By Franklin Alli

Mr. Nicolaas Vervelde is the Managing Director/CEO, Nigerian Breweries Plc.   He spoke with VANGUARD about the company’s 70 years of operation in Nigeria, the challenges of investing in the brewery sector, among other salient issues.  At 70 what percentage of your raw materials are being sourced locally and even exported to other countries?

We maintained our contribution to the development of the agriculture value chain in Nigeria as parts of our focus on sustainable sourcing of raw materials.   For instance, in 2015, 47.4 per cent of our raw materials were sourced locally. Hopefully by 2018 we should be able to achieve a benchmark of 60 per cent and Heineken, our parent company has a commitment that by 2020  we should be able to attain 99 per cent local sourcing of raw materials.

•Nicolaas Vervelde

Every year, we improve on our local content inputs so we are making progress with our partners –International Fertilizer Development Centre, IFDC, and Psaltry International, a local processing company on value extraction from cassava. We are also making progress in the development of new hybrid Sorghum varieties with the potential of increasing yield for sorghum farmers as well as improving the quality of sorghum malt which is a raw material input in our operations.

I want to know specifically, which areas of the challenging operating environment that is affecting you? And what would you want government to do with a view to helping corporate entities like Nigerian Breweries remain competitive?

I am not sure I am in a position to give advice to the government on what to do to mitigate the tough operating business environment. Nevertheless,   we have to consider the effect of the global economy which  is playing out, especially the decline in oil prices, which was due to global recession,   worries about China   and oil supply countries like OPEC reducing prices with increased outputs.       All these have effects and we also know that Nigeria is to a very large extent, dependent on oil revenues and this is affecting the salaries  of civil servants in both the states and local level. Of course, if there is improved revenue, it will also help in relieving the forex situation.

It is now very clear that other brands of beer like Golden Guinea  is coming into the market in the third quarter of the year,  I want to know how ready you are to take the heat that will break in the aftermath of their entry into market.

We agree there is going to be increased competition and over the last few years we have been working on a competing portfolio and on a far more diverse group of consumers and their needs. Today we have portfolios with 20 brands all have segments. And having been operating in the market for 70 years, we have very strong position in the market to weather competitions and instead of down trading we will grow big in our offerings with the supports of Heineken, an international brand.

70 years is no mean feat, do you have plans to start growing some of the raw materials locally?   Second, what are the main challenges of breweries in Nigeria compared to the global market?

First of all, I can say that Nigeria Breweries has always been committed to Backward Integration. Our first backward integration started in the 80s during the Structural Adjustment Programmes, SAP. At that time forex were not available for much of what we buy, and then NB with the support of technology from Heineken started developing beers brewed with corn.

In 2006, due to investments made by NB, we have been able to invest in two varieties of Sorghums and now harvesting four tonnes per hectare from one tonnes per hectare.   Today we have created jobs for over 250,000 farmers through our investments in sorghums and cassava farming.   Our target is to make it commercial and we have signed a Memorandum of Understanding with the ministry of Agriculture to upscale it for two to three years and then make it commercially available.

We have been working on this for five years because the point is; backward integration only makes sense if it is commercially sustainable. If it becomes a subsidized system, the more the funds are there and the subsidy is accessed, the business is gone. Backward Integration is a long term commitments before you see the results. It demands long years of hard work.

What is the level of the consumption of beer in Nigeria compared to other countries, and what is NB doing to better the percentage of beer drinking in Nigeria?

Although, 23 percent of Nigeria’s population is middle class, yet per capita consumption of beer is low compared to markets across the globe.

In Nigeria with a population of over 170 million, per capita consumption of beer is 11 litres whereas in Brazil with 200 million population per capita consumption of beer is 70 litres; Russia 64 litres, Mexico 60 litres and South Africa it is 60 litres per person; Burundi 40 litres, Cameroun 40L and Sub-Saharan Africa 17liters. The last time Nigeria had high per capita consumption of beer was 1984, and it was 17 litres per person.

First of all, there are many ways companies like Nigerian Breweries can increase per capita consumption of beer. One of it is road to markets, by making sure that the brands is   always there, not only in the urban areas but in the rural areas which is not a small part given the huge landmark of Nigeria. The other one is try to address all the consumer needs including pricing. Over the last few years, we see that par capita consumption started going down because if you look at the statistics, the average income of workers decreased mainly due to inflation and devaluation of the Naira

How was the brewed products market in 2015?

The overall performance of the brewed products market mirrored the general performance of the economy. Indications are that the sector in Nigeria has been undergoing slow growth for four consecutive years. The sector grew by 1 per cent last year compared to 9-10 per cent recorded in the years before  2010. The slight growths recorded by operators in the sector were in the areas of products innovation and expansions of beer plants driven by acquisition. Among the players in the industry, Nigerian Breweries alone has 20 products category, 11 beer plants and two malt plants in Aba and Kaduna.

70 years in Nigeria – what have been your impacts on the economy and the people?

Government, host communities and shareholders feel our positive socio-economic impacts. For instance, in 2015, despite tough operating environment, the company paid N16 billion as tax to the Federal Government for the financial year 2015 and N38 billion to shareholders. Employment-wise, the company has  4,000 Nigerians on its payrolls across the country while 280,000 people have been indirectly employed by our transporters, distributors and other ancillary businesses.   We also spent over N130 million on corporate social responsibility projects across the country in 2015.