7-Up bottling performance validates aggressive market penetration

Seven up Bottling Plc’s impressive results has validated the company’s aggressive market penetration across the various product lines as profit increased 10.64 percent despite hard hitting economic environment stunting the growth of consumer good firms in Nigeria.

Profit was N7.12 billion for the year ended March 2015, compared with N6.43 billion the previous year, the Lagos-based company said in an e-mailed statement on the NSE. Sales increased 5.93 percent to N82.45 billion.

The growth in sales was due to 7UP’s penetration in the rural areas than urban Nigeria.

This gives the company higher market leverage than other newer fringe players competing with the products in cities.

The company has a well-coordinated distribution network with an extensive network of over 200 distribution centers located across Nigeria.

Analysts say 7UP’s strong brand also helped bolster sales, grow its customer base, increase and retain market share.

The well Branded product of the company has improved the return on its advertising and marketing budget as selling and distribution expenses fell by 2.33 percent to N12.90 billion.

This also means customers insist on the company’s brand and they are willing to pay for the product in preference to lower-priced offerings.

While 7UP is thriving, consumer goods firms in Africa most populous nation are groaning under weak consumer spending, rising inflation, security challenges and the devaluation of the naira.

The devaluation of the naira exposes consumer goods firms to currency risk as imported raw materials becomes expensive hence spiraling cost of production

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A 40 percent decrease in the price of oil forced the Central Bank to devalue the local currency in order to stabilize the economy and protect the country’s foreign reserves from continued depletion.

Reserves fell 23 percent to $29 billion in the year to the end of June but have risen to $31 billion in July, latest figures from the CBN show.

The naira weakened less than 0.1 percent against the dollar to 199.02 on the interbank market as of Friday, taking its decline to 7.8 percent this year.

Consumer spending has been constrained by rising prices as inflation accelerated to 9 percent in May from 8.7 percent a year earlier, data from the National Bureau of statistics shows.

7UP spent N0.6303 on input costs to produce each unit of product while cost of sales were up by 5.18 percent to N51.97 billion in 2015 compared with N49.42 billion last year.

The company’s gross profit was up by 7.06 percent to N30.40 billion in the period under review from N28.70 billion in 2014.

Net margin, a measure of profitability and efficiency moved to 13.54 percent in 2015 as against 11.71 percent last year. This means the Nigeria bottling company is efficient in managing direct costs attributable to projects.

7UP’s total assets grew by 21.16 percent to N67.68 in 2015 from N55.86 billion in 2014. Shareholder’s fund rose by 38.1 percent to N23.93 billion.

7UP’s share price has been rising since 2011 to close at N188 on the floor of the NSE. Market capitalization was N121.07 billion.

July 13, 2015; http://businessdayonline.com/2015/07/seven-up-bottling-performance-validates-aggressive-market-penetration/#.VaPhQ_nHQ2g

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