Heineken Nigeria sees profit tank by 41% in 2018

Heineken Nigeria sees profit tank by 41% in 2018

Heineken N.V’s local unit in Nigeria, Nigerian Breweries said its net profit for the full year 2018 fell by 41.18%.

The result showed further deterioration of the company’s fortune.

Gross revenue for the period fell by N20 billion on a year on year basis. The company reported that its excise duty payment was up by 21% to N25 billion.

The entrance of AB InBev into the market actuality changed the competitive landscape. As opposed to the two horse race Heineken (NB) vs Guinness, the arrival of a ‘third force’ coupled with the excise duty, dealt a huge blow to Heineken.

It will interest anyone to know that the competition in Nigeria’s foods and drinks industry was heightened by a combination of macro-economic challenges & changing demography. We have many young people who have entered the drinking age & they are not brand loyal but explorers.

Macroeconomic pressures had reduced disposable income, changing demography coupled with the rise of new investors/brands into the alcoholic beverage category has seriously impaired the revenue profile of the big players such as Heineken, Guinness and AB InBev.

While the big brewers/coys are finding it hard to arrest a continuous crash in their revenue, smaller brands/coys with products that consumers can trade down with are having a ‘filled day’. Many faceless and non-promoted products have infiltrated the category.

It will be interesting to see the balance sheet of AB InBev for Nigeria. The drop in revenue of Heineken and Guinness might be close to the total revenue of AB InBev. This means three companies/brewers are now sharing the revenue shared by two major companies.

This category, especially as represented by these two brands could continue to see a decline in revenue until it gets to a point of equilibrium. AB InBev would continue to grow its market share across regions which will further eat into Heineken and Guinness’ revenue.

It could take another two to three years for AB InBev to reach a dead-end. Heineken and Guinness could change their marketing strategy to take AB InBev head-on targeting its cash-cow/flagship brand (Budweiser) while AB InBev could create one or two brands to deflect the target.

Should AB InBev use new brands as fighter brands against Heineken/Star and Guinness/Orijin, it will further put NB and Guinness in a difficulty position bearing in mind that both companies already have enough fighter brands that are struggling to get any serious market share.