Sixteen years after a combination of the somewhat irrational decision of the Ibrahim Babangida military government to ban importation of barley, and poor management on the part the Abia State government, coupled with a fire incident that burnt its facility, brought its production to a halt in 2003, former Eastern Nigeria brew giant, Golden Guinea Breweries is back. This time, however, as a midget in the midst of giants.
The 1987 Babangida government ban on barley import, like the new wave of bans that Nigerians are having to contend with under the President Muhammadu Buhari administration, was meant to encourage, if not force local production, and indeed save forex. But it delivered a devastating blow to the country’s once thriving indigenous beer industry, paving the way for Diageo’s Nigerian subsidiary, Guinness Nigeria and Heineken, which were the only players that had the capacity to invest in the R&D needed to produce drinkable beer out of locally cultivated grains, to take up more than 90 percent of the market share.
Indigenous brands such as Life – produced by Life Breweries, Onitsha; Trophy – produced by International Breweries, Ilesha and Goldberg – produced by Sona Breweries, Ota and Kaduna, as well as Golden Guinea, saw their fortunes plunge rapidly. They never quite recovered. Heineken and Guinness consolidated their positions as the two dominant players.
The market has since witnessed the entrance of a third giant in the world’s largest brewer, Anheuser-Busch InBev (AbInBev), which with Heineken, now Nigerian Breweries Plc. (NB) and Guinness, have nearly 100 percent of the market share, having shared the local breweries amongst themselves by way of acquisition. The return of Golden Guinea will make it the only local player of note in the industry. But with little capacity in relative terms, the critical question is: what will be its strategy to survive in a market dominated by three giants, even in an economy that continues to struggle?
Golden Guinea is, in a sense, a child of promise. Founded by the Eastern regional government of Dr. Michael Okpara in 1963, it had strong presence in the region through the 70s and 80s, struggled in the 90s before collapsing finally in 2003 following a fire incident.
The company’s collapse marked another major highlight in the deterioration of the once vibrant Eastern economy. It was often listed among the companies that once made the region thrive, but whose collapse was emblematic of a regrettable new order. Although NB which eventually took over the region, set up a brewery in Enugu, reputed to be the largest in Africa, in addition to a few others, it is not an indigenous company and the people had little emotional attachment to it.
When therefore, it became public knowledge a few months ago, that Golden Guinea was being revived by a private investor, Pan Marine Investment Limited, promoted by Chief Okey Nzenwa, the news was welcomed with fanfare, particularly in Abia. Pan Marine Investments had won a bid to acquire the brewery and had put in months of intense hard work which eventually paid off a few weeks ago when the brand hit the market in Abia.
The return had coincided, too, with the renewed campaign for Easterners to invest at home to revive the regional economy and create the much needed jobs. And at a time when for some reasons, Eastern solidarity was growing.
The brand will hope to ride on this sentiment, and has indeed begun to do so. Since it hit the market two months ago, it’s been widely accepted in Abia, promoted as the people’s own brand.
The revival is in some ways, a win for the government in Abia. Whilst it had little to do with it, Dr. Okezie Ikpeazu, governor of the state did not hesitate to cite it as one of the milestones of his government.
“This (Golden Guinea return) is clear evidence that our policies are working. I don’t want to go into details about what we did to support Golden Guinea to come back, and the things we are going to do make sure that International Equitable comes back. But let me say that whereas new companies are springing up gradually, the ones people thought had died are also coming back. Aba is coming back to the role it played in the post civil war era,” the governor told BusinessHallmark last week.
The company, as noted earlier, has started well in Abia, helped by its status as an indigenous brand. It has, without a doubt, put the giants on notice. But still, the question remains whether it has the capacity to sustain the fight.
The company has said it plans to spread, from Abia, to other Eastern states in a few weeks. And will subsequently push into other regions.
“We are working on getting to other states gradually. You know we just started. We are trying to build traction,” Chief Nzenwa, the company’s chief executive told Business Hallmark.
“I’m sure we will get to Enugu and other states in the East before the end of the year. We are going to cover everywhere.”
In a sense, the prospect of Golden Guinea’s acceptance in the East will be a particularly bad news for NB, which although still maintains about 50 percent of the market share in the country, is witnessing increasing pressure from AbInBev, with Guinness still pushing not to be outdone.
Yet, the brewery market is facing some challenges such as declining profitability market due to poor economy as a result of low purchasing power of consumers; as well as the rise of Pentecostal Christianity. There is also the prevailing insurgency in the north east which has largely excluded the area from the beer market.
The period between 2000 and 2010 was a golden era of sorts, for NB. Its Star, Gulder and Heineken were choice beers for almost everyone. Harp introduced by Guinness challenged Star, but couldnt sustain the challenge. Guinness Stout still maintained strong presence, however.
Star and Gulder dominated the value category nationwide, while Heineken was first choice premium brand. Life and 33 Export before they were acquired by NB were also in the market, but a combination of price and taste put them in a position where they had no chance. They were sold cheaper and everyone regarded them as brands the low class. 33 Export was particularly denigrated as the masons brand, which caused headache.
But the scenario changed in the Eastern market in 2012 with SABMiller introducing its signature brand, Hero. Hero was strategically positioned as the brand for Easterners. Its logo bore the image of a rising sun, a feature of the Biafras flag. And it was released on the day of Chief Emeka Ojukwu, the late Biafra leaders funeral.
