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Loss-making Nigerian Breweries Plc acquires Distell Wines and Spirits in battle for survival

STRUGGLING local brewer, Nigeria Breweries Plc, has acquired Distell Wines and Spirits Nigeria Limited as part of a battle to navigate through the tough business terrain of Africa’s most populous nation.

Nigerian Breweries Plc incurred a loss totalling N52.089 billion in the first quarter (Q1) of 2024 as against N10.715 billion loss reported in the corresponding period of 2023. In the 2023 financial year, the country’s biggest brewer incurred a net loss of N106 billion after emerging from a profit of N13.187 billion in the 2022 financial year.

To navigate this challenge, Nigerian Breweries Plc has completed the acquisition of 80 percent stake in Distell Wines and Spirits Nigeria Limited, which makes it the majority shareholder of the company.

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The brewer said the completion of the transaction followed South Africa Reserve Bank (SARB)’s approval for the acquisition of the shares of Distell International Limited (now known as Heineken Beverages Holdings Limited) by Nigerian Breweries Plc.

Distell International is a South African entity. Nigerian Breweries Plc has also acquired the import business of Distell International Limited in Nigeria.

According to the Managing Director, Nigerian Breweries Plc, Mr Hans Essaadi, the acquisition and subsequent commencement of business operations aligned with the strategic objective of the brewery company to expand its current product offerings beyond beer to include wines, spirits, and flavored alcoholic beverages.

“This acquisition is part of efforts to provide access to a complementary multi-category portfolio of fast-growing brands of wines and spirits market segment and capture significant growth opportunities in the wines and spirits segment of the brewing industry,” a statement by Nigerian Breweries Plc on Sunday said.

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“We are excited to have the process completed and can’t wait to see how this transforms our business.”

In his remarks, the Managing Director, Distell Nigeria, Mr. Steve Ighorimoto, said the acquisition was an exciting new chapter for the company as it would help increase the
capacity necessary to achieve improved business performance.

“We are excited to be a part of Nigerian Breweries, as we share in the solid track record of growth, including a highly engaged, dynamic, experienced, and diverse team. These
changes will strengthen the organization’s manufacturing, marketing, and distribution capabilities while ensuring sustainable growth and maximum value creation for all
stakeholders,” he said.

Brewers are generally struggling

Nigerian Breweries Plc is not the only brewer that is struggling. The entire brewery industry is facing one of its toughest times in the Nigerian business history.

Guinness Nigeria Plc incurred a year-to-date net loss totalling N61.652 billion to March 2024, as well as quarter-to-date net loss of N56.418 billion to March 2024. Guinness is Nigeria’s second biggest brewer.

International Breweries, Nigeria’s third biggest brewer, incurred a loss of N60.392 billion in Q1 of 2024 as against N2.306 billion net loss in the corresponding period of 2023. The company incurred a net loss of N70.025 billion in the 2023 financial year.

“It is tough times for the industry due to a chain of factors such as foreign exchange crisis, decreases in the purchasing power of Nigerians due to high inflation (especially food inflation) and interest rates. You will only drink beer after eating,” said one analyst, who works with one of the brewers but did not want his name in print.

“There are cost pressures due to bad roads, high fuel and diesel prices, raw materials costs, among others. So, it is just about the economy, which is not in the right shape,” the analyst said.

Nigerian Breweries suspends operations in two plants

In early April 2024, Nigerian Breweries Plc said it would suspend operations at two of its nine plants.

In a statement signed by Corporate Affairs Director, Ms Sade Morgan, the company said the company would relocate and redistribute employees to the remaining seven breweries, promising to offer support and severance packages to those that were unavoidably affected. 

The statement said following the company’s “Business Recovery Plan,” it would undertake a company-wide reorganisation in order to secure a resilient and sustainable future for its stakeholders. 

Nigerian Breweries Plc further said it had notified the Nigerian Exchange Group (NGX) of plans to raise N600 billion via a rights issue with a view to restoring the company’s balance sheet to a healthy position following the net finance expenses of N189 billion recorded in 2023, driven mainly by a foreign exchange loss of N153 billion resulting from the devaluation of the naira. 

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Managing Director, Mr Essaadi, was quoted as saying that “tough business landscape characterised by double-digit inflation rates, naira devaluation, FX challenges and diminished consumer spend has taken its toll on many businesses, including ours. This is why we have taken the decision to further consolidate our business operations for efficient cost management and optimal use of our resources for future sustainable growth.”

He said the company recognised and regretted the impact that the suspension of brewery operations in the two affected locations might have on our employees, noting that Nigerian Breweries Plc was committed to limiting the impact on our people as much as possible by exhausting all options available, including the relocation and redistribution of employees to our other seven breweries and providing strong support and severance packages to all those avoidably affected.

“We are also committed to supporting our host communities in ways that ensure they continue to feel our presence. We remain wholly committed to having a positive impact on our host communities and our consumers; leveraging our strong supply chain footprint; excellent execution of our route to market strategy; and our rich portfolio of brands across the Lager, Stout, Malt, Soft drinks, and Energy drinks categories; and more recently, Wines and Spirits with the acquisition of Distell,” he noted.

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