alcoholic beverages, ABInbev, GUINNESS, United Capital Plc, Nigeria, Federal government
United Capital

In recent months, Nigerians have seen the introduction of new alcoholic drinks into the market thereby increasing serious competitions in the industry.

Consumers have been given various choices of going for any brand of their choice as some go for brand loyalty, change in price or alcoholic volume but to the manufacturers, they are kind of faced with some challenges when it comes to government regulations and laws.

Taking a peek into the industry, the United Capital Plc, a leading African financial and investment services Group providing bespoke value-added financial service to its clients recently released a report that “The performance of brewers in H1-18 was driven by developments in the competitive landscape. ABInbev completed its new plant in Shagamu and flooded the market with its regional premium beer, Trophy lager.

“Also, the company introduced its flagship international premium beer, Budweiser, into the Nigerian market. Unsurprisingly, NB’s revenue took a hit, tumbling 0.2%y/y to N95.2bn in Q2- 18 amid volume weakness.

“However, GUINNESS’ printed stronger revenue number in its 9M-17/18, up 17.4% to N105.5bn amid increased sector competition. Going into H2-18, the implementation of the new excise duty on alcoholic beverages may dampen revenue growth.

“In Jun-18 the Federal government replaced the ad-valorem rate on alcoholic beverages with a fixed rate charge estimated based on volume. Accordingly, consumption of Beer & Stout now attracts N0.30/Centi-Liter (Cl) in 2018.

“To moderate the impact on prices, an additional increase of the N0.30/CL will spread over into 2019 and 2020 with charges per CL anticipated to settle at N0.35/Cl over the period. Consumption of Wine would attract N1.25/CL in 2018 and N1.50/CL in 2019 and 2020, while Spirit would attract N1.50/CL in 2018 with a planned increase to N1.75/CL and N2.0/CL in 2019 and 2020 respectively.

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“Notably, given the intense competition for market share, we believe the sector players might find it difficult to transfer the tax burden to their consumers.”