Brewers in Africa’s largest consumer market are riding on the reduced volatility of the naira and moderating inflation to change the tide of their bottom-line in the first quarter of this year after recording all round losses in the same period last year.
Four brewers analysed by BusinessDay – Nigerian Breweries, International Breweries, Guinness Nigeria and Champion Breweries – all saw their net profits turned positive running into N82.62 billion, a 148.69 percent recovery from N169.7 billion losses incurred in Q1 2024.
Industry analysts attribute the rebound to the new found stability in the FX market and waning cost pressures as a result of the slowing inflationary trend.
According to Uchenna Uzo, professor of marketing at Lagos Business School (LBS), the beer makers performed “moderately well” when compared to 2024’s performance, indicating an improvement in the fundamentals of the economy in terms of exchange rates stability and the rate of inflation.
Read also: Brewers see stable naira boosting profits, operational efficiency
Uzo who doubles as the faculty director at LBS noted that while inflation remains high, the rate of change in prices hasn’t been significantly higher than it was in 2024.
“The macroeconomic fundamentals have been a bit better for businesses and this has helped a lot of the brewers in their planning,” Uzo said.
“This has shown in better sales results and so these sales results are not necessarily coming from higher consumption, but because the beer makers have come to manage their portfolios better and they’ve also come to understand how to manage price increases.”
Though the naira has shed more than 7 percent of its value year-to-date, it’s largely remained stable, reducing brewers FX-induced losses for the period under review.
Nigerian Breweries saw a sharp drop in its losses as it fell to N178 million in the first three months to March compared to N72.9 billion in the corresponding period last year.
A similar positive turnaround was witnessed by International Breweries as the company reversed its net foreign exchange losses of N80.5 billion in Q1 2024 to positive of N581.4 million in the months to March this year.
While Champion Breweries made no FX related losses in the period examined compared to N743 million recorded in the corresponding quarter, its rising cost of raw materials calls for concerns.
Read also: Highlights of Nigerian brewers’ 2024 performance
Inflationary pressures are gradually slowing although global uncertainty remains a contending issue for lowering prices.
Data from the National Bureau of Statistics (NBS) show that the inflation rate declined to 23.71 percent in April from 24.23 percent in the prior month, pointing to a decelerating trend in consumer prices that soared to a near three-decade high last year.
But the storm is not completely over. For Uzo, though macroeconomic conditions are improving, “they are not going to change significantly this year” as inflation and interest rates are still high.
This trend is expected to place the brewing industry in a “cautious growth this year.”
“We’re going to see brewers being very cautious about their investments and they’re going to try innovation where they can carry out innovation, either process innovation or some level of product innovation,” the University don said.
“Also local sourcing of raw materials is likely to increase. These are some of the different ways that the brands will hedge this year.
