Heineken NV, the world’s third-biggest brewer, is investing in Nigeria on bets that economic expansion will increase consumption in Africa’s second-largest beer market, helping to boost profits.
Heineken, which is the majority owner of Nigerian Breweries (NB), Nigeria’s largest brewer by volume and market value, is confident in the Nigerian market based on its potential, population growth and rising urbanisation, Jean-Francois van Boxmeer, chief executive officer of Heineken, said in an interview with BusinessDay on the sidelines of the World Economic Forum on Africa.
“Nigeria is our largest brewery operation in Africa and second-largest in the world after Mexico,” van Boxmeer said. “We are the market leader for decades and have been investing ahead of the curve. If you are too cautious, you can miss the boat.”
Nigeria’s beer market has been expanding at about 10 percent per annum over the past decade. Even so, average per capita beer consumption is still only 10 litres a year, a sixth of the rate in South Africa, meaning the potential for growth remains huge.
Analysts say that as Nigeria’s middle class grows, they are becoming more brand conscious and are targeting aspirational brands such as Heineken, which costs between N500 ($3.1) and N2,000 ($12) per bottle in trendy bars across Nigeria’s major cities.
Heineken has spent over N1 billion to develop sorghum as a substitute for imported barley in some of its major brands in Nigeria over the past decade. The company plans to sign an MOU with Nigeria’s Ministry of Agriculture at the World Economic Forum (WEF) on how to optimise the sorghum value chain in Nigeria, said van Boxmeer.
Heineken is also about to launch hybrid sorghum seeds, “the first of such in Nigeria”, which will quadruple yields to four tonnes per hectare, as well as aid employment and food security.
Nigerian Breweries reported in March that revenues for 2013 rose by 6.3 percent to N268.61 billion from N252.67 in the earlier period of 2012. Pre-tax profits increased 11.9 percent to N62.24 billion from N55.62 billion in 2012.
Heineken is committed to continuing its innovation in the Nigerian beer market and improving the local content of its beers.
“Our commitment is that by 2020, 60 percent of our raw materials will be locally sourced. This includes sorghum, cassava, and other local products,” said van Boxmeer.
The company’s regional strategy is working, according to Van Boxmeer, as Goldberg sold mainly in the West and North and Life mainly available in Eastern Nigeria remain the fastest growing regional brands.
“While our regional brands continue to outperform, our flagship star brand is still a very strong national brand,” said van Boxmeer.
