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Nigeria beer industry loses affects economy

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By Usman Oladimeji

Factors like devalued currency, FX shortage affects brewery industry.

With the current administration scrambling to ease the increasing economic crisis burden on the population, it is evident that some corporate entities are being compelled to take drastic measures in order to stay afloat amidst the challenging situation. Brewery industry operators in the nation are facing challenges due to factors like inflation, increased sale costs, devalued currency, scarcity of foreign exchange, higher petrol prices, and electricity tariffs. Consequently, they have no choice but to raise prices for their products.

For instance, Nigerian Brewery Plc approved a second price change in February, and on March 13, 2024, Guinness Nigeria Plc introduced a fresh pricing structure. Yet, with the release of their 2023 full-year performance data, it became evident that the top three beer producers in Nigeria – Nigerian Breweries, Guinness Nigeria Plc, and International Breweries – experienced substantial financial losses. The main factors contributing to the losses are fluctuations in foreign exchange rates, increased expenses for financing, and higher production costs, as indicated by the research.

Guinness reported a post-tax loss of ₦5.23 billion.

Nigerian Breweries Plc reported a significant net loss of ₦106 billion in its financial results for the period ending on December 31, 2023. The main cause of this loss was the negative effect of the devaluation of the naira on the company’s foreign exchange dealings. The primary factor contributing to this loss was a substantial net foreign exchange (FX) loss of ₦153.3 billion, a stark increase from the FX loss of ₦26.3 billion reported in 2022. Also, the company faced challenges from rising production costs, resulting in a situation where the increase in expenses exceeded the growth in sales revenue for the year.

Due to the challenging business conditions, the company has announced a comprehensive restructuring initiative as a key component of its strategic turnaround strategy. Guinness Nigeria Plc, known for its iconic brands such as Baileys, Dubic Malt, Gordon’s Dry Gin, Guinness, Harp, Johnnie Walker, Malta Guinness, Orijin, Satzenbrau and Smirnoff, reported a post-tax loss of ₦5.23 billion for the six months ending December 2023. This marks the first time in three years that the company has experienced a loss, compared to a profit of ₦4.02 billion during the same period last year.

Rising operating costs largely affects International Breweries.

International Breweries Plc / , the company behind popular brands like Castle Lite, Trophy, Beta Malt, and Hero, faced a deteriorating financial situation in 2023. Despite already reporting a loss of ₦21.63 billion in 2022, the company’s financial woes worsened the following year with a staggering loss of ₦70.03 billion being declared, a stark contrast to the ₦21.63 billion loss reported in 2022. The company reported a significant increase in net foreign exchange losses, jumping from ₦5.11 billion in 2022 to ₦55.98 billion in 2023.

Despite seeing a significant increase in revenue of 19.18% to ₦260.6 billion in 2023 from ₦218.65 billion in 2022, International Breweries suffered its worst performance in more than a decade due to rising operating costs. Critics in the industry worry that recent price hikes by beer companies, along with sustained losses, could damage the longstanding connection between average Nigerians and their favourite brews. They perceived that the increasing cost of partaking in this traditional cultural activity means that enjoying a frosty beer with friends is now considered a luxury that is unattainable for a large number of people.

Related Article: Breweries to suspend production in two plants

The recent series of losses suffered by top beer companies in Nigeria is predicted by analysts to create far-reaching impacts on both the economy and society. Mr. Oladosu Morakinyo, a businessman from Ogun State, highlighted that this could potentially result in a decrease in government revenue generated from taxes and fees imposed on the brewing sector. Additionally, the possibility of job cuts or lower salaries in this industry may lead to an increase in unemployment and a decrease in consumer purchasing power, impacting different parts of the economy. Since these losses have the potential to influence both economic and social environments, it is important for stakeholders to implement strategic measures to lessen any negative effects.

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