A wines and spirits expert, Dr Victor Ikem has said the acquisition of Distell Wines and Spirits will not only diversify the portfolio of Nigerian Breweries’ but also help expand the company’s revenue base.
Dr. Ikem, in his comments on the acquisition, which the company said during its recent pre-AGM briefing, would be completed in May 2024, Nigerian Breweries will leverage its vast distribution network and experience in alcoholic beverage marketing to make a success of the acquisition.
It would be recalled that Heineken BV, the majority shareholder in Nigerian Breweries acquired a 60 percent stake in the South African distillery in November 2021, a development that paved the way for the planned formalisation of the takeover by the business in June 2024.
Distell Wines and Spirits, which produces popular alcoholic beverages like Amarula cream liqueur, Cruz wine, Bain’s whiskey, and other spirits, wines, and cider drinks was acquired for $2.56 billion. With the global annual total consumption put at 48 billion litres, Distell’s figure becomes even more significant and stands quite strong against big players like Diageo, Hennessy and others.
The company, which has a strong footprint in the global wine and spirits market, is a profitable company that in 2022, raked in a revenue of N2.695 trillion (R34.133 billion) and a gross profit of N717.6 billion (R9.083 billion).
Reacting to the acquisition, Dr. Ikem who is the founder and Director of Drinks Revolution Limited and author of the book, Nigeria Wine and Spirits Market: Structure and Regulations, said the fundamentals of Distell Wine and Spirits would combine with the distribution network of Nigerian Breweries to make a success of the acquisition.
“What Nigerian Breweries has going for it is the distribution network. In most of the places beer is consumed, and there are also fair level of wine and spirits consumption in those places. These places are what we call HORECALs, that is Hotels, Restaurants, Canteens, and Lounges. Because they are traditional market players, Nigerian Breweries already have footprints in those places and key channels, and it is basically to reactivate those channels and exploit them to distribute and instigate consumption,” he said.
He said Nigerian Breweries does not need to create a new supply chain but will need only to incentivise the existing channels to make its wine and whiskey brands top of mind.
“Because they have also been dealing traditionally with those channels, it will be easy for them to make deals by giving incentives and even do trade marketing within those channel networks. This gives them a big advantage, and more importantly, understanding that consumer preferences are shifting away from beer to spirit, makes it much easier now for them to close existing demand gaps,” Dr Ugo stated.
On the challenge of premiumisation in the wine and spirits sector, he said Nigerian Breweries w survive even without playing in the premium segment because the sector is driven by volume rather than premium positioning.
“We are not sure at the moment if there are no premium brands in the assortment of drinks Distell has in its portfolio. I am aware of one or two premium wines and I am sure they also have some premium whiskey. But be that as it may, if you examine the market critically, the bulk of the sales are in the value-for-money segment. The premium market is just about 11 to 15 percent at the best. The medium level is another, on its part, is 15 to 20 percent, but the volume, which is over 60 percent is at the value-for-money segment and that is where those who extract the greatest value in the sector play,” the wine and spirits expert who has appeared as a judge in international wine and spirits festivals, stated.
He emphasised that the deep roots Nigerian Breweries have in distribution gives it an edge because they have the opportunity to be everywhere, in parks, in all jollity bars, and in neighborhood stores and kiosks, a situation that confers on them greater advantage than the existing brands in the market.