Guinness Nigeria targets “lower end” market to revive profits


LAGOS, Aug 2  – Brewer Guinness Nigeria is shifting its focus from premium brands to the “lower end” volume market in order to boost sales and revive profits, it said in its rights issue share offer prospectus.

The Nigerian subsidiary of Diageo is looking to raise 39.7 billion naira ($109 mln) to help reduce its now expensive dollar-denominated debt and to support its volume growth strategy in the face of a recession in Africa’s biggest economy.

Diageo, which owns 54 percent of the company, is supporting the cash call by converting into equity part of a dollar-denominated loan which it granted Guinness Nigeria at the peak of Nigeria’s currency crisis.

The company said shareholders can buy five new shares for every 11 held at 58 naira a share, a 17 percent discount on Wednesday’s market price of 69.87 naira.

“Given the economic recession in Nigeria … the company plans to deepen its participation in the value beer segment and increase beer product offerings in the lower end of the market,” Guinness Nigeria said in the share sale prospectus.

Africa’s second largest beer market after South Africa is dominated by multinational brewers, with Guinness saying the market was growing at 7 percent a year in 2015 when 22 million hectolitres of beer was consumed.

But it said market growth has slowed over the last two years as a result of the weak economy and declining consumer income with growth now forecast to be running at 5.6 percent a year.

Guinnness, which hitherto has concentrated on the premium beer and malt sector of the market, reported in April that it made a loss of 2.46 billion naira in the nine months to end-March.

As a result it now wants to increase local sourcing of raw materials, boost its distribution network and has made significant investments to increase its brewing capacity.

It will also explore exports to Britain and South Africa.

“In order to reverse the recent losses by Guinness Nigeria … the company has reduced prices to grow volumes and … broadened its product portfolio to meet shifting consumer preferences,” it said in the prospectus.

Guinness Nigeria’s share price is down nearly 20 percent this year after falling 31 percent last year.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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