By OBINNA EZUGWU
Introduced amid fanfare during the FIFA World Cup of June 2018 by world’s largest brewer, Anheuser-Busch InBev (AbInBev), Budweiser, the company’s leading premium brand, gave Nigerian Brewery Plc (NB’s) Heineken and Guinness, Diego’s Nigerian subsidiary’s Guinness Stout, reasons to worry. Budweiser had been the official sponsor of the Russian held World Cup.
It was a time when millions of Nigerians were glued to their TV screens to watch the Super Eagles and other national teams do battle on the highest football stage. AbInBev seized the moment to launch Budweiser. The effect was instant. Sold at N300, it soon became hot demand, putting Heineken and Guinness on notice.
Throughout the World Cup period demand for the brand by many accounts outstripped supply. Many warehouses were out of stock. AbInBev had struck gold again; having displaced NB in the value category with Hero and Trophy brands in the East and West respectively, Budweiser was certain to have similar effect on Heineken, or so they thought.
But few weeks after, perhaps over confident in its ability to hold demand, AbInBev made a strategic mistake. It increased the price of Budweiser, hoping it wouldn’t affect demand. It did, and the brand has struggled to recover since.
“It was a threat initially, but in my opinion, they made a strategic mistake,” a senior marketing staff with NB noted.
“They came during the World Cup of 2018. Budweiser was the official sponsor of the world cup, it had that initial acceptance. There was no question about whether it was a good brand or not, many people thought that, Wow, these guys are powerful. And Nigeria, fortunately for them, was playing at the World Cup. So, the brand was selling like water.
“At a point, it was not available in the warehouses because of demand. But they increased the price from N2700 to N3200, per carton hoping that they would be able to sustain the demand. Heineken did not increase. So, it affected the unit price at the beer parlours. From N300, it became N350. People returned to Heineken.”
“But people would say, why do I have to pay extra 50? They have come back to the original price but are finding it hard to pick up again. They even had a problem at some point, we heard that about 200 thousand cartons expired in their warehouse.”
Official sales statistics are hardly available. Attempts to get data on the performance of Budweiser from one of its senior management staff yielded no positive result. He said it was not available. But argued however, that sales volumes have been on the increase gradually.
“Sale volume is increasing, but I cannot say specifically that this is the volume we are selling, but the acceptability in the market is getting better,” the management staff whose name we cannot give because he was not authorized, said.
He may indeed be correct about increase in sales volume with time. Nonetheless, a visit to pubs and interactions with bar owners show that Heineken and Guinness still dominate the premium category. Budweiser simply hasn’t had the same effect as Hero and Trophy.
“I would say that some prefer Budweiser to Heineken”, Nnaji Ken, a pub owner in Enugu noted. “But those I know who take Heineken are still sticking with it. Heineken still sells more. Those who migrated to Budweiser are those who were drinking Hero, Life etc. But generally, because it’s more expensive, people buy more of the value brands. For some it’s too light as well.”
In the nation’s capital, Abuja, another drinking hot-spot, the story is nearly the same. Heineken, more established, more preponderance is still leading the pack. But in the value category, Hero, like everywhere else, has since knocked out NB brands.
“Budweiser is a new drink and has not occupied the consciousness of consumers as Heineken has,” noted Alex Nwezea a customer in one of the popular pubs in Dutse Alhaji. “It is not really competing presently.”
AbInBev is focusing attention, in its marketing of Budweiser, on high end markets in the belief that it’s where demand is. It is neither here nor there in reality. The rich drink mostly wine and spirits. The market is caught somewhere between upper and lower middle class, groups that are thinning out. And so it is with the market premium beer brands.
In its Q3, 2018 report, Heineken NV reported high-single digit decline in Nigeria due to an increased competition in the market. Value brands have the giant share of the demand.
“What has happened is that the premium lager segment is a shrinking market. The younger generation is not lager people, they are spirit people. The other people who are still drinking beer are in the Trophy league. Hero is still the number one in the east even though NB has Life that is fighting it,” said Mr. Onos Molokwu, Country Head, Bates Cosse Communication and Marketing Agency.
“In the West, NBs Goldberg is trying to fight Trophy, but Trophy is still number one. From a portfolio manager point of view, what AbInBev has done with Budweiser is just to have another brand that can give Heineken a run for its money.
“But if you notice, they are not pushing Budweiser that strongly. What they are doing is that they will use that value brands to knock off the volumes. Then they will keep a significant presence in the premium lager segment, but they are not going to kill themselves over whether they win it or not. They will just take some market share from you, which is what they have done with Budweiser. You will see that in the East, Budweiser is now becoming the preferred beer in the East for those who want to show that they are big boys.”
Indeed, as it concerns beer market, the value category is where the war is. And in that war, AbInBev has had the upper hand. For long periods, NB was the undisputed king in the industry, with its value brands, Star and Gulder bossing the market. The only challenger was Diageo through its subsidiary, Guinness Nigeria, which by the way seemed quite comfortable in its second position.
However, the landscape changed with the entrance, originally of SABMiller, but now AbInBev, which in 2016, completed the latter’s acquisition, becoming the largest global brewer. It has displaced Guinness in second place in terms of revenue, and is now aiming, aggressively, to topple NB, in what is an ever intense battle for market share.
AbInBevs signature products, Hero and Trophy have since become leaders in their respective catchment areas, and the performance is reflecting on its revenue.
While profits have been on decline on account of costs which is understandable considering that the company is still building capacity in the country, it is outperforming both Nigerian Breweries and Guinness Nigeria in terms of percentage increase in revenue.
In its 2018 annual report, ended December 32, 2018, International Breweries, the arm of AbInBev listed on the Nigerian Stock Exchange, recorded N120.6 billion in revenues, up 230 percent from N36.5 billion recorded in 2017. On the other hand, NB recorded N324.4 billion in 2018, which represented a 6 percent decline from 2017 figure of N344.5 billion.
NB, meanwhile, is devising means to ensure that Heineken stays ahead. Although conceived as premium beer, it had last year, introduced smaller can version is sold at N200, same as the value brands.
Last week, NB also introduced non-alcoholic Heineken brands to cater to the interest of the growing number of Pentecostal Christians who reject alcohol. It tastes like normal beer, except that it doesn’t have alcohol.