E-Malt.com News article: Nigeria: Outgoing Guinness Nigeria Managing Director/CEO sums up his

The outgoing Managing Director/Chief Executive Officer, Guinness Nigeria Plc, Mr. Seni Adetu told select journalists that the drop in disposable income constitutes serious challenges for firms in the alcoholic and non-alcoholic beverages sector, This Day Live reported on November 3. Select parts of the interview are published below:

You will be leaving as the CEO of Guinness Nigeria after close to three years on the saddle; how has the journey been?

First and foremost, Guinness Nigeria Plc is a company that has a rich heritage and has delivered strong shareholders’ returns over the years and so I am proud to have been the managing director of this company in the last two and half years. Before I speak to what I met and what I am leaving behind, I think it is necessary to clear the air regarding my term in office because a lot of people are saying why just two and half years. Certainly, it is not unusual in a multinational company like this that in every two-three years, that you see changes like this. So, for me it is not really about how long, but how is the quality of legacy we are going to leave behind. For me, in the last 24 years, I have never done more than three years on any job. So, this is very consistent with the rhythm of my career. So, there is absolutely nothing strange about that. In terms of what I met and what I am leaving, like I said, even before I joined, the company was always a fantastic company. But like any company of this sort, you will always have challenges. The time I came in, the company was already facing some challenges in the market. That was about a year or two before I came in. So, my mandate was to come in and tackle those challenges as well as create a platform for a sustainable growth trajectory. In this respect, I am very proud of what the team has achieved in my period. Some of the challenges were that given that market dynamics and the competitive landscape were changing few years ago, mostly because we were coming from a two players industry to a three players industry. In other words, another major multinational company came in a few years ago and that changed the competitive landscape. But beyond that, with the subsidy removal, we started seeing some challenges around the disposable income of consumers and that resulted to what we call down trading in the industry. So, there was down trading from the premium and mainstream brands to the value brands which are typically the N150 brands. As Guinness, until that time, we had been more established in the premium or mainstream segments of the market. So, we did not exactly have strong value brands. So, that was one challenge. Another challenge that we had was that we were having difficulties reaching all of the outlets that we liked to be distributing to. So, distribution was another challenge, but that does not mean that distribution had collapsed. Thirdly, at that time, we went into the capacity expansion programme that we started a few years ago. So, in terms of what I am leaving, I am incredibly proud of the fact that today we have a stronger portfolio. We now have value brands that are thriving. These were brands that were launched and repositioned as value brands. On the road to consumers in terms of distribution, we have started a project that was really directed to enhance the quality of our distribution and to make sure that we expand into places that hitherto we were not able to reach. That project is underway and I am also proud of the fact that we have completed the capacity expansion programme that I talked about. It cost the company a lot of money, but we have completed it. I am aware that people have talked about the performance of the company in terms of the financial results. But I just want to emphasis what we had said before. As a company, when you go and take borrowings to invest in a major expansion programme like the one we embarked on that cost us N2 billion, normally, it is expected a few years after you are going to be paying finance charges as interest on the borrowed loans and the capacity we have built is the capacity that goes for between five and 10 years and it takes time before you wrap it up to the maximum. So, from my perspective, it is not unusual that you see some of those interest rates coming in. Of course, there are other things that we could have done better to ensure that we deliver stronger results. But, I just want to put it into perspective that one of the reasons we have seen the bottom-line sort of struggle over the last few years is because of some of the finance charges we are putting through our operations. The good thing is that from our first quarter results, you will see that we have turned the business around. So, I am leaving at a time the business has started growing again and I am really pleased with that.

Talking about challenges, one would have thought the company would leverage on its economies of scale to lower its prices so as to be able to attract more consumers?

Indeed, our prices are very competitive, even on the value brands, we are very competitive. It is also that at the time we are putting in that investment into the business in terms of the capacity expansion, there was a cost pressure that was associated with that. So, that led to some price increases to partly mitigate the size of the investment and its impact on cost. The good news is that with the scale that we have now and the ability to meet demand as much as possible, especially now that we also have the value brands in our portfolio, what we have seen is a better cost out turn and that explains why today, across the segments, our prices are a lot more competitive.

With the security situation in the north-eastern part of the country, is your market area not shrinking?

We will not be authentic if we say that the security challenge in the north-eastern part of the country has not had a toll on the performance of the company. But I would argue that it would not have been only Guinness Nigeria that would have been affected. So, I always moderate that by saying that that is a level playing. What I mean is that no competitor would be able to get more into the north than I can do. The north does not necessarily discriminate against one player or the other. However, the distribution challenge I was referring to really references even where we do not have security issue, in terms of our ability to cover 100 per cent of the market and that is what I am saying that we have started a major project that would ensure that over time, we are able to reach every outlet that we should be reaching.

