The Managing Director, Guinness Nigeria Plc, Peter Ndegwa, in this interview, speaks on challenges confronting the beer industry, especially impact of the economic downturn, and how operators are responding to them.
By Princewill Ekwujuru
What would you consider as recent significant developments and possible challenges in the Nigerian beer market against the backdrop of economic recovery sentiments?
It has been a tough couple of years for Nigeria and the economy. At Guinness Nigeria, we have continued to focus on our strategic goals, especially in the area of expanding our portfolio. The value or accessible beer segment is in growth and we have started to play more strongly in that area with brands like Satzenbrau.
We have also expanded our portfolio by going into the production of locally manufactured spirits. About two years ago, we got distribution rights for international premium spirits from Diageo, our parent company, to distribute brands such as Johnnie Walker, Baileys, Smirnoff, among others. We have expanded our product range for our consumers. Last year, we launched our local mainstream spirits, locally produced international brands in our plants here in Nigeria. We are proud that we have been able to launch additional brands such as Smirnoff X1 Intense Chocolate Vodka, and Gordons Dry Gin with Moringa Citrus Blend, while we have also started producing brands like McDowell’s, which we got distribution rights from United Spirits Limited, which is owned by Diageo. Basically, we have expanded our range and we are going into segments that are growing which we were previously under-represented in.
How has the coming of other beer manufacturers affected the market shares of leading brands in the market?
Competition is good for any market. Guinness sees competition as an avenue to innovate and come up with what our consumers will prefer. When we talk about locally manufactured spirits, for example, we are saying you are getting world standard brands produced by a reputed house of quality, at affordable prices. Consumers can then make informed choices knowing that they are getting quality in an environment where counterfeiting and adulteration are big issues. You have a brand that you can trust, from a house that you can trust, at a quality level that you can trust.
What marketing strategy have you employed to sustain or even grow your market share in the face of stiff competition and economic difficulties?
Despite the challenges we have been seeing in the environment, we continue to grow our business. We have invested in our production capacity to produce spirits locally. We are not only saving the country some foreign currencies, but this is also allowing us to price these brands at the right price so that consumers can afford them. Our investment in spirit shows that we are committed to the future. The second is we have also increased our local sourcing. We used to source locally about 40 per cent, now it is about 75 per cent in materials like sorghum, glass, packaging materials like labels and crown corks. This reduces our cost of doing business.
Innovation continues to be a core part of our business and we have come to be known as the business that innovates. One aspect of that is our spirits innovation. However, we have also expanded our participation in some of the other categories including beer and soft drinks. We are the only total beverage business which has spirits, beer and soft drinks, giving us a bit more opportunity to service consumers, compared to if we were specialists in a particular area. It is about expanding our portfolio through innovation and also through building existing brands. It is about lowering our costs both through local sourcing and locally produced brands instead of importing. We also continue to drive our productivity agenda, which is all about reducing waste and being more effective. Finally, it is being close to the consumer in terms of the way we go to market, our products being better distributed.
How has the improvement in foreign exchange market impacted your sector?
Undoubtedly, there have been some level of stability both in terms of the expected range of price versus the volatility we have seen in the currency before. That is good because it improves predictability, ability to plan and even when costs are higher, it helps to know what the price is and that is key.
What can the government do to further support the manufacturing industry in Nigeria?
Power is one area where improvements would enable industries to do business more easily. Without reliable power the interruptions to production and to our retailers are significant. Then there is the issue of government policies and making sure that these are more consistent and predictable so we can plan for the future. The regulatory requirements need to be clarified, especially for importing and exporting goods, and there also needs for more cohesion between the ministries otherwise the layers of policy at the state and federal levels can be confusing for businesses and can prove challenging to comply with where these are not fully transparent.
Guinness Nigeria Plc is associated with numerous initiatives and campaigns targeted at responsible drinking. What factors underscore your interest in this area?
For us, it goes beyond just alcohol. The whole issue of alcohol in the society, and in particular, our response to the drinking agenda, is very important to us. While our commercial interest, investment and paying dividends and returns to shareholders are very important, success for us is more than the commercial aspect. Reputation, trust and respect are also very important. What consumers, customers and society think about us is a big part of what makes us successful. As leaders in the alcohol industry, we want to make sure that we also lead the agenda in raising awareness about responsible drinking with stakeholders, not just consumers but communities, suppliers and the public. Alcohol has been part of the society for a long time and had been used in celebration for many centuries but if misused, it can cause harm, which is the primary basis of all the messaging on the responsible drinking campaigns that we do.
The other context is at a global level. Diageo, our parent company, is a part of the global producers and marketers of alcohol. The CEOs of global companies that produce alcohol came together and made a commitment that across the countries they operate, they will ensure that they focus on efforts that reduce the harmful use of alcohol. So, as part of Diageo, the activities that we take part in locally are a part of that bigger commitment and global collective. Also in Nigeria, we are part of Beer Sectoral Group (BSG)for beer and for spirits, we are also part of the Spirits and Wine Association of Nigeria (SWAN) and we work with these groups to tackle the misuse of alcohol.
Some reports have it that issues around underage drinking may be more prevalent in developing countries. Do you have any programmes targeted at this group in Nigeria?
