Nigerians Spend Over $1 Billion On Beverages In 6 Months

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Nigerians Spend Over $1 Billion On Beverages In 6 Months

In the first half of 2022, Nigerians spent more than $1 billion on alcoholic and non-alcoholic beverages.

This is based on information taken from the financial records of some of the biggest beverage manufacturers in the nation that are listed on the NGX, the top stock exchange in the nation.

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The world’s largest breweries, including Nigerian Breweries, Guinness, and International Breweries, all claimed double-digit revenue increases as Nigerians drank their goods despite a decline in purchasing power and skyrocketing inflation. As Nigerians drank more chocolate beverages, non-alcoholic beverage producers including Nestle, Cadbury, and Friesland Campina also reported similar revenue gains.

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Nigerians Spend Over $1 Billion On Beverages In 6 Months

Together, these businesses offer some of the most popular beverage brands in Nigeria. In contrast, Guinness sells Guinness Stout, Orijin, and Malta Guinness whereas Nigeria Breweries distributes Star and Maltina. Golden Mourn and Milo Nescafe are both sold by Nestle. Manufacturer of Peak Milk and Three Crowns is FrieslandCampina.

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Over N700 billion generated

A cursory analysis of the results of the companies under review shows total revenue generated from beverages alone stood at N763.9 billion as against N587.5 billion reported a year earlier.

The 28.5% growth in beverage revenue over the last one year indicates how strong demand still is for beverages despite cost pressures arising from taxes and price increases.
At N593.2 billion for the first half of the year alone, the companies are on track to top a trillion in beverage sales this year alone.
This result excludes over a dozen larger beverage makers who are not quoted on the Nigerian Exchange.
This suggests the actual revenue in the first half of this year will be much higher when added to the revenue generated by the 5 beverage giants.

Nigerians appear to spend most of their money on beer in the first half of the year helping the likes of Nigeria Breweries, Guinness, and International Breweries to a combined revenue of N483.1 billion as against N379.2 billion same period in 2021.

Nigerians Spend Over $1 Billion On Beverages In 6 Months

Nestle also reported a significant rise in beverage sales, reporting a sale of N90 billion up from N70.2 billion. FrieslandCampina which makes milk products also saw its revenue boosted from N125.7 billion to N170.7 billion in the first half of the year.

Reports from some companies indicate the major driver of revenue growth over the last year has been significant adjustments to prices.

For example, Guinness reported it had price adjustments in nearly all its categories with Beer and Malt drinks increasing by 29% and 37% respectively.
According to Nigeria Breweries, the increase in operating profit and profit after tax was driven “mainly by top-line growth resulting from our pricing strategy and better mix.”
Other companies echoed similar sentiments in some of their interactions with investors and analysts.
A survey of some distributors of beverages who spoke to Nairametrics also confirm reliance of price adjustments to boost sales.
Some opine that despite the hike in prices Nigerians still purchase beverages for parties, events and for home use.

Nigerians Spend Over $1 Billion On Beverages In 6 Months

Weakening Purchasing Power: However, the companies might find it harder to rely on price adjustment to boost revenues as the economy bites harder for Nigerians. Some of the companies are already reporting strained demand evident by volume dips.

Guinness for example reported it was seeing “deceleration” as Nigerians see their disposable income shrink under the weight of rising inflation, exchange rate crisis and increase in fuel and diesel costs.
Nigeria Breweries also stated that the growth they experienced was “in the context of a very challenging operating environment.”

More headwinds: Latest data from the National Bureau of Statistics suggest Nigeria’s inflation rate rose by 19.6% in July. Food and non-alcoholic beverages at 21.9% and alcoholic beverages at 17.9%.

With inflation on the rise, beverage companies are likely to face higher cost inputs that could hurt margins down the line.
All of the companies under review reported double-digit growth in the cost of sales due to the high cost of raw material inputs.
They also face high finance cost due to foreign exchange challenges despite borrowing at fairly cheap interest rates.

Nigerians Spend Over $1 Billion On Beverages In 6 Months

Nigeria Breweries again captured the challenges succinctly.

“Increase in cost of sales was due to rise in commodity prices. Marketing, distribution and administration expenses were driven by the increase in commercial activities, rising diesel prices and higher wages arising from collective labour agreements. Although interest expenses were lower, the net finance cost was higher due to foreign exchange losses arising from a higher cost of meeting foreign obligations to overseas partners.”

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