Earlier in the year, we highlighted that intense rivalry, following the entry of AB-InBev, and a new fixed rate charge on alcoholic beverages, which became effective in In Jun-18, were the factors to watch in the Nigeria beer market in 2018. Looking at the Q3-18 earnings, we note that increased competition has actually constrained price increases despite government levy on beer.
With the completion of its new plant in Shagamu, AB-InBev flooded the market with its regional premium, Trophy lager and simultaneously introduced its flagship premium beer, Budweiser, into the Nigerian market. This boosted supply, constrained volume growth and forced key competitors (Nigerian Breweries (NB) and Guinness), to hold-off plans to pass on the burden of the new fix charge on beer to consumers.
Accordingly, NB’s 9month revenue fell 6.5%y/y to N238.1bn while PAT tumbled 38.4% to N14.8bn. Notably, NB reported a negative operating profit of N3.9bn in Q3-18 amid volume pressures. Similarly, GUINNESS’s 3month revenue also weakened 3.3%y/y to N28.9bn on weaker volumes, although PAT recovered significantly due to improved finance cost. On the contrary, INTBREW sustained an aggressive q/q topline growth as its Q3-18 standalone revenue came in higher at N30.2bn, the highest in the last four quarters. Overall, we see further pressure on NB and GUINNESS’s numbers going forward.
UNITED CAPITAL
