Since its merger with SABMiller, Anheuser-Busch InBev, AB InBev, has become the largest brewer in the world, and the Belgium company sees promise in the Nigerian market.
The company has been making a gradual entrance into the Nigerian market, following strong regional footprints already established by SABMiller who were already operating in the country.
According to a Reuters report, AB InBev is currently exploring ways to satisfy the Nigerian market’s insatiable thirst for beer.
With a $250 million brewery built in Shagamu, Ogun State set to be launched in the Q2 of this year, competition in Nigeria’s beer market is about to become more aggressive.
According to its Head of Africa Operations, Ricardo Tadeu, the company sees huge opportunities in Nigeria’s beer market being the most populous black nation in the world.
Also, Tadeu stated that Africa is projected to be an important growth driver for the global company in the next five to ten years.
“We have a clear strategy to keep a good level of growth in Africa based on developing our brands in different segments of the market. “Growth in African countries, excluding South Africa, was a “healthy growth rate in the mid-teens,” he said.
Anheuser-Busch InBev NV is making a huge entrance into the Nigerian beer market in 2018, as it plans to make a stake in Africa’s second-largest beer market.
The news of having the largest producers of beer in the world in the Nigerian market will not sound melodious to Heineken-owned Nigerian Breweries and Diageo’s Guinness Nigeria Plc. However, the two biggest brewers will be geared up for the beer war as they look not to be taken unawares.
Considering the turbulent nature of the Nigerian market, many analysts are eagle-eyed on the plans AB InBev has on the ground to succeed. However, certain factors are in favour of the company who are not only here for the competitive beer market but looking at growing its investment in the country.
The Economy out of Recession
With the Nigerian economy out of recession, there is no better time for the company to invest in Nigeria. Christian Nouboue, On Trade Manager of Moet Hennessy in Nigeria, said that “the more the country comes out of recession, the more the GDP grows, which means higher employment, higher consumer income, and higher disposable income.”
Despite recent economic challenges, AB InBev’s business in Nigeria recorded double-digit growth over the last quarter. According to BussinessDay data, International Breweries shares have jumped 161 percent in the past year, Guinness Nigeria shares are up 19.79 percent while NB is up a mere 0.98 percent.
With that kind of growth, the brewer will be more confident in mounting a strong fight for a market takeover.
In October 2016, AB InBev, the world’s largest beer producer, completed a $106 billion takeover of SABMiller, the second largest. That merger meant that one in three beers that are consumed will be coming from the giant brewer. That merger also resulted in AB InBev taking over the business of SABMiller in Nigeria, which has led to the merger between International Breweries Plc (based in Ilesha), Intafact Breweries Ltd (based in Onitsha), and Pabod Breweries Ltd (based in Port Harcourt) which would be completed next year with the final company to be known as International Breweries Plc.
According to sources, AB InBev currently owns 75% of Intafact, 82.8% of Pabod and 72.2% of International Breweries. International Breweries Plc is listed on The Nigerian Stock Exchange and should be the leeway for the consolidated company to achieve its aim of becoming the 5th largest listed company on the exchange.
With a united front, which will also oversee productions in Ghana, the company will not only cut cost in operations but will also avoid any unforeseen delay in decision making.
Before the takeover by AB InBev, SABMiller was the third largest brewer in Nigeria after Heineken’s Nigerian Breweries and Diageo’s Guinness Nigeria.
Although it entered the Nigerian beer market late in 2009, it moved swiftly to acquire Pabod Breweries, makers of Grand lager beer, International Breweries, makers of Trophy lager, and in 2012, SABMiller established a $100 million brewery in Onitsha, which brews Hero lager.
That regional strategy by SABMiller has created the perfect in-road for AB InBev coming into the Nigerian beer market. This is coupled with the fact that its beers are about 40 percent cheaper than its rivals, which gives them an upper hand in terms of pricing.
Increasing Local Production
Managing Director-designate of International Breweries Plc, Annabelle Degroot, disclosed recently that the brewer would be completing an “over $250 million” brewery in Sagamu by 2018.
This plant is to serve the company’s target of increasing production lines at existing breweries.
“We are investing in a fourth brewery, a large brewery outside of Lagos, in the Sagamu area that will come on line next year and it’s our largest brewery in Africa outside of South Africa,” Ms. Degroot said.
“The exciting news is that we will be introducing some new brands, so we are very proud of our Hero brand and our Trophy brand, and those brands will grow because we like to focus on local, great brands.”
One important reason why AB InBev will be producing locally is to avoid the prohibitive tax placed on the importation of beer. This means to have their global brands in the market, they have to be produced locally in Nigeria. Thus the plant in Sagamu, and other plants as well, will not only continue to support the growth of the local brands but also enable their global brands to be present in the Nigerian market.
Introduction of Global Brands – Budweiser and Beck’s
AB InBev’s plan to hit the market with two of its global brands will create a strong fighting fort for the giant brewer. The company plans to introduce Budweiser and Beck’s into the Nigerian market, mainly as competition for Heineken and Star Lager of Nigerian Breweries. The company has already introduced Castle Lite into the market which NB Plc has tried to match with the introduction of Star Lite.
Budweiser is the leading brand for AB InBev globally, and it will spark the curiosity of Nigerians to try it out. It will be positioned to knock off Heineken Lager in the premium beer category. For Beck’s, this is more like a re-introduction as it was once brewed by Champion Breweries in Uyo, partly owned by Nigerian Breweries. Beck’s will give Budweiser added support in the international brand category for the company.
AB InBev’s Sneaky Marketing Strategy
The manner in which SABMiller sneaked up on Nigeria’s biggest brewer, NB Plc, is no cheerful news to the AB InBev’s competitors in the beer market.
Rather than go with the usual fanfare that follows the launch of a new product, the brand capitalised on the heroic status of Chukwuemeka Odumegwu Ojukwu in the East and launched the product during his burial. It was not actually a ‘launch’, it was more like a massive release during the burial of the Biafran War hero. From then on, it found love with the people and it had to take the release of Life Lager by Nigerian Breweries to curb the harm it was doing to other brands in the market.
It is sneaky strategies like that that has kept NB Plc and Diageo’s Guinness on their toes, as they warm up to the beer war analysts have envisaged for 2018.
Bloomberg reported last year that AB InBev was cutting 3% of its workforce in three years after its takeover of SABMiller, which amounts to over 5,000 staff. This is in line with the company’s global plans to save up to $1.4bn annually.
In that same light, the company is renowned for its penny-pinching policies which have seen to it that there are no free beers on its plants, no private offices for top executives, no lavish parties, and no hideaways at high-end hotels. With the money saved on these luxuries and staff reduction, AB InBev will have enough cash in its armour to match the fierce competition it expects from Nigerian Breweries in Nigeria.