Nigerian Breweries Plc is considering increasing prices of certain brands, which were not named, in a bid to reflect the increase of excise duties announced last year by the President Muhammadu Buhari-led administration.
The impact of excise duties on Nigerian Breweries Plc: Excise duty make up 7.5% of Nigerian Breweries’gross revenue, thereby impacting the company’s net revenue which declined by 5.8% in 2018. The company recorded N324.4 billion in 2018, dropping from N344.5 billion in 2017. Its gross profit also fell by 11.6% to N126.9 billion from N143.5 billion in 2017.
Why FG increased excise duties: The Nigerian Government had increased excise duties on beer and Stout by N0.30 kobo per centiliter (Cl) in 2018 and N0.35 kobo per Cl each in 2019 and 2020.
The decision was prompted by the need to achieve a dual benefit of raising the Government’s fiscal revenues and reducing the health hazards associated with tobacco-consumption and alcohol abuse.
Why Nigerian Breweries Plc will increase certain prices: The company is looking to record a better result in 2019. One of the ways to achieve this is to increase the price of certain products since the excise duties will increase this year rather than decrease.
The company had taken this path before, but backtracked after studying the reactions of its customers. It needed to remain competitive in the market.
Alternative to increasing product prices: While he didn’t rule out price hike, the Chief Executive Officer and Managing Director of Nigerian Breweries, Jordi Borrut Bel, told Nairametrics that the company doesn’t intend to place the burden on the company’s diverse consumers. He further stated that the company could consider selling more revenue-driving brands.
“WE WOULD LOOK AT OUR PORTFOLIO BRAND OR DIFFERENT SKU, AND WE WILL ALWAYS TRY TO MAXIMISE ITS VALUE BY THE RIGHT COMBINATION WHETHER IT’S INCREASING PRICES OR SELLING MORE OF THE BRANDS OR SKU THAT HAVE HIGH REVENUE.
“SO WHAT I SAY IS WE NEED TO MAXIMISE OUR REVENUE, I DON’T SAY WE WOULD INCREASE PRICE BROADLY OR THAT WE WOULD DO IT ON A CERTAIN DATE. WE WOULD ALWAYS FOLLOW CLOSELY WITH OUR CONSUMERS AND REMAIN COMPETITIVE.
“SO WE WILL NOT DO SOMETHING THAT STRAYS US APART FROM CONSUMERS, WE WOULD ALWAYS MONITOR WHAT IS OUR COMPETITIVE SITUATION, WHAT IS OUR CONSUMERS LOOKING AT, AND WE WOULD DO IT BY PRICE, BOTTLE BY BOTTLE, BRAND BY BRAND.”
The CEO assured that harsh decision on a broad perspective will not be made in order to remain competitive in the market.