African beer market suffers as inflation and currency devaluation take their toll | Prestige News

Heineken’s beer sales in Nigeria and South Africa declined in the third quarter of 2023 due to high inflation and currency devaluation.

The company’s global beer volumes fell by 4.2% in the July-September period, with declines in all regions except the Americas.

Heineken reaffirmed its previous projection for 2023, expecting operating profit growth to range from zero to a mid-single-digit percentage increase.

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Heineken, the world’s second-largest brewer, has reported declining beer sales in Nigeria and South Africa in its third-quarter report, blaming high inflation and currency devaluation in these markets.

The company’s global beer volumes fell by 4.2% in the July-September period, with declines in all regions except the Americas. However, Heineken managed to boost its net revenue before one-time items by 4.5%, thanks to higher prices.

According to Nairametrics, Heineken’s net revenue in Nigeria grew by a low single digit, driven by pricing to partially mitigate significant inflation and currency devaluation. However, total volume declined in the twenties, behind the market.

“Consumers’ purchasing power continued to be under severe pressure due to inflation and the impact of structural economic reforms, affecting our premium portfolio disproportionately,” Heineken said in a statement.

In South Africa, Heineken’s beer volumes fell by double digits as the country continues to grapple with a severe cost-of-living crisis. The brewer reported that the decline in sales in Africa weighed on their overall regional results, as beer volume in Africa, the Middle East, and Eastern Europe fell in the third quarter.

Despite the challenges, Heineken reaffirmed its previous projection for 2023, expecting operating profit growth to range from zero to a mid-single-digit percentage increase.

African Beer Market Faces Headwinds

The African beer market faces several headwinds, including high inflation, currency devaluation, and rising energy costs. These factors make beer less affordable by putting pressure on consumers’ disposable incomes.

In the first half of this year, three major brewers in Nigeria posted losses as their borrowing costs soared due to rising interest rates and the devaluation of the naira.

Nigerian Breweries Plc, International Breweries Plc, and Guinness Nigeria Plc suffered a combined loss of N89.4 billion in H1 2023, compared to a profit of N34.7 billion in the same period last year, BusinessDay reported.

In addition, some African governments are implementing stricter regulations on alcohol sales and consumption, which will likely dampen beer demand.

BusinessDaily reported that the Kenyan government is expected to raise taxes on alcohol, cigarettes, betting, and sugar-based products to promote healthy living and curb addiction.

According to the report, the Treasury says the tax hike will be informed by quantitative analysis to determine the optimal tax rate for each alcoholic product.

“Government will increase excise duty on spirits and other higher alcohol content products to discourage their consumption, as they pose higher health risks,” the Treasury noted.

Despite these challenges, the long-term prospects for the African beer market remain positive, thanks to the continent’s young and growing population. This is expected to drive demand for beer in the coming years.

However, brewers must adapt to the changing market dynamics by focusing on more affordable brands, expanding into non-alcoholic beverages, and reducing their environmental impacts.

– Business Insider Africa