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Brewers in Nigeria Struggle with Rising Costs Amid FX Pressures and Logistics Challenges

By Samiat Dec, 05, 2024 Editors Pick

Brewers in Nigeria Struggle with Rising Costs Amid FX Pressures and Logistics Challenges

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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