E-Malt.com News article: Nigeria: SABMiller’s penetration in Nigeria to provoke a ‘fascinating’ battle for market share and consumers loyalty

SABMiller, one of the largest brewing groups in the world, has moved into Nigeria, BusinessDay reported on March, 9.

SABMiller has bought Pabod Breweries, Port Harcourt and Standard Breweries in Ibadan, the companies the South African and world brewing giant is using for soft landing. Coming at a time of diminished international investment, the move has set Nigeria’s brewery abuzz with the enhanced competition SABMiller’s entry would elicit.

According to sources, SABMiller has been eyeing, for many years, the beer market in Nigeria but has so far missed out on entering Africa’s second largest beer market which is dominated by Nigerian Breweries plc (which has Heineken as technical partner and leading stakeholder, and Guinness Nigeria plc).

Industry sources hold that SAB’s Amstel beer malt and Miller beer are heavy hitters and will energise the Nigerian market. Guinness Nigeria’s contribution to global revenue, volume and margins is at record levels. So are Nigerian Breweries’ Star and Gulder in the Heineken group results. It is believed that the battle for market share, consumer loyalty and distribution channels will become one of the most fascinating in Nigeria’s fast moving consumer goods space.

Strategic Alliance JV 2, a subsidiary of SABMiller, acquired the shares of German brewing consultancy, Brewtech, as well as some of the shares of the Rivers State Government in Pabod Breweries. Furthermore, the company will participate in a share capital increase such that it will hold the majority shareholding in the company.

Established by the Rivers State government, Pabod Breweries started production in 1982. From 1983 to 1985, sales of the company rose to over three million cartons of Grand Beer and Grand Malt per annum.

The company experienced a major drawback when in 1986 a government policy, the Structural Adjustment Programme (SAP) had an adverse effect on the importation of raw materials for the breweries which depended heavily on foreign raw materials. In addition, lack of proper management and corruption resulted in the closure of the brewery.

Pabod Breweries remained dormant for many years before Brewtech re-started the brewery about a year ago with the help of the Rivers State government. By then the old Rivers State controlled 51 percent shares, Brewtech, 20 percent, while the defunct Nigerian Industrial Development Bank and some indigenes of Bayelsa and Rivers states held the remaining shares.

The venture came to a preliminary stop when national competitor, Nigerian Breweries plc, in which Heineken holds the biggest stake, took Pabod to court on the claim that Pabod’s customised beer bottle looked like NBL’s Star bottle. On 30 June, 2008 Pabod won the case in court but NBL appealed the decision of the Federal High Court. The case is still pending. In the meantime Pabod has been bottling its beer and its malt beverage in Nigeria’s generic beer bottle.

Nigeria, with a population of about 140 million, is Africa’s most populous country and the continent’s third largest economy. Oil dominates the economy, accounting for about 80 per cent of Federal Government revenues, and 95 percent of foreign exchange earnings. Despite the poverty of the population the size of the market makes it very attractive to investors.

Earlier in 2008, SABMiller’s strategic partner and competitor in Africa, French Groupe Castel, acquired the majority stake in International Breweries, Ilesha in the Osun state in south western Nigeria from Germany’s Warsteiner Brewery.

SABMiller was founded in South Africa in 1895 as South African Breweries (SAB). The business operations were mainly limited to southern Africa, where it had established a dominant position in the market, until 1990 when it began investing in Europe.

SAB’s first investment in Europe was in 1990 through the purchase of an interest in Compañía Cervecera de Canarias SA in the Canary Islands. After listing on the London Stock Exchange in 1999 to raise capital for acquisitions, the group purchased the Miller Brewing Company in North America from the Altria Group in 2002, and changed its name to SABMiller. Altria Group retains a 28.7 percent ownership interest in SABMiller.

Following this, the group’s next major acquisition was of a major interest in Bavaria S.A., South America’s second largest brewer and owner of the Aguila and Club Colombia brands in 2005.

In the same year, SABMiller acquired a 29.6 percent stake in Harbin Brewery, China’s oldest brewer, preparing the group to benefit from growth of the beer category in developing markets.

SABMiller has grown from its original South African base into a global company with operations in both developed markets and in emerging economies in Eastern Europe, China and India.


11 March, 2009