Last Thursday, the Managing Director of Guinness Nigeria PLC had a chat with Financial Vanguard in his office. He spoke about the half year result of the company, strategies being put in place to reposition Guinness for better performance and others. Excerpts:
I am fairly well known to most people around Nigeria. For those who may not know me, I am Seni Adetu, the Chief Executive of Guinness Nigeria.
I have resumed now for about 18 months and in that period, we’ve made big strides for Guinness Nigeria Plc. My vision for the company clearly, is to build a company that is seen and respected as best performing; most trusted and respected company in Nigeria, which is my ultimate goal.
At this point in time, what we are doing is to set the foundation, the platform to enable that happen. And I have always said to people that holistic delivery of two sorts of three pillars enables you claim you are the best in the country.
Guinness has been around for a while. Are you saying you are laying a new foundation or you are reengineering for a different purpose?
Just like I said, it is more like building a platform for the future. Guinness has been in this country for over 50 years and has been incredibly successful in that period and so what we are doing now is to build the platform to accelerate the trajectory of success of Guinness Nigeria.
The market environment is changing, the competitive environment is changing; our focus now is to strengthen the fundamentals of Guinness Nigeria in a way that we are able to leverage the opportunities that are showing up in the market and address some of the challenges that we are beginning to see in the market.
What are these strategies?
Our strategies are very clear, first is that we have to strengthen our core brands like Guinness and Harp. We want to make sure that we create and sustain an advantaged growth consumer, in other words, in terms of distribution within just being able to create an intensity of distribution that enables what we call an arm’s reach availability.
Every time a consumer goes out to look for any of our brands, we don’t want him having to stress himself to reach our brands. We want to leverage our expertise in relation to building scale, so we’ve introduced new brands in the market and that will really excite the consumers.
We’ve got the strategy around creating sort of a bigger, stronger efficiency in our core structure, to be able to invest in the business is exactly one of the things that we are doing.
And finally, at the end of the day, the most important thing I say to people is that whatever strategy you come up with, you’ve got to have the talent to support it, so guaranteeing our strategies and our plans with the right talent is very big for me. In a nutshell, it is really about brands, innovation, consumers, cost efficiency and talent.
From what you have said, you are refocusing and reengineering; is that what informed the result you’ve just released?
The result that we’ve just released is a function of several things, first, is that we’ve got a very rich portfolio of brands that are adored by consumers in the different categories. When you think about brands like Guinness, Harp and Malta Guinness, they are the brands that are really adored by the Nigerian consumers.
However, what we’ve seen in the last six months of the result that we are announcing, is a softness in demand, primarily, partly on account of the dip in the discretionary income of consumers but also as a result of the fact that perhaps we have been aggressive or bullish with our pricing, that’s just one part of it.
Secondly is the fact that we are seeing a down trading in the market by way of consumers going for more affordable, cheaper brands in the market today.
Our brand as Guinness Nigeria typically plays in the premium and mainstream and so over the years, we haven’t built scale in the value segment which is the low end where so many others are and therefore we are seeing an opportunity there.
So our inability to play strongly in that segment obviously affected our performance. The last thing that really impacted performance in the result that we’ve just announced has been the challenges that we still have with our distribution because where our brands exist, where they get to, people love us; people drink our brands. Like I said before, our brand is the most adored.
You only drink a brand that you see easily and therefore, if you flip over those challenges that I have just talked about, then you get the reasons why we are confident that the business will turn around because the aggression around pricing and the fact that we were price disadvantaged versus our competitors in the market place, have been addressed. We did a price rollback in October; we went up in October and we rolled back the price of Harp and Malta Guinness in January.
The price disadvantage that we had against competition has been addressed. The other point is really around the value brands that I talked about before.
Now, we have a brand called Dubic which is intended to explore the opportunity within that segment where people are buying their beer for N150.00, so our Dubic should really serve that purpose for us.
There is real intense work going on to help us address small distribution challenges, especially when it comes to things like outlet coverage; how we cover the outlets, the off trade account, where typically you see them in the open markets, that is an area we haven’t played effectively as we would have liked to, things like rural distribution and so on.
That is why we believe that if we address all those opportunities, the head room for growth for Guinness Nigeria is very solid and that is what keeps us motivated.
Hope I am not mistaking you for Nigeria Breweries; you have an outsourcing distribution network before, is it?
The outsourcing in the sense that we used third party before, and that is what we are still using.
You are having problems with it?
No! I am not suggesting that.
What are these third party distribution challenges?
The challenges are in terms of the reach and the strength so you could argue that though we have third party operators who we call distributors, we need more distributors especially for rural areas. So if you are going into the hinterlands, the level of availability of our brands is sort of lower than what you get in urban areas like Lagos, Abuja and Port Harcourt, and that is the area we are working on.
It is not all; I say this with emphasis, not to suggest that we are not happy with the distributors that we have, we are just saying that perhaps, there is an opportunity for us to move further into rural areas as some of our competitors do.
Remember that some of our competitors actually acquired some businesses which were in the rural areas whereas we have taken the consolidation model approach where we have big breweries that we invest in, there is no right or wrong; they both have their pros and cons but the important thing is that whether it is one brewery or 10 breweries, you want to make sure that when a consumer calls at an outlet to ask for your brand, the brand is indeed available.
That is the project that we are working on, so this is an opportunity, I should say and not a challenge in the way that you see it.
Does this challenge in distribution have anything to do with the security situation in the North-East?
