Recent report shows that the struggle for Nigeria beer market is kicking in strong, with different players battling to increase their market share.
Nigerian Breweries, which owns the largest market share compared to Guinness and International Breweries have in recent times, faced new threats posed by International Breweries for market share with the Company’s pricing strategy.
Recent increase in the price of beer products by both the Guinness and Nigerian Breweries is steadily paving way for International Breweries to add to its market share, according to analysts at Renaissance Capital. They forecast an increase in market share for International breweries but at the cost of its operating margins though.
International Breweries’ rapid expansion in Nigeria has seen it gain 16.4 percent in market share in 2017, which drove the industry margin lower. While it holds great potential to grow faster than the industry in the nearest future, analysts are concerned about its margins outlook and the figures on their financial statement post-merger.
In light of this, Adedayo Ayeni, an analyst at Rencap explained possible scenarios going forward.
“We expect it (INT BREW) to report net losses in full year 2018 and full year 2019, driven by low operating margins, as it sells at materially discounted prices and has high interest expenses. While it’s not in our base case, we think management might consider a rights issue in second half of 2019 to restructure its balance sheet,” Ayeni said.
Contraction in first quarter revenue combined with a negative growth in volume for NB will cause a further decline by 11.2 percent in volume for NB for the whole of 2018 and followed by another decline of 3.0 percent in 2019 which will result in them ceding part of their market share to International Breweries.
Guinness has seen a slight gain in market share in the past two years as a result of its introduction of new products and products discounting strategy. However RenCap analysts believe the brand will suffer as well from recent price increase which will result in a loss of their market share but at a lesser extent, as well as an expected increase of 4-5 percent in the volume of their non-alcoholic brands.
Estimates of market share according to Rencap by 2022 is projected at 45 percent for Nigeria Breweries, 31 percent for International Breweries and 24 percent for Guinness.
