NIGERIA – Nigerian beer consumers are becoming increasingly price-conscious and are opting more for products in the value segment which are more affordable than the well-known mainstream brands.
The shift is prompting brewers into the innovation of new value brands and increased spending on advertising, with a view to establishing and maintaining a positive impact on the customers’ hearts and minds.
Analysts identify factors that drive consumer demand for the value beer segment as advertisement, peer group influence and situational variation, among others.
Value beer products are low-cost brands, or brands which are cheaper and more affordable to low-income consumers. In Nigeria, prices of most beer brands in this segment range between N150 and N170 per bottle.
On the other hand, mainstream or premium beer brands are often readily available and appealing to the general public, as opposed to being of interest only to a very specific subset of the market. Prices of mainstream or premium beer brands are upwards of N200, say experts.
Jude Fejokwu, principal analyst, Thaddeus Africa Independent Research, says the trend has mostly affected Guinness Nigeria, whose sales declined in the country due to the emergence of a more price-aware and -sensitive consumer base.
According to Fejokwu, the decline in beer sales in Nigeria, where consumers traded down to value beer resulting in share losses, has driven Guinness into introducing a new product, ‘Orijin’, which is a cheaper alcoholic brand made with local input.
The brewer, BusinessDay gathered, had earlier re-launched the ‘Dubic’ brand as well as ‘Satzenbrau’, both of which are value brands.
Nigeria is the third-largest market for Guinness, behind Great Britain and Ireland. Incidentally, the brewer’s net sales in the country declined 9 percent, while sales nose-dived by 11 percent (in absolute naira terms) in the last financial year.
Nigerian Breweries is also aware of the price sensitivity of consumers and has likewise assumed leadership in the value segment, with its ‘Life’ and ‘Goldberg’ products.
According to Renaissance Capital (RenCap), a new product called ‘Star Lite’ has also been launched as a healthier version of the ‘Star’ brand, containing 40 percent less calories than a regular lager.
Apart from Consolidated Breweries, which is known in this segment, with its ‘33 Export’ and ‘Williams’, the new entrant, SABMiller, is steadily gaining market share in the southern part of the country with its ‘Hero’ and ‘Castle’ brands which are well-received in the south-east.
“We expect the value segment will continue to experience higher growth levels against mainstream beers, but the margins for this segment are lower,” says RenCap in a report.
The value segment has grown above 20 percent in the last two years, while the mainstream segment has only seen a low single-digit volume growth.
Beer consumption worldwide is influenced by economic growth, affordability, availability, as well as cultural and religious factors.
Currently, there has been stiff competition for market share among brewers. Research shows Nigerian Breweries plc has 61 percent market share, while Consolidated Breweries has 10 percent share. In other words, Heineken, the parent company of both, has 71 percent share of the market.
On the other hand, Diageo, parent company of Guinness plc, has 27 percent market share.
Analysts say much more work needs to be done by local brewers to improve their margins.
“A beer producer who wants to be on the cutting edge of competition should develop a more effective advertising campaign programme to increase the consumers’ preference for their brands of beer,” says the European Journal of Business and Management in its recent report on Nigeria’s brewery industry.
“It is therefore advised that any advertisement for beer brands should convey information about the advantages which the brand being advertised would offer over other brands,” it says.
Since peer group influence was found to be significantly relevant to brand preference of beer, producers should in their advertisement emphasise social groups, the report further says.
“They should exploit this further, through segmenting the market into distinctive social classes. The advertisement should encourage group purchasing and the positive effect of such purchase (security, acceptability of choice, championship etc) and depict friendship situation. The advertisement should emphasise the situation in which the consumer may find him/herself, such as in beaches, carnivals, parties and dining out,” it says