High cost of input killing local production, says NB

THE Managing Director of Nigeria Breweries Plc, Hans Essaadi, said the fact that the naira has shown some appreciation against the dollar in recent weeks has had little or no impact on input cost.

Reacting to questions on the rising prices of commodities at a media briefing in Lagos, Essaadi said that instead of input costs going down, they have risen significantly, forcing them to raise the price of their products. He said they do not wish to raise prices as they are in a competitive market and cannot out- price themselves out of the market, but the cost of production keeps escalating daily.

He said the greatest driver of rising costs is the skyrocketing inflation, especially food inflation and hopes that if this is addressed, it would help in bringing down the cost of other goods as well. He said price reversal in a volatile market such as this is almost impossible as production costs remain unstable and on the high side.

Adding that the market has shrunk 20 per cent below what it was in 2022, he outlined several macroeconomic issues that will affect the company’s performance this year.

These, he said, include high inflation, naira devaluation, the ‘ japa syndrome’, insecurity and pressure on disposable income.

Outlining the economic challenges of 2023, he said they include Naira scarcity, removal of fuel subsidies, foreign exchange crisis, food inflation and a triple increase in beer excise rates among others. He said that these factors significantly affected consumer disposable income due to increased input costs from the removal of fuel subsidies and the FX situation.

He noted that the company’s longterm outlook remained positive with Nigeria’s young population and its position as the largest economy in Africa to spur growth and improved performance going forward.

“The outlook for market fundamentals remains positive with positive longterm fundamentals such as rising and young population, urbanisation, and the largest economy in Africa. However, short- term volatility to manage includes devaluation and high inflation, insecurity, pressure on disposable consumer spending and the ‘ japa’ problem,” he said.

Speaking on their 2024 recipe for success, he said it is hinged on their strong business recovery plan which includes continued strong cost management and further optimisation of operational footprint; leveraging their strong portfolio, exploring innovations and delighting customers with new portfolios while prioritising employees, communities and their stakeholders.

It would be recalled that the national brewer recorded a net loss of N106 billion from a profit of N13 billion recorded in the previous year, caused by Naira scarcity, high inflation, FX crisis, currency devaluation and eroded disposable income of consumers.

Recently, the company announced plans to suspend operations in two out of its nine plants as part of measures to deal with the harsh operating environment in Nigeria. The affected plants are Awo- Omamma Brewery in Imo state and Kakuri Brewery in Kaduna state.