KINGSLEY OKOH in this report, looks at the Nigerian brewery industry in the second quarter amidst impact of the coronavirus (COVID-19) pandemic on consumption of drinks by consumers in the country.
The Nigerian brewery industry is experiencing a sharp decline in sales of beer due to the lockdown order caused by the coronavirus (COVID-19) pandemic. Indeed, the demand for beer has been relatively low due to the pervasive impact of COVID-19 on the sales margin. The months of lockdown have hiked logistics cost, reduction of output, revenue and profits.
And with these attendant forces, they can no longer recoup on investment. As low demand hits brewers in Nigeria, nightclubs, hotels and bars have been forced to halt their operations in a move to cushion the effects of the pandemic and this has largely affected promotional sales, sales performances, marketing strategy and returns of investment of brewery brands. checks showed that the brewery industry is also experiencing shortage in supply of essential raw materials because of the interstate lockdown, thereby disrupting production and sales.
The distribution chain of breweries across segments seems to have been disconnected thereby bringing production to a low level and forcing brewers to run skeletal operations. Although the brewery sector never envisaged a lockdown that would affect sales, distribution and logistical supply of raw materials across the states, its survival strategy has always depended on patronage from the hospitality industry, nightclubs, bars and social events. Despite the partial ease of the lockdown of the economy, bars and clubs have not been permitted to reopen by the federal government.
Government envisaged that a full reopening of economic activities would abort the successes achieved so far in containing the spread of the pandemic. Speaking with Sunday LEADERSHIP Sunday, the acting director-general of the Manufacturers Association of Nigeria (MAN), Mr. Ambrose Oruche, stated that breweries were going through tough and challenging times, and most of their warehouses were loaded with goods they could not sell.
He explained that vendors that were dependent on the food and beverage companies had also been impacted by the poor state of businesses in the country. Oruche said, “Breweries have really gone through a hard time at the second quarter of the year because most of their warehouses were stockpiled with goods they could not sell and they have a workforce they will pay and they also integrate backwards to the agricultural sector where they are sponsoring farmers in sorghum production.
“Most of their consumers come from the bars, restaurants, hotels and hospitality companies. Now the hospitality businesses are shut down and the bars have not been allowed to reopen,” he said. Continuing, Oruche projected that under the present circumstance, it would be difficult to keep employment for too long, adding that some of the breweries have 4,000 direct employees. “In terms of distribution and retail shops, if sales continue to drop, there would be massive downsising of workers,” he said.
He lamented that the manufacturing outlook in the industry especially in the second and third quarter of 2020, might be worrisome if the situation persists since manufacturers can’t import raw materials because the foreign exchange (Forex) is unavailable to import and farmers that produce sorghum for breweries are not based in Lagos. “To bring in the farm produce from the hinterlands to the plants in Lagos is another challenge. Inter-state lockdown in states is preventing the movement and distribution of goods across states. “Passengers and distributors can’t move into states with their goods without having to settle the security operatives at the checkpoint and this has caused a downward spiral in the sales of goods,” he explained.
Also, the deputy general secretary, National Union of Food, Beverage and Tobacco Employees, Mike Olanrewaju, remarked that the effects of the lockdown was so devastating as virtually most of the companies could not access raw materials and the cost of production have increased due to non-availability of forex. He said the possibility of getting raw materials has dropped. Olanrewaju further noted that because of the interstate lockdown and social distancing rules, companies with about 20 lines of production cannot run more than seven lines, “meaning that a lot of workers were casualised and some were forced to stay at home.” He said, “
Alcoholic and soft drinks producers are affected because there is no massive celebration in the country. People can only do take-away at restaurants and many are forced to stay at home. “The irony is that most of these products have short expiry dates because they are consumables and some cannot last more than six months in the factories.
The government should give tax waivers to affected companies until they stabilise and are able to return to normal production,” he said. Speaking to LEADERSHIP Sunday, one of the distributors in Lagos, Mr. Segun Agunbiade, said demand was not strong at this point and sales had dropped. According to him, the brewers had no inventory to load on the distributors.
He noted that a few of the distributors were not at the sales point, they were not at the warehouses, and they were not at the stores because they don’t want to be harassed by the security operatives. “There’s no strong incentives giving to the distributors on a daily basis, the brewers themselves cannot supply because the security agencies have clamped down on some of them that have tried to supply and that is what prompted some of the brewers to reach out to the authorities to get clarification on what exactly they are permitted to produce as essential supplies,” he noted.
He said the potential impact of COVID-19 on the breweries has a far reaching effect on them as a result of the curfew and lockdown in Lagos and Ogun states in particular, and other states in general. Agunbiade stated that because of the shut down on the economy, brewers were unable to distribute their products across states. He added that the interstate lockdown of many weeks affected the distribution of products from Shagamu to other states across the country which resulted in sluggish demand.
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