Certainly, if you look at the North, there are parts where you can go freely requesting for an alcohol drinks company, and there are parts that today, for security or other reasons, you have to probably limit your movement and your penetration. Our job as businessmen is to find ways to work around these challenges and create opportunities for ourselves in the sense that if you don’t shape your destiny, circumstances are going to shape it for you. This is really about us shaping our destiny and the future of Guinness Nigeria.
What is the acceptance level of your Dubic and Alvaro in the market?
One our strengths and the biggest basis of joy for us is in the quality of our innovation. Some of the new brands that we have put in the market in the last 18 to 24 months have done very well, brands like Sinapp, Dubic, and Alvaro. Alvaro to a lesser extent, because it is brand new in the market, but Dubic is doing very well, it is the brand that will enable us to really play well in the value segment that I mentioned before, the N150 price point. What we are doing now is really wrapping up distribution for the brand with a view to ensuring that we are competitive. For Alvaro, it is our first entry into soft drinks; keep malt in a separate category. We have good reasons to believe that, that brand is going to be a big winner in Nigeria.
Let’s go back to the performance issue, what are you expecting as reaction of shareholders as well as directors of the company?
The good news is that the board of directors of the company understands that we are really building a platform for long-term success of the company. We have the absolute confidence of the board of directors and the shareholders in what we are trying to create for the company. We believe that a year from now, the success story will be absolutely amazing on account of the big changes that we are making now and structurally, the things around pricing strategy and portfolio strategy and root consumer strategy. We are very clear of what we want to do, we lay on top of that our innovation strategy which is broken, and then you begin to see the reasons why we have confidence. The board is very familiar with this, they are confident and are really backing the management and local team.
What impact does this have on your shares? Nigerians are interested in value, once prices are going up, everybody is happy and when it is beginning to show downturn, people get scared; are you not afraid that investors will begin to dump your shares?
Not at all! The business that we run is not a one day or one month business. Secondly, it is a business that has a rich heritage of strong performances over the years.
Our brands are still the most adored. When you talk about what marketers call brand equity, our brands are still the strongest in terms of brand equity. These are the reasons to believe that for the long-term, it has to be very successful.
A dip of a quarter or half will not make people who have signed up a long-term partnership with us to be worried about their shares. If your investment is long- term, we are saying that we have confidence in the shareholders; they are in the game for the long run and they are absolutely staying the course.
Looking at the
result, it seems to suggest that you are losing market share to your competitors, especially like you said the lower end priced products…
It is so difficult to say who is gaining share or who losing share.
(Cuts in) Why?
The sources of data that we have are not completely foolproof and what you see companies reporting, certainly, is in the net sales revenue and you cannot deduce from net sales revenue who is gaining or losing share.
What we know is that we have perhaps the most balanced portfolio in the market and it is the richness of our portfolio that will enable us to win in the long-term.
In a nutshell, I as a leader of the team, I am confident that we are clear on the issues that we face in the quarter, that is the period that we reported.
We are very clear on the strategies that will enable us turn that around so that we see improvements going forward and we are confident in the team that we have.
They have got the capability to help us in winning this market. So all that we are doing now is reengineering some parts of our business to enable us to win in the future and that is the game that we are playing.
I was reading an analysis done by FBN Capital, and it was trying to suggest that the unit volume of stout which is your flagship, has declined, the unit volume of harp has also declined, how and what is your reaction to this?
I have no idea what they have seen, because we typically do not report on unit basis.
(Cuts in) From what they wrote, they said it was a conference call discussion.
We have an investors’ call and I am saying to you that I lead an investors’ call and we never talk of unit volumes. Now, it is not impossible for somebody to look at the net sales and call it a unit volume or assume that the net sales are down marginally.
What we do know is that these are brands that have been in the market for over 50 years. The performance of a quarter or a half in six months, does not change the fact that these brands are the most loved brands in Nigeria.
We are very clear that the aggressive pricing that we applied on the brands in October, slowed down the performance and that is why we are confident that having got the prices right, we are better placed to grow the brands.
We all know that in an economy of our type, pricing strategy becomes critical and if your price is high or unreasonably high, especially compared to competition, it is no rocket science that there will be impact on volume and that is why I am saying with emphasis that we have reviewed our pricing strategy, we have got it right and we expect to see changes in our brands.
As a Nigerian managing an outfit like Guinness when you meet your colleagues, how do you feel and what do you tell them?
First, I feel privileged to lead a company that is this big and not just that it is big but one of the biggest in Nigeria and one of the biggest globally. But I will like to suggest that it is a job that I have been long prepared for.
This is my fourth managing director role, in that regard, I have not gotten to the seat by accident, it is something I have been prepared for. Sometime in 2012, I was actually voted for by Forbes as the CEO of the year in East Africa and the last job that I did in East Africa was actually as big as Guinness Nigeria.
I feel we’ve got the right leadership and I have got the right team without a doubt. We have really positioned this business to win the mark up term, I just want you to watch the space.
What impact does power supply has on your operation as of today?
The insurgence of power is one that we have all talked about consistently and the reality of it is that in spite of the privatization that happened recently, we have not seen a significant improvement in the power supply.
With the result of the likes of ourselves operating on self supplied gas infrastructure, gas piped all the way to source.
The truth of the matter is that we all need power to come back, we need it for the manufacturing companies, we need it for the small and medium scale organizations, we need it for the homes, where consumption really take place, we need it for the bars. Is such a critical case of infrastructure in the value chain of every manufacturing company and also the beverage industry.