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Nigerian brewers benefit from alcohol demand recovery
The gradual recovery in alcohol consumption in the third quarter of the year gave succour to Nigerian brewers badly hit by the lockdown measures to tame the outbreak of the COVID-19. Chukwuebuka Agulue, Research Analyst at Meristem Securities joins CNBC Africa's Esther Awoniyi to unpack some earnings from Nigeria’s breweries industry.
Wed, 25 Nov 2020 15:00:26 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The recovery in alcohol consumption in the third quarter provided relief to Nigerian breweries, leading to improved sales numbers for key companies like international breweries and Guinness Nigeria.
- Companies like international breweries face challenges due to economic recession and consumer strain, impacting their traditional strategy of offering discounted prices.
- Innovation and adaptation will be crucial for breweries in Nigeria to navigate through shrinking consumer wallets and changing market dynamics, with a focus on pushing out volumes and introducing new products.
The gradual recovery in alcohol consumption in the third quarter of the year gave succour to Nigerian brewers badly hit by the lockdown measures to tame the outbreak of the COVID-19. Chukwuebuka Agulue, Research Analyst at Meristem Securities, joined CNBC Africa's Esther Awoniyi to unpack some earnings from Nigeria’s breweries industry.
The third quarter is typically the worst quarter for brewers, but some key names saw relatively strong numbers. International breweries, for example, had a revenue growth of 22.7%. The recovery in these numbers was attributed to the easing of lockdown measures, which led to increased demand for alcoholic beverages from restaurants and bars. This trend boosted sales for Nigerian breweries, Guinness, and international breweries.
However, despite the positive numbers, there are challenges ahead for companies like international breweries. The company faces pressure as consumers are strained due to economic recession and job losses caused by the pandemic. International breweries' strategy of offering discounted prices might not be as effective in the current economic climate. Additionally, the company had recent financial restructuring, which improved its position but challenges from top-line growth and production costs continue to impact performance.
In terms of Guinness Nigeria, the company also saw an improvement in its top-line performance in Q1 2021. This growth was supported by the resumption of activity in sales channels. While the current performance looks promising, analysts are cautious about the company's sales prospects for the rest of the year. The ongoing pandemic has led to a decrease in large-scale gatherings and events, which are key sales channels for breweries like Guinness.
Looking ahead, the key for breweries in Nigeria will be the ability to continue innovating and adapting to the changing market dynamics. With shrinking consumer wallets and a weak macroeconomic environment, companies need to focus on pushing out volumes and introducing new products to attract consumers. Innovation in packaging, new flavors, and digital marketing strategies will play a crucial role in separating the winners from the losers in the industry.
Overall, the Nigerian breweries industry is facing challenges despite the recovery in alcohol demand. Companies like international breweries and Guinness Nigeria will need to navigate through economic uncertainties and changing consumer behaviors to sustain their growth in the coming months.
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