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Nigeria’s beer war

60% of the Nigerian population live in abject poverty, surviving on less than one dollar a day (or under 10 Naira in local currency terms). That’s not my valuation it comes from the country’s own National Bureau of Statistics. Meanwhile a 600ml (most popular size) bottle of beer costs upwards of 100 Naira in retail. So beer is a luxury item, consumed by the elite, right? Wrong. Average per capita of beer is over 8 litres a year (and growing) making Nigeria the second largest beer market in Africa.

There are reliable published statistics on either beer production or consumption and as imports are technically banned there are no import statistics either. However all three main brewers in the country (Consolidated Breweries, Guinness Nigeria and Nigerian Breweries) generally agree that the market is in excess of 15 million hectolitres.  It is difficult to get a really firm fix on volumes as the local industry tends to include non-alcoholic, (sickly to my mind), malt drinks like Guinness Malta, and Maltina in their estimations. These malt drinks are an important market component in this semi Muslim country.

So a massive market with huge potential and with all international brewers enjoying a share, right? Wrong again. As I mentioned above imports are prohibited. This is in order to protect the domestic industry, although brands like Corona still manage to find their way behind the counter in selective on-premise outlets. So that leaves only local production. Unfortunately two particular pioneering brewers gained advantage over the competition several decades ago and they ain’t in any the mood to share their nest egg.

Heineken achieved their first foothold way back in 1946 and Guinness Nigeria was established in 1962. They have subsequently ruled the roost.  Whilst Guinness has been happy to maintain its single market entity Heineken operates through both Consolidated Breweries (concentrating on discount brands) and Nigerian Breweries. The Dutch brewer further strengthened its position last year when it bought control of the brewing interests of the Sona Group.  This added a production capacity of 3.7 million hectolitres to Heineken’s existing 12 million hectolitres. As a result Heineken and Guinness now control an estimated 90-95% of Nigeria’s beer market.  Anheuser-Busch InBev doesn’t get a look in, Carlsberg is only available as a licensed brand and poor old SABMiller is more or less trapped in a regional back water operating through Pabod Breweries in which it has a majority interest.

Okay, maybe that’s a little hard. SABMiller opened a new  greenfield brewery in south-eastern Nigeria in August 2012 with an annual capacity of up to 500,000 hectolitres for an investment of  over U$100 million. This brings SABMiller’s total number of sites in Nigeria to four, having first entered the market in 2009 through a strategic alliance with Castel.

But its capacity is still way, way behind Guinness (circa 5 million hectolitres) and by allowing Heineken to acquire the Sona breweries the Dutch top dog was able to increase its capacity by a massive 30%.  Surely it would have been more prudent for SABMiller, or Anheuser-Busch InBev come to that, to spend the €500 million+ that Heineken paid to the Sona Group (SNS Securities estimate) in order to gain an immediately operational production framework and prevent Heineken from  strengthrening  its already dominating position.

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