Guinness Nigeria is stepping up its strategic expansion plan, in response to competition from new comers, SABMiller and old rivals , Nigerian Breweries Plc, as the frenzied struggle for market share in Nigeria’s robust brewery sector gathers momentum.
Only recently, Guinness opened a new plant in the company’s Ogba premises in Lagos State, which was commissioned by the UK Minister for Africa, Henry Bellingham MP.
The expansion is driven by the growing demand of consumers nationwide for Guinness Foreign Extra Stout, as well as Harp Lager Beer and other products of the Guinness stable. The investment included the upgrading of existing facilities as well as increasing the brewing capacity of both Benin and Ogba Breweries.
BusinessDay’s investigation reveal that Guinness is out with a fresh plan to spend ?225million (NGN 55 billion) to further expand capacity in its brewing operations in Nigeria this year.
Heineken N.V.’s (Nigerian Breweries Plc’s parent company) acquisition of two holding companies from the Sona Group, which has controlling interests in five breweries in Nigeria , and SABMiller Africa’s entry into Nigeria, is keeping Guinness on its toes, industry watchers say.
BusinessDay gathered that on completion of the expansion project, Guinness Nigeria will create an additional 200 permanent jobs for Nigerians and further step up the competition among the brewing giants – Guinness Nigeria Plc, Nigerian Breweries Plc and SABMiller.
Devlin Hainsworth, managing director Guinness Nigeria Plc said “Nigeria is an exciting and vibrant place to do business, and the increased demand for our iconic brands such as Guinness and Harp requires us to invest in our breweries and infrastructure.
“ Guinness Nigeria is a significant contributor to economic growth through paying taxes to government, generating capital growth and distributing dividends to our many shareholders and creating broad-based wealth through our extensive value chain. We are delighted that we will create a significant number of jobs for Nigerians upon completion of the project.”
Nick Blazquez, president Diageo Africa accompanying UK Prime Minister David Cameron to Nigeria said: “Diageo is proud of its history and the heritage that Guinness Nigeria has with over 60 years brewing experience in the country. Guinness Nigeria has become a flagship Nigerian company, so much so that Nigerians take pride in the fact that their country is the second biggest Guinness market in the world with ‘Nigerian’ Guinness now being exported to the United Kingdom.
“This investment underscores Diageo’s confidence in Nigeria and its people and is an affirmation of our belief in its future as a growth economy and prosperous nation.”
Industry watchers say that with the current expansion in the nation’s brewery sector, operators in the sector will benefit from economies of scale and huge volume of Foreign Direct Investment.
The International Monetary Fund (IMF) estimates that the Nigerian economy will grow at an average rate of about seven per cent over the next four years, while the population is expected to grow at a rate of about three per cent.
“This along with a youthful population enmeshed in a culture in which entertainment has gained a foot-hold, present key drivers for the Nigerian beer market. A growing, largely youthful population, with increased disposable incomes is expected to drive beer consumption, leading us to estimate that the Nigerian beer market will grow at an average of eight per cent over the next five years,” Vetiva Research, a Lagos based research company said.
It added: “The ‘two giants’ (Nigerian Breweries and Guinness) have long operated in Nigeria, controlling about 90 percent of the market- Guinness with its niche Stout brand and Nigerian Breweries with its prime Star Lager Beer. Both owned by world beer giants (Diageo and Heineken respectively), these two have wielded control of the market, with essentially only each other as competition. With the entrance of another beer giant, SABMiller into the space in 2008, competition has begun to heat up. However, it is unlikely that the ‘two giants’ would concede their hold on the market, without putting up a good show of strength to defend their market shares.
“Nevertheless, the low level of penetration in the Nigerian beer market (as evidenced by the beer consumption per capita of about 10 litres, compared with the African average of 14.6 litres) clearly leaves room for brewers to take advantage of the underlying growth potentials in Nigeria . While the premium end of the beer market still has some play for the brewers to make, the current competition seems set to re-shape the low end of the market. Improving levels of disposable income following economic expansion, means that there is some market to capture at the low end, as drinkers switch from home brewed drinks to low end beers.”
Guinness Nigeria Plc was established in 1950, making it one of the oldest companies in Nigeria. Listed on the Nigerian Stock Exchange in 1965, and with over 75,000 shareholders, it is also one of the foremost quoted companies in Nigeria . The company built its first brewery in Ikeja in 1962, and currently has facilities in Ogba , Benin City and Aba .
Included in its portfolio are such acclaimed brands as Guinness Foreign Extra Stout, Guinness Extra Smooth, Malta Guinness, Harp Lager Beer, Gordon’s Spark, Smirnoff Ice, Armstrong Dark Ale, Satzenbrau Pilsner and Top Malt.
Guinness Nigeria Plc is a member company of Diageo Plc; the world’s leading premium drinks business, with an outstanding collection of brands such as Johnnie Walker, Smirnoff, J&B, Baileys, Cuervo, Tanquery, Captain Morgan etc