Stiff competition and dominance of brewing business in Nigeria by the two major players, Guinness Plc and Nigeria Breweries Plc, have placed the world’s second largest brewer in a quandary in the local market.
According to a market analyst's report from Liberum Capital, the varied challenges impacting consumer spend dampened the hopes for a boost in the business of beer making in Africa’s largest market, resulting in unimpressive performance from market leaders and putting market contenders like SABMiller in very difficult situation.
“It has been declared that the company is still facing tough competition in Nigeria. This competition is held against the most established players like Guinness and Nigerian Breweries, majority of which is owned by the Heineken,” the report said.
A report on the brewing industry in sub-Saharan Africa (SSA) in 2013, from Renaissance Capital further added that the past 12 to 18 months have been characterised by soft volumes in most of the markets in SSA, with earning in the sector declining by 2 per cent.
The Liberum report however noted that SABMiller reported an increase in earnings in Latin America and Africa. Being the second biggest brewer in the world, it has been reported that this growth is expected to continue in the field of developing markets.
The London-based company said there seems to be an increase in earnings to about seven per cent before interest, taxes and amortisation (EBITA). This increase has been stated after seeing the latest figures revealed in the month of September.
The latest figures revealed that EBITA had gained a total of four per cent to about $3.27 billion. This has overcome the $3.2 billion median estimate earnings. The weakness of the currencies of South African rand and Australian dollar has been held responsible for suppressing the growth.
SABMiller said it was expected to have no change in the business conditions. This, it pointed out, would be responsible because of the increase in prices and the people increasing interest towards more profitable brands.
An analyst at Liberum, Pablo Zuanic said: "It is encouraging seeing the margin expansion and pricing trends in the company's key growth markets. Earnings trends should help support the stock."