The future for the brewery sector of the economy remains bright in spite of current challenges including competition, insecurity among others, according to Managing Director/Chief Executive,
How would you describe the beer industry in
In the past, it used to be a two-player market, obviously the top
Do you think the low consumption pattern has a link with the structure of the Nigerian economy? The economy could be a factor. It's a great point you raised because when we've seen the downturn in consumption, a lot of that have been attributed to challenges around discretionary income and especially since after the fuel subsidy removal or what some will call 'partial removal of fuel subsidy' of the last couple of years with the result that consumers have now downgraded the consumption of alcohol in their hierarchy of what we have as consumers' spend. They have sort of restructured their hierarchy of spending such that they want to take care of the basic needs, and by the time they are done from the top which would start with food to housing and transportation, there is very little left to put into alcohol.
Now there is a bit of down trading in the industry. Down trading is when you see consumers moving away from the premium brands or mainstream brands which are the most highly priced brands to the lower priced brands. We are seeing a lot of that, that's why you see the growth of the industry coming largely from the value brands which is N150 versus the mainstream price which is about N182 or in the case of some premium brands even higher than that. When you see that happening, more and more consumers will be dropping from the mainstream brands to the value brands. This is a clear indication that there may be challenges around the economy and discretional income.
What strategies is Guinness employing to contain competition and remain profitable? It is good that when you are losing share you know why you are losing your share of the market. That said the first thing I have to say is that competition is good especially if the playing field is level and everybody is playing by the rules. I think it is good for the industry, the consumers, the pricing is reasonable. It's good for the government too because more revenue comes in for the government, more revenue comes in through taxation and so on. We are not afraid of competition. We believe very strongly in the quality of our brands and our people. The fact that we have the required capacity we have the confidence and believe that we have enough ammunition to fight competition. The key thing for us is to focus on our strategy and ensure that our strategy works for us, because for us with or without competition there will always be some head room of opportunities that we have seen in our business as
How has the security situation in the country hampered your distribution channel? A lot has been said on the security situation of the country, especially in the northern part of the country but even then we can never sound like a broken record on that because it is such a critical part of the drivers of the economy, in other words, having the right security or secured environment is critical to the survival of any business. From our perspectives, certainly the challenges around security have created a restriction in terms of where we are able to penetrate with our brands because at the end of the day we value the lives of our people and therefore when we see that there is a risk to life, we consciously pull out our approach and sales force from those areas and therefore by implication that has an impact on our business as it has had on so many other businesses. We have had a lot of other businesses come out and cry about the fact that the shortfalls in performances have been due to the security situation in some parts of the country.
I want to use this opportunity to encourage the government to move fast and deal with this security issue that we are talking about and the reason is that it appears that it is the local companies that are based in
Your 2013 financial statement has been criticised by analysts who felt your earnings were below expectation. How would you explain your performance last year? Okay, we released results for the three months earning in
So it's just now that we've put in a few new brands in the value segment to be able to compete against our competitors within that segment so if you can understand the fact that up until now we didn't have that scale, segment because our plan or product in the value segment called Dubic is relatively new and is the brand that is supposed to fight competition in that segment and in the case of competition they have been ahead of us on that but we've the opportunity to actually reverse the performance and turn it around. The third thing is our route to the consumer at distribution. We have considered that we are slightly disadvantaged to the extent that our brands are not in all the places we want them to be and we have a big project that is dealing with the issue of distribution. So for me, yes we would like the result to be better than what it was but clearly we know why it is what it is and we don't believe for a second that this are factors that cannot be fixed. We are confident especially now that we have taken those decisions and have imputed them through the business and we will begin to see the impact in the future. In terms of the bottom line performance when we talk about earnings, a big chunk of what you see in the profit decline is attributable to the finance charges. About four years ago in 2010, we announced an investment of N52 billion that we were going to put into capacity upgrade which included increasing the capacity of our bottling lines, putting in new canning lines, brewery expansion and so on. We have gone through that whole phase and completed the N52 billion investment. Of course, some of that came through bonds and the interest charges are coming through now and that explains the impact in profitability. From our perspectives we are confident that we will turn it around. We've put in all the interventions that we needed to and we expect that in the future we will see the impact positively. Our innovation is clearly the best in the industry. We put in brands like Snap, Orijin which is also doing very well. In terms of innovation we are very strong. We have been around for over 50 years and my expectation is that in 50 years time Guinness will be stronger than it is today.
Are you going to push your value brands more than your premium products because it's like the latter are more pronounced in the market than some of the former which you mentioned? We try not to be brand centric but to be consumer-centric in other words, we give to the consumers what they want. You can decide that you are a premium company and the consumer keep saying they want the value brand, if you don't give it to them, someone else will give it to them so the way we play the game strategically is to be very open to what the consumer wants. There will be that segment of consumer who will always go for premium brands anyway. Don't get me wrong, Nigerians are not turning to paupers, in fact there is an emergence of affluent Nigerian consumers that are coming soon and getting to premium. At one level we see down trading and also in another level we also see up trading. Consumers as they get promoted in their job, they step up. The premium segment and mainstream segment will for eternity always have their place in the scheme of segmentation of Nigerian consumer. What I am saying is that the value segment that existed before and was very tiny has suddenly become so big and is still growing and growing faster than the other two. This does not mean that the other two are going to be cast away forever.
How are you dealing with the issue of regulation within the industry? For us, we think that we are a highly self-regulated organisation in other words, our regulations and our policies are all the subject of responsible drinking as stringent as they come. We would not put out any piece of advertising that does not carry the age limit declaration. There would also not be an advertisement which would portray our company or our brands in an irresponsible way. We have what we call DMC(
The menace of de-marketing has reared its ugly head among brewing companies in the country. How has it impacted on competition? I am glad you brought that up because it is something that is, from my perspective, an anti- trust issue. I have heard that a particular company actually does that, unfortunately in this market we don't have a strong anti-trust policies that will deal with issues like that. In some other countries, no company is allowed to go out to the market to delist another company's brand. I think it is something that the government will do well to look at as a neutral regulator. From my perspective it is clearly the wrong thing to do in service of creating a fair competitive environment in this country.
How do you administer assistance to communities under your corporate social responsibility (CSR) initiative? First, we start with the state government because all land belongs to the state government and we tell them about our intention. After that, they link us to the local government; from there they link us with the
As a private business man, do you think investors are truly interested in
Considering the challenges in the education sector, do new recruits meet your expectations or do you have problems with acquiring skills? There are four factors that are affecting the growth of the manufacturing sector. In fact, even with the rebasing of the GDP, the manufacturing sector is reported at about less than 7 per cent of the GDP and if you compare with other economies in
What should we expect from Guinness in the next 12 months on new products? The one thing I can say to you is that when it comes to innovation I think our competitors will agree with us that we've perhaps been the most successful in the last 12-18 months.
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