A ban on alcoholic beverages in sachets and small bottles below 200ml by the National Agency for Food and Drug Administration and Control and its ongoing full implementation are sweeping across the Fast-Moving Consumer Goods sector, public health and the whole gamut of Nigeria’s economy. In addition to the economic haemorrhage occasioned by multinational giants leaving Nigeria in droves, the ban on sachets and small bottles of alcohol is estimated to cost the country over N1.3 trillion in investments, according to the Manufacturers Association of Nigeria. The Distillers and Blenders Association of Nigeria also mentioned during a recent protest in Lagos, that over 500,000 jobs will be axed with millions of livelihoods likely to be affected. What’s more, tax revenue generated from the production and sale of sachet alcohol, and small businesses that rely on its sale for a significant portion of their income will be severely affected.
But the ban was not an overnight decision, according to Professor Mojisola Adeyeye, the Director-General of NAFDAC.
Adeyeye emphasised the collaborative effort involving the Federal Ministry of Health and consumer protection agencies. Industry watchers, however, are alleging that multinationals that are entering the Nigerian market are working hand in glove with NAFDAC behind the scene.
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Recently, there have been changes in alcohol consumption trends. Gen Z consumers are no longer drinking beer as much. They reportedly said that spirits are more exciting than beer.
Before the change in consumption pattern, many Nigerian Gen Zs had traditionally been fond of beer. But a new report by Williams & Marshall Strategy, a global market research company, showed Nigerian consumers, particularly the younger generation, have demonstrated an increasing interest in exploring a more comprehensive range of spirits.
The report further stated that the seismic shift in taste preferences could be attributed to various factors, including globalisation, exposure to international cuisines, and the influence of the digital age.
As Gen Zers who make up to 70 percent of Nigerian consumers of alcoholic beverages gravitate towards spirit consumption, marketing alcohol in sachets and small bottles has witnessed a significant boost in recent times.
While they are increasingly turning to spirits, the rise of Nigerian-owned distilleries is contributing immensely to the growth of the local industry. These distilleries not only produce quality products but also strategically cater to a significant portion of consumers through sachet marketing, which is gaining dominance and giving the multinational whiskey and spirits giants a run for their marketing investment.
The steep decline in beer consumption is confirmed in the monumental losses among many players in Nigeria’s largest beer makers. For example, Nigerian Breweries Plc posted N145.3 billion in pre-tax loss in the last quarter of 2023, its biggest since opening shop in the country in 1946
To curtail the traits posed by the success of these local distillers, multinationals are allegedly sponsoring the ban on sachet marketing of alcohol by NAFDAC.
The gains of N14 billion revenue recorded by Guinness Plc in the financial year ended June 30, 2023 were from Johnnie Walker, Baileys and Singleton and other Diageo brands. But the legendary Johnnie Walker is taking a walk away from Guinness Nigeria by April 2024. As Guinness Nigeria stops the importation and sale of Johnnie Walker, Baileys and other Diageo products, 6 percent of its market share will be wiped off.
Guinness Nigeria also incurred a N49 billion loss in its 2023 half-year operations and had in August revealed challenges with accessing forex for its operations. Guinness had been importing the spirits under its 2016 Sale & Distribution Agreement with Diageo plc. Diageo Plc has concluded plans to establish a new, wholly owned spirits-focused business in the Nigerian and African markets.
Also, Nigerian Breweries’ Star, Heineken, and Tiger were able to grow their revenue by 9 percent compared to the previous year aided by positive price mix. However, the operating profit fell by 15 percent due to higher input cost and one-off reorganisation cost despite strong and aggressive cost savings and other efficiency measures. Coupled with the impact of the devaluation of the naira which resulted in a foreign exchange loss of N153 billion, the company recorded a net loss of N106 billion during the year.
Nigerian Breweries recently announced it would execute an upward review of the prices of its products effective from February 19, 2024 on account of “continued rising input cost and the need to mitigate the impact. Logically, the skyrocketing prices of beer will further push Gen Zers away from beer consumption to spirit consumption.
With beer sales volumes down in high double digits, the foregoing reasons support the assertion that breweries group are vigorously supporting and sponsoring the ban on alcoholic drinks in sachets and small PET bottles, especially by fast rising local distillers.
Lawal is a Lagos State-based business journalist and public commentator.