Brewing industry choking over high cost of raw materials

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The Nigerian brewery industry is grappling with severe cost pressures as prices for local raw materials such as sorghum and wheat skyrocket.

In Q1 2024, leading brewers saw their local raw material expenses rise by 113.6% to N188.0 billion from N88.0 billion in Q1 2023. The ongoing economic challenges, including inflation and insecurity in agricultural regions, are exacerbating these pressures.

As a result, the top four breweries—Nigerian Breweries Plc, Guinness Nigeria Plc, International Breweries Plc, and Champion Breweries Plc—resorted to bank loans, accumulating N812.7 billion in Q1 2024, a 29% increase from the previous quarter.

Their finance costs soared by 191.2% to N125.5 billion in Q1 2024 from N43.1 billion in Q1 2023.

The industry’s cost of sales increased by 250.9% to N278.5 billion, and net finance costs jumped by 616.1% to N191.2 billion. These cost pressures led to a combined after-tax loss of N169.7 billion in Q1 2024, a dramatic 1034% increase from N14.9 billion in Q1 2023.

Foreign exchange losses also surged by 1342% to N272.9 billion in Q1 2024.

The rising inflation and economic hardships are forcing brewers to raise product prices multiple times a year, further straining consumer demand. Nigerian Breweries, for instance, plans to temporarily suspend operations in two of its nine breweries as part of a strategic recovery measure.

(Vanguard)

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