Good times ahead

Nigeria’s alcoholic beverage industry is set to grow as the economy improves.

Brewing is considered one of the fastest growing industries in Nigeria and beer is the most popular of all alcoholic beverages consumed, accounting for approximately 92% of all alcoholic drinks sold in 2010. Beer consumption has continued to increase due to brand loyalty, aspiration, indulgence and as a pick-me-up as well as the youthful population.

Beer prices have increased up to 11% due to increasing cost of production especially public electricity supply, and the general lull in the Nigerian financial sector due to ongoing economic reforms. The consequent impact on consumer disposable income has led beer drinkers to seek cheaper brands. Despite the increased prices the beer market grew overall by 8% in 2010 with all price segments achieving growth with the exception of premium which has been declining for a number of years.

The mainstream segment continues to dominate achieving volume growth of 9%. All brands within the segment experienced growth with Castle Milk Stout and Grand from SABMIller more than doubling their 2009 volume in 2010. Most brands in the mainstream segment are predominantly sold in cans. The ban on imported beer has had a positive effect on local manufacturing with new brands and players entering the market.

The market has been dominated by two major players namely Nigeria Breweries Plc (Heineken) and Guinness Nigeria Plc (Diageo) for decades. However, SABMiller’s entry into the market in 2009 indicated an interest by other international brewers in the market. SABMiller is consciously targeting the mainstream segment of a market that had been traditionally dominated by Diageo and Heineken.

beverages1The key market driver for the beer industry is the large and growing population and per capita consumption still below 10l. The main limiting factors to beer growth are increasing awareness of health and wellness implications of alcohol consumption, increasing religious observance, inflation as well as unemployment resulting in lower disposable income to consumers.

Wine and spirits

With domestic production grossly underdeveloped, the wine market is heavily dependent on imports with demand largely generated by a wealthy urban niche market. However, the consumer audience is expanding, supported by increased marketing activities and promotional events which bodes well for the future, especially with the increasing perception that wine is a healthier alcoholic beverage than beer.

The spirits category has grown steadily assisted by the availability of affordable single-serve sachets and bottles plus marketing investment. However, the recent harsh economic environment has restricted annual progress while consumer enlightenment over health issues could dampen future category development. Increased marketing activities by distributors and suppliers will be needed to counter these influences. Fortunately for the spirits category, these are expected to be forthcoming, allowing for continuing annual growth.

The report was originally produced by Canadean, a consumer research company based in London.