Nigeria’s beer market post-2024 after Tolaram becomes ‘Diageo’ in Guinness

IKEM OKUHU

Ikem Okuhu, a journalist, author, PR professional, brand strategist and teacher, is the CEO of BRANDish, publishers of BRANDish, Nigeria’s first nationally circulating Brands and Marketing magazine. He has a career that has traversed print media, oil & gas, banking and entrepreneurship. Ikem is the author of the book, “PITCH: Debunking Marketing’s Strongest Myths”, a dispassionate exposition of the dos and don’ts of successful engagement in the marketplace, especially the Nigerian marketplace. He can be reached on + 234 8095121535 (text only) or brandishauthority@gmail.com

Ahead of the 2025 cut-off date that would witness a change of ownership guard in the boardroom of Guinness Nigeria Plc, the market is bustling with frenzied speculation of what the nature of competition would look like without the presence of Diageo calling the shots.

In my last article on this deal, I raised the question of how Tolaram would be able to reconcile the alcohol-averse religion of its owners with the reality of Guinness Nigeria Plc and Diageo having alcohol as the blood that transports the oxygen of profitability through their bodies.

Although it has spent decades in Nigeria, the farm that produced the approximately $2 billion that Tolaram Group is said to be worth, has its roots in Pakistan and Indonesia, which makes a possible venture into the production of alcoholic beverages a tough call, even if the secularity of their cash cow provides the latitude. Those who know the brains behind the group speak of their strong connection to their roots, a factor that would nearly foreclose any investments in the alcoholic beverages segment.

In Pakistan from where the progenitor of the Tolaram Group migrated to Indonesia, for instance, alcohol is a tough thing to sell. With a 97 percent Muslim population, alcoholic drinks are permitted for the remaining three percent comprising mostly Christians, Hindus, and Sikhs. Even among the Christian population who are permitted to drink and trade on alcohol, stringent permits that limit a buyer to 100 bottles of beer or five bottles of liquor per month put a lot of checks on investment appetites.

In Indonesia, their adopted country, the government cannot be said to be alcohol-investment friendly. As recently as 2021, Reuters reported that the country’s president, Joko Widodo, reinstated a ban he had earlier lifted on foreign investment in the manufacturing of alcoholic drinks, weeks after agreeing to relax restrictions as part of a broader effort to attract investors.

When examined from this background, investment in the alcoholic beverages sector will ordinarily not be a strong attraction for a business such as Tolaram. Feedback from several people who read my earlier intervention on this acquisition had many people agreeing with what they assumed was my position. Many opined that nothing, including religion, prevents Tolaram from making beer and other alcoholic beverages insofar as there is money to be made.

Fabian Asadu, who is an engineer and businessman, submitted that big companies such as Tolaram know how to run rings around the centrifugal pull of religion in the pursuit of profits.

“Capitalism is a high religion of its own. Capitalists know how to handle religion and Tolaram is on top of the game,” Asadu said.

While his argument is compelling, the point must also be made about the nature of multinational investments. Businesses moving from one capital jurisdiction to another are also flag carriers, representing the values and ethos of the mother country. No matter how rivetingly huge the margins are, it would be nearly impossible to find an Emirati company investing in the alcoholic beverage industry in another country. Without pressure from the country of destination, an American business such as ExxonMobil cannot be expected to champion environmental issues in places such as Nigeria since that would have gone against the interest of their business. The same goes for a company with Pakistani and Indonesian roots. The influence of country-of-origin contributes significantly to the behaviours of businesses abroad, being as they are, ambassadors and potential sources of expression in the realm of global politics and influence peddling.

If not alcohol, then what?

I guess it took my initial article on this for most observers to reflect on the religious angle to the Tolaram-Diageo deal, and while most agree that a Tolaram-beer marriage is a tough call, questions are also being asked about what this Indonesian behemoth wants to do with the sprawling assets of Guinness spread across the country.

The truth is that the volatility of the beer market in Nigeria doesn’t look like the sort of still water that a Tolaram wants to test how deep it runs. Tolaram, as big as it has grown, measures every step it takes in business, and as huge and successful as its ventures in Nigeria have been, its ventures outside the country have not been influenced by its groundbreaking successes here. Take its success with Indomie Noodles for example. When Tolaram wanted to take its noodles business to Egypt and some other North African countries, what it did was leverage its partnership with Kellogg’s, the global cornflakes giants to package what it names Kellogg’s Instant Noodles, perhaps aware that those people up there might not be receptive to brands with a Nigerian stamp of origin.

This doesn’t speak of a business that leaps, Jackie Chan style, at every business venture, and the beer industry is one not as compelling as would attract the attention of a business known for its shrewdness, penny-pinching, and political correctness.

But perhaps because of the group’s perceived closeness to President Bola Tinubu under whose administration and influence, they became the operators of the Lekki Free Zone and Lekki Port, some people hold the view that investing in the alcoholic beverage sector might not pose such a moral challenge. But even if this is so, the Tolaram Group, if their footprints are tracked carefully, was putting their money along the path where the spring is perennial and you need rigs to reach the waters of profitability.

