Nigeria: Heineken to lift local raw material sourcing to 60%

In order to mitigate foreign exchange challenges, Nigerian Breweries (NB), a subsidiary of Heineken, has announced to intensify local raw material sourcing. The company intends to increase the level of locally sourced raw material like sorghum or cassava to be used in their own malt houses and in the brewing process from currently about 50%to 60% before 2020.

Nigeria, similar to Venezuela, is in its worst economic slump in 25 years because of low oil prices, which account for more than 90 per cent of foreign revenue. The lack of foreign exchange restricts manufacturing companies from importing goods which have in turn to increase prices, reduce production and lay off workers. Therefore substituting imported raw materials like barley malt is of major importance and helps improving business results.

NB operates two malt houses in Aba and Kaduna, in which locally grown sorghum is malted. This malt is used in different concentrations for all its varieties of beer.

While presenting the company’s results of the first quarter 2017, Nicolaas (Nico) Vervelde, managing director of Nigerian Breweries, said the companies was making progress in the deployment of new hybrid sorghum varieties with higher yields as well as on value extraction from cassava.

He said, revenue grew by 18 per cent due to last year’s  increases in sales prices, implemented to mitigate the effects of higher cost of goods sold, which increased by 25 per cent as a result of higher input cost. Results from operating activities and profit after tax grew accordingly by 7% and 9% respectively.

Vervelde, was recently appointed new managing director (MD) of Heineken’s Asia Pacific Region effective August 1, 2017. His former position as MD Nigerin Breweries will be filled with Johan Antonie Doyer, who will start in his new role half a month earlier. Mr. Doyer retired from Heineken as the managing director of Heineken Ethiopia in July 2015 and was appointed last week as interim managing director of the company pending the appointment of a substantive managing director/CEO.

NB was founded in 1946 as a joint venture between Heineken and the United Africa Company (Unilever at the time). Today, the company is by far the largest player in the market and operates 11 breweries across the country  (Lagos [1946], Aba [1957], Kaduna [1963], Ibadan [1982], Enugu [1993, closed in 2004], Ama [2003],  Ota and Kaduna [acquired from Sona Systems in 2011], Onitsha [acquired from Life Breweries in 2011], Ijebu-Ode, Awo-Omamma and Makurd [through merger with Consolidated Breweries in 2014]). Main brand in a portfolio of about 20 brands is Star Lager, which was launched in June 1949.

Per capita consumption of beer in Nigeria is low compared to other developing beer markets across the globe. A population of over 170 million is consuming on average only 11 litres per capita and year. This leaves a lot of potential for further market growth.

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