As part of the global CEOs commitment, one of the areas we focus on is underage drinking. We need to make sure that young people understand the dangers of alcohol misuse from when they are younger rather than when they have already started to engage in drinking. We have a programme called “Smashed” which has been running in Diageo for about nine years. We are going to launch the programme in Nigerian 2018.We will work with an agency to run this in schools, using drama to educate young people about the dangers of excessive drinking so that they understand what alcohol abuse means from the time they are young and understand the harmful impact this may have. We believe by doing this and doing it in an interesting way, in an environment where they are comfortable, they will respond to the message on the dangers of alcohol misuse.
The second thing we are doing is to look for advocates within youth communities. We recently signed a partnership with the NYSC and we use that platform to recruit responsible drinking ambassadors amongst the Corp members who are then tasked with spreading the message of responsible drinking in their communities and places of primary assignment. These ambassadors will be chosen and trained to influence their colleagues not to engage in alcohol in harmful ways.
Following global news, that Diageo has launched a new campaign called ‘Drink Positive’, what is this campaign all about?
The advantage of looking at alcohol in a positive way is to recognize that alcohol, if used in moderation is a part of a balanced lifestyle. Therefore, Drink Positive is asking employees to engage consumers in their jobs and personal lives about the positive role that alcohol can play in our lives. For example, I am talking to you as a Journalist; this is part of my role to create awareness about responsible drinking to the public through the media. As we go to the motor park for our rallies, that is another way of creating awareness on responsible drinking through various forums. We are saying that consumers should not abuse alcohol, they should drink positively. On one of our internal websites where employees collaborate and communicate, an employee said that every time he sees a behaviour that is not positive he will use the knowledge he has to tell the individual to stop misusing alcohol and convince the person to drink positive.
How have the initiatives of Guinness Nigeria rubbed off on the Beer Sectoral Group (BSG), of MAN, to which you belong?
As I said at the beginning, we are part of the Beer Sector Group which comprises of alcohol beverage manufacturers who have come together to drive responsibility of alcohol in society, and drive awareness around responsible drinking. We have a programme that we normally run during the ember months, which is Drive Alcohol Free. It is a way of encouraging drivers, whether commercial or private, not to drink and drive. Individual companies do various things on their own but we also come together to create awareness and communicate the dangers of drink driving. We support FRSC in their initiatives, and we will continue to do so. We also do research on areas we should be focusing on as far as alcohol in the society is concerned. One of the issues we research on is underage drinking. We are interested in knowing which parts of the country are more prone to issues around drink driving; which parts of the country would be prone to underage drinking; which types of drinks should we be watching out for in terms of underage drinking; We do these researches because there are lots of perceptions about what alcohol does and doesn’t do. There are lots of misconceptions about alcohol and we try to educate consumers around that. Some people may believe that alcohol gives you more power to drive. So we make sure we remove that kind of misconception in our communication.
In terms of these initiatives outlined, do you not think it will have a direct impact on your sales?
Our objective is to be the best performing business, but also to be the most trusted and respected. We would not have been in this country for 67 years if we had taken a short cut in the way we drive our sales. The reason why we want responsibility in the way that consumers engage with alcohol is because we know that this is more sustainable, so people can have a balanced lifestyle that incorporates alcohol in their ways of celebrating or enjoying themselves. Abusing alcohol is harmful and we do not want harm in our society. Part of our responsibility is to ensure that there is increased awareness of the dangers of alcohol misuse and how to reduce related harm. And where we have carried out a number of these initiatives we have recorded a reduction in the incidences of abuse. This means that a lot of the work we have done around the “don’t drink and drive” initiative has had impact. So the level of awareness is much higher. It is like safety, when people are more aware of the need to stay safe, they wear seatbelts. They know that when you are in the car and if we do not wear seat belt, you are likely to be injured if an accident occurs.
We believe that we will create a better society if we have a better understanding about alcohol use and its role in a balanced lifestyle. That is why it is not in conflict with our commercial interest. In fact, it supports our ability to be in business because we will be a more respected organization if we are seen to be responsible.
Just recently the World Bank recently said Nigeria has improved economically. You have been in the country for the past two years and mentioned a few challenges earlier on. What areas of the economy do you think have actually improved?
There is no doubt that a number of areas have improved. First will be the availability of liquidity on the foreign currency side especially for manufacturers who import raw materials and also spare parts for our plants. We have seen some level of stability both in terms of the expected range of price versus the volatility we have seen in the currency before. That is good because it improves predictability, ability to plan and even when costs are higher, it helps that we know what the price is, which is key.
The second is the availability of gas. About 12 months ago we had fluctuations on the availability of natural gas that we use to power our plants. When we had shortages we had to go into the use of diesel, which is more expensive, less environmentally-friendly and more erratic. Previously, we had incredible delays in getting work permits or travel permits. However, in these areas, we have seen some level of improvements. Areas I feel we could improve further are the congestion at the seaports. Our exports have doubled in the last 18 months and one of the reasons why we are doubling exports is to get foreign currency, which is very helpful for us. But we have seen some level of delays as a result of the congestions at the ports, both in terms of outbound and inbound of raw materials. As a result, two things happen to the business eventually, we incur demurrage and more transport costs and also when we don’t get the materials on time, it is challenging to ensure continuity of production. However, it is good to see that government wants to spend more money on infrastructure.