The Nigerian beer market doesn’t look like a road Tolaram would want to travel. If this is the case, what business case drove Tolaram to purchase 58 percent of Guinness Nigeria Plc?

The answers might be found in the five brewing plants of Guinness spread across Nigeria where it produces a little more than 8.5 million hectolitres of beer per annum. Many observers are suspecting that Tolaram is gearing towards converting the production lines to produce mostly malt and carbonated soft drinks. Even while many believe it might not immediately shut out Guinness Stout and the RTD brand, Origin Bitters, these might be pushed back by merely denying them sufficient shares of the marketing budget, forcing them to a slow but sure exit from the bar tables.

To fully leverage the spread of Guinness factories across the country and the experience of Tolaram in the marketing of consumer goods, a carbonated soft drink might be introduced into the market.

Coincidences happen every time, but some draw more attention than others.

Shortly before the announcement of the acquisition of Guinness Nigeria by Tolaram, reports from the US market filtered into my newsfeed suggesting that Dr. Pepper has risen to second place in the most popular soda drinks ranking, sharing the same spot with Pepsi.

Dr. Pepper was a spicy soft drink I remember as a child growing up in the late 70s. I still have a fond memory of it because my mother (now of blessed memory) sold it.

I am not going to be categorical here. On the contrary, I am only mentioning Dr. Pepper because the brand is on the upswing in the US and its name recognition might be a winner for a company that just acquired five brewing plants it just might not be making optimal use of.

Those who might gain

Guinness Nigeria has remained in business thanks to the crushing dominance of its stout brand in the market. Every attempt by competition to cut a decent slice of this market has always ended up less than second-best. Having been unsuccessful with its mainstream beer brand, Harp Lager, and its eventual scion, Guinness Lager, the company has remained largely a mono-product business even as it also struggled to stave off the crushing onslaught from the multitudinous assault from fringe players in the bitters segment that has ensured its Orijin brand remained well-known but not as massively patronised.

Therefore, waiting in the wings to benefit from any significant shift in the production and marketing of dark beer (and perhaps the bitters drink) in Nigeria are some brands that have, all through the years of dominance of Guinness’ dark beer brand, been left to fish on the fringes.

The fate of Legend, Trophy, Goldberg, and Turbo King

But with the market looking to experience some form of revival going by the outlook which is still projected to reach a cumulative average growth rate of 18 percent, adding about $6.7 billion by 2028, comes the possible opening of the stout segment.

Standing on the sidelines as a possible direct heir to the stout throne is Legend Extra Stout, a brand that has struggled in vain to earn a decent space in the sprawling palace from where Guinness has sat like an emperor for years. Legend has laboured to draw the attention of stout drinkers for years. Its best success was around the time it won the Gold Quality Award at the 51st Monde Awards in Athens, Greece, in 2012. The brand squeezed this award with endless activations which included a Real Deal consumer promotion that took consumers to Dubai for a shopping experience.

This promotion “upticked” the brand but things thawed soon after as Guinness remained the undisputed king.

Should Tolaram relax the hold on Guinness Stout, the heir apparent is most likely to be this brand. Its experience as a generational fighter and the pedigree of being a second choice will propel it to the numero uno. Stout drinkers in Nigeria are the most loyal of beer drinkers and are not expected to move back to what, in beer parlour parlance, is called the “green bottle.”. They most likely would gravitate “Legend-wards” if the religious orientation of Tolaram forces Guinness to lag.

The chance will be brightened by the weak positions of competition such as Trophy Stout and Goldberg Black, two brands that have struggled to even get their engines revving thanks to the challenges of line extension that has had consumers confused as to what the name of the brand represents – beer or stout.

Turbo King is the other stout brand that was in the market, but I am not sure Nigerian Breweries should carry it in the same basket as Legend Stout in the push to occupy the space that might be left by Guinness. The brand never really left the ground and the owners will do well not to slowly overburden the vehicle of growth with it standing beside the suspected heir apparent.

Action, Ace Roots, Alomo, and the vast field of bitters

Should Tolaram not tolerate alcohol, it would create an open field for the thousands of big players and pretenders in this market.

The bitters market has grown since Alomo Bitters, produced by Ghana’s Kasapreko entered Nigeria and infused the psychology of aphrodisiac into its brand. The quest for sex to linger longer by men and the flagging economy has fueled the patronage of bitters by otherwise beer drinkers, leading to the birthing of a legion of products with dizzying propositions to better the sexual performance of men.

As it is, Alomo, the hitherto market leader has lost ground, yielding the field to Action Bitters, Orijin, Odogwu Bitters, and a host of others whose reach is limited to local markets.

Nigerian Breweries recently relaunched its Ace Roots and with what is predicted to happen to Guinness’ Orijin, there might be a straight fight between Action Bitters, Ace Roots, and the rest.