Uneasy calm, anxiety and palpable tension have been the lot of Nigeria’s wine and spirit market, of late. This is not unconnected with the announcement by the National Foods and Drugs Administration and Control (NAFDAC) of its plans to implement the ban it had earlier placed on the production of alcohol in sachets, or in less than 200ml PET, in the country.
According to the federal health regulatory authority, the aim is to check alcohol abuse among the under-aged, since the packages can easily be concealed by school children in their pockets.
Expectedly, the ban has not gone down well with stakeholders. They believe, going ahead with such a policy would lead to over five million direct and indirect workers, in the sector, being laid off; with more than 25 companies going under.
The stakeholders, comprising, the Manufacturers Association of Nigeria (MAN), the umbrella body of manufacturers in Nigeria; the Distillers and Blenders Association of Nigeria (DIBAN); and other operators, in the market segment, at a media briefing in Lagos, recently, also warned that implementing such plan could also lead to over N800billion investments going down the drain; since some of the machines being used to manufacture these packages, they explained, are specifically designed for that purpose, and would, therefore, become a waste if the ban is implemented.
Also likely to happen, they added, is the loss of tax revenue generated from the production and sale of sachet alcohol, with small businesses relying on its sales for a significant portion of their income, severely affected.
But justifying the ban, the NAFDAC boss, Professor Mojisola Adeyeye, explained that the decision to ban the packages was never taken in a hurry. There had been collaborative efforts, involving the Federal Ministry of Health and consumer protection agencies, she stated.
Interestingly, there are loud whispers and allegations about the likelihood of multinationals, having a hand in the decision to do away with sachet enterprises, in that sector. Sachet and PET alcohols are getting increasingly popular and disruptive, they stated, a development the multinationals are no longer comfortable with.
For instance, at a media briefing held at the MAN House in Lagos, few weeks ago, a stakeholder, while pointing an accusing finger at the multinationals, described the ban as amounting to calling a dog a bad name in order to hang it.
But how true could this be?
Recent changes in alcohol consumption trends, among the youths, popularly referred to as Gen Z, point to that direction. For instance, those in this category no longer find beer drinking fashionable, and this stemmed from the belief the tendency to develop a pot belly is higher among beer drinkers than among those who consume spirits.
A recent report, released by Williams & Marshall Strategy, a global market research company, has also confirmed the interesting trend of the Gen Z generation, who constitutes 70 per cent of consumers in that market segment,, tilting towards exploring a more comprehensive range of spirits.
While the report never mentioned the ‘Pot Belly Factor’, for the surge in interest towards spirit drinks, it however identifies globalisation, exposure to international cuisines, and the influence of the digital age, as some of the factors.
The rise of Nigerian-owned distilleries has also contributed immensely to the growth of the local industry. These distilleries not only produce quality products but also strategically cater to a significant portion of consumers through sachet marketing, which is gaining dominance and giving the multinational whiskey and spirits giants a run for their marketing investment.
The steep decline in beer consumption can be seen in the monumental losses recorded by many players in Nigeria’s largest beer makers.
For example, while Nigerian Breweries Plc posted N145.3 billion in pre-tax loss in the last quarter of 2023, its biggest since opening shop in the country in 1946; the gains of N14 billion revenue recorded by Guinness Plc in the financial year ended June 30, 2023, were from Johnnie Walker, Baileys and Singleton and other Diageo brands, not from its lager beer or stout.
To confirm how dire the situation is, Diageo, last year, stated that the legendary Johnnie Walker would be exiting from the stables of Guinness Nigeria by April 2024. Interestingly, as Guinness Nigeria stops the importation and sale of Johnnie Walker, Baileys and other Diageo products, 6% of its market share will be wiped off.
Guinness Nigeria also incurred a N49bn loss in its 2023 half-year operations. In August, last year, the company revealed challenges with accessing forex for its operations. Guinness had been importing the spirits under its 2016 Sale & Distribution Agreement with Diageo plc.
Not a few believe that the announcement by Nigerian Breweries that it would embark on an upward review of the prices of its products effective from 19 February on account of “continued rising input cost and the need to mitigate the impact, may further push the Gen Zers away from beer consumption.
With beer sales volumes down in high double digits, those who see the multinationals as the ‘unseen hand’, behind the ban, may not be farther from the truth.
and then