Brewers in Nigeria Struggle with Rising Costs Amid FX Pressures and Logistics Challenges
- Posted on December 05, 2024
- Editors Pick
- By Samiat
Key Highlights:
1. Surge in Cost of Sales Ratio Across Breweries
• Guinness Nigeria recorded the highest cost of sales ratio at 88.6%, up from 69.6% in 2023.
• International Breweries followed with 72.4%, up from 68.8% in 2023.
• Nigerian Breweries stood at 70.5%, rising from 62.02% last year.
• Champion Breweries had the lowest cost of sales ratio at 59.1%, a marginal increase from 58.9%.
2. Cumulative Industry Impact
• Combined revenue for the four brewers grew significantly to ₦1.19 trillion from ₦653.5 billion, reflecting increasing consumer demand.
• However, input costs surged to ₦869.4 billion from ₦421.9 billion, eating into profitability.
3. Profitability Challenges
• Guinness Nigeria reported a ₦12.2 billion loss after tax, reversing a profit of ₦2.59 billion in 2023.
• International Breweries saw its losses deepen to ₦112.8 billion from ₦28.6 billion.
• Nigerian Breweries’ after-tax losses grew to ₦149.5 billion, up from ₦57.2 billion.
• Champion Breweries remained profitable with ₦386.7 million after-tax profit, recovering from a ₦77.69 million loss last year.
4. Key Factors Driving Rising Costs
• Foreign Exchange (FX) Pressures: Devaluation of the naira has made imported raw materials more expensive.
• Logistics Bottlenecks: High transportation costs for moving goods from factories to markets further erode margins.
5. Implications for the Industry
• With cost of sales consuming 72.8% of total revenue, Nigerian brewers face significant hurdles in maintaining profitability.
• The industry’s reliance on imports makes it vulnerable to currency fluctuations and international supply chain disruptions.
Conclusion
Rising costs and persistent losses highlight the need for breweries to explore cost-cutting measures, increase local sourcing, and optimize logistics. Without these, sustained profitability may remain elusive.
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