Alcoholic Beverages Industry In Nigeria

Alcohol consumption in Africa is high and is thriving strongly. As per World Health Organization’s (WHO) ‘Global Status Report on Alcohol and Health’, Nigeria is estimated to have highest annual alcohol consumption in Africa. An average Nigerian consumes about 12.28 litres of alcohol per annum.

Definition / Scope

Market Overview

The alcoholic drink market of Nigeria is one of the striving industry of Nigerian manufacturing sector, despite being at the maturity stage of its life cycle.
Increase in disposable income and urbanisation support demand for alcoholic beverages in Nigerian market. There has been expansion of drinking occasions which further fuels the demand.
Nigerian Breweries and Guinness Nigeria are two major players of the market. Both these leading breweries together hold close to 90% of market share. SABMiller entry in the market has further intensified the competition, whose strategic aim is to provide affordable alcoholic beverage to Nigerian consumers

Top Market Opportunities

Beer consumption in Nigeria has been experiencing growth of 9 per cent annually over the last 10 years. This growth was as a result of foreign investments in new production plants, rising disposable income, and changing consumption patterns.
Major players definitely find the industry attractive in terms of profitability, specifically due to impressive growth and economies of scale. However fringe players struggle owing to heavy capital investments, it also becomes major entry barrier in the market.
Beer consumption in Nigeria increases with a growth in social activity; and the middle class, major consumers of beer, is growing
There is a growing awareness among Nigerians to become health conscious and are ready to accepted branded/ imported products which are healthier then home brewed alcoholic beverages.
Consumers’ high discretionary income and ability to spend on the more expensive alcoholic beverages.

Market Drivers

With the largest population in Africa and growing middle class along with large number of drinking – age consumer present significant growth opportunities.
Nigeria’s rising middle class and the emerging young consumers are adopting consumption patterns similar to Western countries and are increasingly developing preferences for premium imported brands
The country’s increasing urbanization and the rising number of female alcohol drinkers, especially in the large cities, such as Lagos, Port Harcourt, and Abuja also offers expansion opportunities.
These favourable market scenarios lured various multinationals to strengthen their foothold in Nigeria.
Nigeria‘s favourable demographics, with a populous and vibrant youth and growing middle class are also contributing growth factors.
Beer dominates on volume share basis, while spirits and wine are more important in monetary terms.
The marketing communication by some alcohol beverages brands portrays these drinks as vitality enhancing beverage, thus attracting increasing number of youth to consume them.
In Nigeria, there are not very stringent policies or measures regarding production and marketing of alcohol. ‘Self-regulatory’ or drink responsibly is common theme which brewers use in their campaign.
Some of the alcoholic beverages are now liked with affluence and class/ status symbol. Increase in purchasing power and aspirational spending habits have generated the demand for premium drinks.
Nigerian wine market is currently dominated by importers like Ekulo Wine World which accounts for 30% market share.
To promote business recently Nigeria International wine and spirit fair has been started where importers, distributors & customers can meet.

Market Restraints

Increasing spirituality and abstinence as many Nigeria’s religious organizations continue to discourage alcohol consumption.
Current brands enjoy high brand equity, which any new entrant would have to surmount.
Nigeria’s wine market is burgeoning, but crippling import duties and complex bureaucracy could dampen the boom before it gets started

Other Key Market Trends

Alcohol drinking was earlier reserved for special occasions and it was mainly consumed by male adult of the family. Women and Youths were culturally restrained from drinking.

In recent year, alcohol consumption in Nigeria has witnessed striking changes led by development of socio-political and economic structure of country. Consumption is no longer exclusively ruled by customs and traditions or for special gatherings/ occasions.

There is no inhibition among youth now with regards to alcohol consumption, who were earlier restricted by social norms. This trend seems to have contributed significantly in becoming Nigeria among 30 countries with highest per capita of alcohol globally.

Another trend worth noting is increasing consumption of alcohol among females. This change could be attributed to influence of globalization and upsurge of feminism in the county.

Market Size and Forecast

Beer: Beer consumption is estimated to be about 19.5 million hl (2012 estimate) and is growing at about 9% per annum. Beer turnover in Nigeria is growing faster than its economy. The country has the second largest beer market in Africa, after South Africa. It constitutes about 96% of all alcoholic sales.

Spirit: Spirit’s market comprises of whiskey, brandy and vodka, the market is valued at $2.84 billion according to an International Wine and Spirit Research (IWSR) report. It is estimated to be growing at about 7% year-on-year. Premium spirit segment which occupies about 5-10% of alcoholic beverages market is growing at much faster pace with an annual growth of 18-20%. Imported brands account for $500 million of the spirits market.

Wine: The wine market is currently valued at approximately $370 million and is expected to grow 6% a year. Red wine accounts for 74% of the sales. There is a robust appetite for premium and high-end South African wines in Nigeria. According to an estimate that 5.2m people, representing the top 10% of earners among the 156m population, account for 43% of wine consumption in the country.

Competitive Landscape

Nigeria’s 160 million strong population offer a large market for alcoholic beverages. The alcoholic drink market of Nigeria is worth more than $6.5 billion. In terms of consumption pattern, beer is the most popular alcoholic drink in the country followed by spirit and wine.
Beer approximately constitutes about 55% share in Nigerian market, spirit and wine share is 30% and 15% respectively.

Key Market Players

Heineken: The brand holds about 71% market share through its two subsidiaries, Nigerian Breweries Plc (NB Plc) with 61% market share and Consolidated Breweries with a 10% market share. Nigerian Breweries has largest capacity in the country; it is estimated to have total annual capacity of 13.5mn hl. Through its lager brands Star, Gulder, Gulder Max and Heineken, Nigerian Breweries controls almost two thirds of the lager market in Nigeria.

Diageo: It occupies 27% market share through stake in Guinness Nigeria. Guinness has an annual capacity of 7.5mn hl.

SABMiller: It is a relatively newer entrant in the market and has forayed in market through acquisition of two local breweries. The brand has been working towards cultivating a significant stake in industry and has toughens the competition. South African Breweries Miller capacity is estimated to be around 1.8mn hl per annum.