The taste Nigerians are developing for spirits has attracted reviews from many market watchers. Those who saw the initial mass adoption of wines and spirits as a fleeting fad had to revise their positions when the fad began to look like an evolving culture.
The spirits market is not new in Nigeria. But the dimensions and dynamism haven’t attracted the attention it has been getting in the past few years. A search back in history would unearth periods when what was in vogue, especially among the rich, was gin and brandy. Whiskey brands were not as popular as brandy and certainly were not flaunted by people as lifestyle items.
Remember there was a time, between 2003 and 2006 when red wine appeared to be the most potent threat to beer in many bars and clubs? This period saw the influx of several wine brands, and with it, a growth in the counterfeit market. Wine became the preferred choice of the health-conscious section of the community when the narrative about excess sugar in beer was gaining currency. But this paled when it was revealed that at 0.6 to 1.2 grammes per bottle, the sugar content in red wine compares quite closely to those in beer which ranges from one to 1.5 grammes per bottle.
Although the body count for wine dropped a bit after this, it staged a major comeback as whiskey invaded the Nigerian market over the past 10 years, spurting up the scales and notching some dazzling statistics that had got the world talking. Quoting statistics by Naija Liquor, Joseph Osemegbe Aito, a customer development and route-to-market expert said Nigerians consumed $9.54 million worth of whiskey in 2022.
This translates to N13.3 billion and does not factor in either the hundreds of locally-produced brands or the millions of bottles smuggled into the country by importers who hide them in either cars or other containerised goods.
The valuation of the Nigerian wine and spirits market is quite a difficult one. While Osemegbe and Naija Liquor placed it at the precincts of $9 million, Dr. Victor Ikem, founder and Director of Drinks Revolution Limited, valued it at $34.38 billion. Ikem also projected a cumulative average growth rate of 10.9 per cent for the wine and spirits sector between 2023 and 2027.
With no clear market leaders particularly in the value-for-money segment and with the leadership of the premium segment swinging between and among several brands, the market looks like it is everybody’s fair game.
Whether it be a coincidence of strategic insight, the acquisition by Heineken of South Africa’s wine and spirits company, Distell Wines and Spirits, comes into focus against the backdrop of begging opportunities in the Nigerian market.
Heineken, the majority shareholder of Nigeria’s largest brewer, Nigerian Breweries began the acquisition process in 2021 but completed it in 2023 after fulfilling regulatory requirements, paving the way for the adoption of the newly acquired company by its Nigerian outfit.
In the wine and spirits coven, Distell is a formidable spectre by all standards. Its sales volume stands at 48 billion litres. In 2022, it raked in a revenue of R34.133 billion, equivalent to N2.69 trillion. Gross Profit was also impressive, standing at more than R9 billion (N717 billion).
Heineken must know what it was doing when it coughed out a whopping $2.56 billion for the South African company. Speaking about the completion of the acquisition, Heineken Chief Executive, Dolf van den Brink said the company was delighted to welcome Distell into Heineken. adding: “We look forward to adding more than €1 billion in net revenue and €150 million operating profit to our African footprint. By combining the strengths of all three entities, we can leverage our expertise and resources to foster growth, create jobs, and contribute to the overall economic development of the region”.
Heineken has been a perpetual laggard in the African market where it controls only 18 percent market share, and it looks like the Distell acquisition was executed to solve three problems; one to bolster its penetration problems in Southern Africa where AB Inbev has more than 70 percent market share. To achieve this, it also acquired Namibia Breweries, perhaps as a window to the Southern African market. With beer consumption in that area averaging 7.2 litres per capita, Namibia Breweries will help bridge the gap between Heineken and other brewers in that subregion.
Secondly, having been an “only beer” company for so long, the acquisition may have been to diversify its portfolio and wager against lifestyle changes that might adversely affect beer consumption.