The brand was quickly accepted, believed then by many to be owned by former Anambra State governor, Peter Obi. Such sentimental attachments proved impetus to its huge success. It broke the class barrier. Although it was sold at N150, N50 less than the price of Star and Gulder, almost everyone preferred it. Star and Gulder, which had until then, dominated the market, lost appeal. They have not recovered since.
At the same period, SABMiller took over Trophy, a popular brand in the West, originally launched in 1978 by International Breweries. Promoted also as the people’s own brand and it had similar effect as Hero in the East. NB suddenly found itself struggling to maintain its dominance in the beer market.
It acted fast. In 2012, it acquired, re-branded and relaunched Life for the Eastern market while also buying over and re-branding 33 Export as a response to Hero. For the Western market, it bought over Sona’s Goldberg to counter SABMillers Trophy.
In the East, NB promoted Life sold then at N150, same as Hero; both brands now go for N200, while Star and Gulder go for N250 as an embodiment of Igbo progress. Its motto became Progress with popular musicians, Flavour and Phyno as brand ambassadors. The new look Life became accepted. It has continued to rival Hero in the value category, but Hero still maintains an edge, remaining dominant in Abuja and other areas of the North Central, particularly areas with sizeable population of people of South East origin.
The market was yet to witness another huge development in 2016 with AbInBev completing £79billion merger with SABMiller, becoming the worlds biggest brewer. The company has since begun an aggressive push for greater market share with brewery plants in Port Harcourt, Rivers State and Shagamu, Ogun State, in addition to Onitsha and Ilesha plants inherited from SABMiller.
Speaking a few months ago at a briefing in Johannesburg, the company’s CEO, Carlos Brito noted that he expects $400m total investment in its new $250 million brewery plant at Sagamu, as according to him, Nigeria is becoming a more important market.
“Nigeria (is) becoming a more and more important market as we grow in that market,” he had said.
“I mean were growing double digits, we didnt grow in the past as fast because we were lacking capacity and now that we have capacity, strong brands and (a) great group of people were challenging the status quo there.”
With Budweiser, AbInBev is challenging NBs Heineken and Guinness Nigerias Guinness Extra Stout, all of which are sold at between N300 and N350 in the premium category, while still looking to introduce Stella Artois, Becks and Corona.
However, it is in the value segment that the real battle is. AbInBev has largely edged out NB in the South West with its Trophy brand. Nonetheless, the country’s leading brewer has seen its standing in the zone improve significantly of late, with its Goldberg and Tusk brands which are now among the top brands in the value category in the region. Tusk is doing particularly well in Ibadan.
Yet, with greater outlets, highest number of breweries, at about eleven, and an array of products: Heineken, Star, Gulder, Legend Stout, Tusk, Goldberg, 33 Export, Williams Dark Ale, Turbo King Stout, More Lager, Star Radler, Star TripleX, Star Lite, Tiger and Stella, NB dominates the market with about 50 percent share. However, AbInBev is placing it on notice, particularly in terms of revenue.
Guinness on the other hand, with its own varieties: Guinness Stout, Harp, Satzenbrau, Dubic, and Royal Kingdom. And an array of spirit, alcoholic and non alcoholic beverage brands: Origin, Smirnoff, McDowells, Baileys, Johnnie Walker and Gordons Dry Gin, comes second in terms of product numbers, but it’s about getting displaced by AbInBev 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. In its half year 2019 report, ended June 30, NBs revenue declined 1.43 percent to N170.1 billion from N172.6 billion in 2017.
But International Breweries posted 29.2 percent increase in revenue in its own half year 2019 report, to N68.6 billion from N53.11 billion in the corresponding quarter of 2018.
Meanwhile, in Guinness half-year ended December 2018, the companys reported revenues declined to N67.79 billion from N70.5 billion in the same period a year earlier.
Golden Guineas entrance could yet change the entire landscape despite it being a dwarf in the midst of giants. It will present a slightly different challenge in what is already an intense beer war. It is indigenous and has deep historical connection with particularly, the Igbo.
“Obviously, we are jittery. You know Golden Guinea is an indigenous brand. The people have accepted it. They have since longed for it,” NB staff, who preferred anonymity because he doesn’t have permission to speak for the company told Businesses Hallmark.
“But we can’t say yet whether the acceptance is because it is indigenous or because it’s new. You know there is always an excitement associated with a new product. Between eight months and one year, we will be able to say.
“It is difficult to say that this is the key driver at the moment. But I think it’s a combination of the fact that it’s new and indigenous. They keep saying it’s their own. It’s very well accepted at the moment. It’s shifting into every part of Abia State. Some say they are even in Port Harcourt now, but I’m not sure. I know they don’t have the capacity yet to expand so fast now.”
It’s possible acceptance in the East would be significant. Nigeria has a huge beer market. Figures from the National Bureau of Statistics (NBS) show that in 2016, Nigerians spent about N208 billion on alcoholic drinks.
The contagious zones of South East and South South which mostly made up the defunct Eastern region, accounted for more than 60 percent of this figure. The South South accounted for N74.4 billion, making it the biggest beer consuming zone in the country, followed by the South East which accounted for N44 billion. The South West came third at N37 billion, the North Central, N30 billion and the North East, N19 billion.
The South East and to a large extent, the South South are the potential catchment market for Golden Guinea. If, therefore, it is able to sustain current push to penetrate the rest of the South East and sections of the South South, it would have taken a chunk of the market, to NB, AbInBev and Guinness’ detriment.