Why EuroGlobal Foods Is Expanding To 30 Nigerian States

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EuroGlobal Foods has stated that it would expand to 30 states and beyond within the next two years. It also stated that 80% of its raw materials were sourced locally. The company is a subsidiary of Sona Breweries which makes other beverage products like beer and ale. The expansion across and outside the country may be due to strategic reasons.

EuroGlobal produces products like rum and dry gin. The harsh economy has made many Nigerians to shift consumption to low cost products. These products retail in smaller sizes that are more affordable compared to beer and other alcoholic products. This also means a faster turnover. The expansion means the company will have an enhanced market share. This means more revenue for the firm. Reliance on raw materials will leave the company less exposed to difficulties in accessing foreign exchange, and exchange range fluctuations. Boosting sales outside Nigeria, will provide foreign exchange earnings for the firm, which when converted to Naira, are quite profitable.

Most of the conglomerates operating in the company have been exposed to these issues, and have had to take loans from their parent companies. The depreciation of the Naira against the dollar, has led to them producing losses. Third quarter results recently released by Guinness Nigeria Plc, showed finance costs increased from N3.3 billion in 2016 to N8.6 billion in 2017. PZ Nigeria Plc also reported a 2017 first quarter loss of N4.7 billion.

Nigeria Breweries acquired a majority stake in Sona Breweries in 2011. This followed Heineken’s (the parent company of Nigeria Breweries) acquisition of five breweries from the Sona Group in 2011. The breweries are located in Kaduna, Markudi, Ota, Onitsha and Uyo. Year to date, shares in Nigeran Breweries are down 16.74%. Shares in Champion Breweries which is part of the Sona group are also down 4.81%.

 

 

 

 

 

(Nairametrics)

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