![#](https://e-malt.com/Images/left_top_corner16x200.gif) | E-Malt.com News article: Nigeria: Brewers groaning under excise duty burden![Brewery news](https://e-malt.com/Images/BeerBullet2.gif)
With competition from cheaper brands and sachet alcoholic drinks, brewing firms in Nigeria are groaning under the burden of excise duty as they struggle to manage costs that would have hitherto been passed to consumers, The Guardian reported on October 30.
Already, consumer purchasing power has continued to drop with preference for cheaper commodities taking centre stage in many of such purchases.
The Federal Government had introduced a new excise regime on 4 June 2018 to address shortfalls in revenue and this new regime led to an increase of at least N30 per litre of alcohol consumed in the country.
Another increase to N35 per litre was slated for implementation earlier in June.
Based on the financial results obtained by The Guardian, excise duty expense for the third quarter ended September 30, 2019 by Nigerian Breweries showed that the company paid N24.24 billion in excise duty compared to N16.93 billion in 2018 even when revenue for the two periods remained almost the same.
International Breweries had paid N1.53 bln as at September 2018; Champion Breweries N311.3 mln as at December 2018, while Guinness Nigeria Plc that controls the second largest market share did not reveal how much it paid, even though industry sources put its duty at almost par with Nigerian Breweries.
For the new entrant into the Nigerian market, Anheuser-Busch InBev, a total of $18 million was earmarked for excise duty for 2018, as it noted in its Q1 2019 report that Nigeria continues to lead the way with revenue per hectolitre expansion and continued double-digit volume growth fuelled by the core portfolio as well as Budweiser in the premium segment.
Managing Director/CEO of Nigerian Breweries, Jordi Borrut Bel, in an investors’ conference note, said: “The Nigerian beer market profit pool has experienced a significant contraction in the last years. It is driven by consumer down trading, currency devaluation and material cost inflation. The inability to pass on price increases to consumers has significantly contributed to the erosion of the profit pool.
“Despite the profit pool contraction, this market is very attractive and as you have seen in the last years it has become more and more competitive. In the time the consumers’ income continues to be under pressure and the industry has been impacted by the excise duty increases, Nigerian Breweries continues to be the undisputed profit and volume share leader in the market.
“If you look at the per capita consumption, clearly the Eastern part of Nigeria is where the highest penetration of beer and per capita is. So, in terms of consumer, let’s say penetration, the percentage of people who drink beer versus non-drinkers, the biggest is in the East part of Nigeria. And then the second one is the West. And for obvious regions the North is less, although the North is much more active in Malt drinks, in non-alcoholic drinks.
“So, our share follows that same logic where the East is really prominent and then the West and then the North. I won’t give exact numbers for competitive reasons”.
From a local brand perspective, he said that there are local products in many different forms.
“We think that that’s part of our competition of course, because you can see the elasticity curve. And beyond a certain price point, consumers switch to these local products.
That’s why I sometimes say it is important that we are not over taxed, because what you can get with excise increase etcetera, is that there is more and more a gap between ourselves and these locals. And actually, the government might get less taxes because simply the elasticity curve will move consumers to the local brews”, he added.
On his part the Managing Director/CEO, Baker Magunda, said “Although the brewing industry has witnessed significant incursions from ambitious brands, Guinness Nigeria has maintained its leading role in the industry. Guinness Nigeria has remained profitable during the year under review as reflected in the financial results contained in the Annual Report published as part of this year’s Annual General Meeting”.
“The year under review witnessed the launch of three new products to expand the brand categories for profitability as the brands deliver impressive volumes. Baileys Delight was launched in January 2019, Guinness Gold launched in March 2019 while Orjin Herbal Gin was launched in April 2019.”
30 October, 2019
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