As you exit as the CEO, do you have any fear that some of the initiatives introduced during your tenure would not be continued?

First of all, in terms of business continuity, incidentally, my successor is somebody I have known for several years. He is somebody I believe very strong in, in terms of his ability and I know that he will fit into this organisation and do very well. One of the reasons why I will be here till the end of the year, is to ensure that the transition is very smooth because with all the efforts that we have put in and now that we are seeing the business turn around, it would be sad to see the company sort of back-pedaling and that would not be good enough. So, having said that, as for where I am going to here, you would have heard that I am taking up a new role, but let us just wait until that time.

With the drop in disposable income, which you said has resulted in strong emergence of value brands; can one say that value brands will be a major factor in determining the future of the industry?

Well, it is a statement of fact that in the last four years, the value brands have been outgrowing the rest of the segments. So, the fastest growing segment would be the value brands which are brands that are sold typically around N100 and N150. In terms of the future, everything really depends on private consumption. We talk about Gross Domestic Product (GDP), but GDP is just a factor, but there is real private consumption. You can see GDP growing, while disposable income is dropping. But I think if there is an improvement in private consumption, in terms of how people are spending their money, then you should expect to see an improvement in the beer sector. If there is more money coming in, consumers tend to trend up again. For example, we do see that in the festive seasons like Christmas, Easter, consumers tend to up trade. So, throughout the year I may be drinking Harp that goes for N150, but at Christmas, I may decide to drink a Guinness, and in case of the spirit brands, a Johnie Walker. So, the point is that the disposable income of the consumers and the ability to spend on beer is incredibly tied to private consumption and the economy. The more the economy booms, the more you expect that people would have money to spend on our type of business. As a company, we are always looking for what to do to create products that would be of real value to the consumers. It was one of such that led to the launch of our brand called Orijin. I can say that Orijin was conceptually introduced by our partners in Africa. But I think clearly that by the way we have taken that up in Nigeria is clearly best practice within Diageo. The product was launched six months ago and the market share has been growing. Orijin, like every other type of product was developed after extensive consumer research.

During your tenure, we saw massive campaigns in terms of advertisement on Guinness. How will you measure the impact of these campaigns on the brand?

I think that you are right that over the past few years we have had big campaigns on Guinness, and if you talk of my legacy, this is something I am very proud of. We supported the Super Eagles when they were going to South Africa for the African Cup of Nations last year. We stuck out our neck as Guinness and said we believed in the team. So, we are very proud of what we have done with Guinness and football. We have done the Guinness made of black campaign as well, which has been very successful and I am really proud of that. In terms of the impact on the brand, despite the fact that Guinness commands a good premium in the market, the brand continues to hold its own in terms of market share and that is really a statement of consumers saying that they believe in the brand. Not only that, if you look at the brand strength, Guinness has consistently shown, not just among our brands, but among all other brands, that it is the one that has the highest consumer strength. So, if you put all that together, my view would be that all of that is a consequence of some of the investment that we have made in the brand over the years. Otherwise, it would be difficult for a brand that commands such a relatively high price to be loved and taken by consumers even in a challenging economic situation.

What has been the experience of leading a multinational company in Nigeria?

What I need to first establish is that Nigeria is not my first role as a managing director, it is actually my fourth. I have led businesses in Ghana and countries in East Africa. So, I would love to think that it is a familiar terrain. My first management role was in 2001. But the other thing is that Nigeria is a very different ball game compared to the rest of Africa. Firstly, because of the size of the country; secondly, because of the complexity of the market and thirdly, because of the dynamism of the populace. So, when you talk about a group of dynamic consumers, who can change their taste at any time and are very price sensitive, then you begin to picture how unique and different Nigeria is. I have enjoyed my time here and I am very proud of what we have achieved here.

Should we take this development as the beginning of series of changes in the industry and what do you want to be remembered for?

Unfortunately, I don’t answer that because I don’t make those decisions. But what I do know is that this is a company that is proud of its heritage in Nigeria and it is a multinational company that is also local. As I leave and move to my next role, I am really proud of what we have achieved. One of the best things I want to leave you all with is the fact that as a Nigerian, I am really holding my head high in terms of the fact that in my period here, there was no single case of fraud, there were no issues about integrity and our governance standards and reputation of the company has improved and that makes me feel so good. This is because when I came in as a Nigerian, I said by the time I will be leaving the company, I want to leave a legacy such that when it comes to integrity people can say I was a standout. So, I am leaving, feeling fulfilled in that area. So, I would say without an iota of doubt that our governance standards have stepped up.


05 November, 2014