Thirdly, Distell looks like it was acquired with the Nigerian market in mind. Heineken has a 37 per cent market share in Nigeria and looks to remain the dominant player for the foreseeable future. But it is perceivably concerned about how competition is chiselling away some portions of its market. In the premium segment, for instance, Budweiser has been giving Heineken Lager some difficulties. While fending off competition is important for Heineken, there is also the existential threat that the spirits subsegment of the alcoholic beverage industry presents to the beer subsegment.
Reports that made headlines in the Nigerian media in December 2023 said that Nigerians consumed N2.19 trillion worth of alcohol in 2022. This statistic, for the first time, brought the value of the alcoholic beverages industry to public scrutiny, even as it caused some reappraisal of positioning and portfolio realignments among the players. Given that this report was released by two players who distributed mostly wine and spirits online, the numbers mentioned in this statistic can easily be said to represent the wine and spirits’ segment.
With beer and wine and spirits being in competitive demand, there is no way beer producers would not watch their rivals with more than a passing interest and Nigerian Breweries want some of those trillions and Distell Wine and Spirits became the answer.
The interesting thing about the Nigerian wine and spirits market is the absence of the sort of competition that exists in the beer market. Unlike in the beer subsegment where loyalty is significantly present, in the wine and spirit, those who have developed a taste for whiskey, for instance, anchor their loyalty mostly on class. For instance, while you rarely find a beer drinker swinging from one brand to another at one session, those who take whiskey might drink any brand provided it meets their status. Thus, in many whiskey gatherings, the question is not usually, “Do you have a Hennesy, of Glenfiddich?” On the contrary, people mostly ask, “which good whiskey do you have”? And these days, people look at either the perceived profile of the brand or the ageing.
Given this, Nigerian Breweries knows that with its reach in the Nigerian market, its experience in the sale of alcoholic beverages, and its strength, a significant slice of that N2.18 trillion can be theirs.
It was, therefore, not a surprise that just one year after it grabbed the big South African distillers, the Nigerian market was already prepped to welcome the brand well ahead of other markets in the West, East, and Central Africa. Several announcements have been made on this already, and come June 2024, another announcement is expected on the full assimilation of Distell Wine and Spirits Nigeria into Nigerian Breweries Plc.
The challenge of identity
How Nigerian Breweries would manage its identity given its new distilleries portfolio is something close watchers are already talking about. Would it hurt to retain its identity as Nigerian Breweries or would there be the need for an identity tweak? While some might dismiss it as unnecessary, with the excuse that nearly all the breweries also produce soft drinks and hasn’t hurt its identity so far, others suspect that the wine and whiskey portfolio will bring a different challenge that demands that its owners be seen and identified by clearly defined nomenclatures. You do not brew whiskey, for instance, and when you line up brands such as Amarula creme liqueur, Bains Whiskey, Cruz Wine, and Black Bottle Whiskey and say they were “distilled” by Nigerian Breweries, it leaves something sticky in the hypothalamic region of the central nervous system that may not drive towards effective demand.
Heineken had foreseen this challenge of perception, and in South Africa, has tweaked its name to Heineken beverages to reflect the diversified portfolio and even the more diverse markets. Therefore, I am not expecting Nigerian Breweries to retain its current name even when it is looking at a N2.18 trillion wine and whiskey market.
Whether the name change will borrow from the Heineken example that would swap the “breweries” in Nigerian Breweries for “Beverages” is something one cannot say this early. Options are available and they might include the adoption of Heineken Beverages as the new name or the shortening and rebranding of the company from Nigerian Breweries to either the initials of NB Plc or a Enbee Plc, much the same way that Ocean & Oil Limited (O and O) became Oando.
There may be some other possibilities, but what might not work is the adoption of Nigerian Beverages Plc as the new name in a clear miscopy of the way Heineken did theirs.
If in doubt, just close your eyes and reflect on the Nigerian Beverages Plc and tell yourself whether it reminds you of a company’s portfolio of brands or a country’s peculiar basket of beverages.
