events, it should be sold as a “must-have” beverage in the evening during family time. It should also be pitched as a must-have staple for house parties and close family gatherings or even casual remote work settings. The packaging should also gear off for a makeover.

Beer dispensers anyone?

SOURCE (abridged): https://nairametrics.com/2020/08/10/brewery-sector-a-quarter-to-forget/