Nigerian brewers collectively faced a significant setback in the first quarter of 2024.
According to a comprehensive analysis of financial statements from leading brewing companies, including Champion Breweries Plc, Nigerian Breweries Plc, International Breweries Plc, and Guinness Nigeria Plc, the industry reported a combined loss of N169.7 billion.
This downturn is in contrast to the same period last year when three of the four major brewers recorded a total loss of N54.3 billion, while Guinness Nigeria managed to eke out a modest profit of N1.84 billion.
Experts attribute this dramatic reversal to a multitude of factors, with the foremost being the steep devaluation of the Nigerian naira coupled with soaring interest rates.
The fluctuating exchange rates have exacerbated the financial woes of brewing companies, particularly those with significant dollar exposures.
International Breweries, for instance, saw its foreign exchange loss balloon to N162.2 billion in the first quarter of 2024 from an FX gain of N1.22 billion in the same period last year.
Similarly, Nigerian Breweries and Guinness Nigeria reported substantial FX losses of N72.85 billion and N37.06 billion, respectively, compared to much lower losses or gains in the previous year.
Even Champion Breweries, which did not record any FX loss in the comparative period, reported a loss of N0.74 billion in Q1 2024.
Industry analysts emphasize that the weakened naira has intensified the costs associated with servicing foreign debt obligations, further straining profit margins.
The shift to a floating exchange rate regime has led to rapid depreciation of the naira, resulting in significant FX losses across the brewing sector.
Moreover, the decline in consumer spending has added to the sector’s woes. Inflationary pressures have eroded the purchasing power and disposable income of consumers, forcing them to prioritize spending and seek cheaper alternatives.
Femi Egbesola, the national president of the Association of Small Business Owners of Nigeria, notes that inflation has significantly reduced consumers’ purchasing power, impacting their willingness to spend on alcoholic beverages.
Furthermore, increased competition from alternative beverages and a more diverse range of beer options have intensified market competition, squeezing profit margins for brewing companies.
