Nigerian Breweries sets up retail labs to boost earnings amid rising competition

NIGERIA – Nigerian Breweries Plc has reported a decline is net revenue by 0.4% from N324 billion (US$887.2m) in 2018 to N323 billion (US$884.5) in 2019 for the full year.

Profit before tax fell by 20.5% from N29.3 billion (US$80.2m) in 2018 to N23.3 billion (US$63.8m) in 2019 with Profit after tax dipping from N19.4 billion (US$53.1m) in 2018 to N16.1 billion (US$44m) in 2019, down 17% year on year.

The company attributed the poor results to the increase in excise duties, as well as the challenging operating environment.

In terms of operational expenses, for every N131 the company made as gross profit, 74.7% or N97.9 went to marketing, distribution and administrative expenses.

Finance costs accounted for 34.3% or N12.1 billion (US$33.1m) of the N35.2 billion (US$96.3m) realized as operating profit in 2019.

During the period under-review the company decided to set up its own distribution chain – debut 234 stores – as a pilot scheme.

234 Stores Limited is a subsidiary of the company which was incorporated to explore opportunities in the route-to-market.

The move is attributed to the growing stiff competition in the brewery space with the reinvigoration of International Breweries.

Many distributors tend to stock all three products. Carving out its own distribution chain gives it some form of exclusivity.

The move is set to lead to higher margins for the firm, as it would be cutting off distributors who are in the middle.

Margins have been squeezed in the beer space, due to the higher excise duties, and intense competition which has made it difficult to raise prices.

Figures from Nigerian Breweries income statement show that 234 and Benue Bottling Company Limited’s made net revenue of N24.3 million (US$66,000) and a profit after tax of N1.1 million (US$3,000), due to finance income.

On an operating level, it made a N49 million (US$0.13m) loss, due to operating expenses.

International Breweries and Guinness Nigeria would be paying close attention to this experiment. If it gains significant mileage, they could decide to replicate, reports Nairametrics.

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