Exploring capacity expansion for profitability in brewing industry

With a yearly revenue exceeding N200 billion, stakeholders in the beer industry seek innovative measures at improving supply of the product to a teeming population of consumers. For a market that has been identified as one of the frontiers to drive growth of the industry, players in the Nigerian brewing industry are exploring capacity expansion drive, among other strategies, to improve the current ranking of an estimated 11 litres beer consumption per capita (BCCP) when compared to other economies. Nigerian Breweries Plc recently explored the capacity expansion alternative at its Aba plant, Abia state. GORDI UDEAJAH writes.

DESPITE the sliding profile of beer consumption due to the global downturn, the size of Nigeria’s market still presents an alluring incentive to investots.

   Indeed, studies show that with the largest population in Africa, a growing middle class and a large number of drinking-age consumers, the brewing multinationals may be jockeying for positions in a market that shows plenty of room for expansion.

   The emergence of rapid consolidation in form of mergers and acquisitions by major global players, in a bid to enlarge market share, however, has unsettled the industry as major players continue to explore regional expansion, both organically and via acquisition.

  For instance, the 58 year-old Nigerian Breweries plant at Aba, Abia state, which commenced operations in July 1957 with an initial installed capacity of 500,000 hectoliters per annum has now been expanded to 2.4 million hectoliters from its previous capacity of 1.2 million hectoliters per annum.

   Obviously, it was due to its profitability, that the Nigerian Breweries Plc  (NB) decided to still expand its capacity to 2.4 million hectoliters. The expansion works commenced in 2012 and was completed in 2014 at the cost of N18 billion. 

   By this expansion, the Aba brewery has been transformed into a most modern highly efficient brewery ranking among the best in the Heineken group worldwide and of course the most modern brewery in Nigeria.

  The expanded Aba brewery, according to the company’s Managing Director, Nicolaas Vervelde, is of ultra- modern facilities that comprise  the most modern brew house capable of making twelve brews of 500 HL  casting volume per hour and  energy recovery system  capable of processing 230 cubic meters of water per hour. 

   He explained that the plant’s installed membrane beer filter is the latest technology in beer filtration in addition to its having the most modern water treatment plant that treats effluents from the brewery with a capacity to handle 3300 cubic meter effluent per day, with new utility plants and a most modern canning line with a production capacity of 57,000 cans per hour.

   According to Verlede, the new brewery that is powered by an 8 MVA internally generated power station that runs on gas, cleaner and  is more environmental friendly, and diesel engines as a fall back, is no doubt a showpiece in brewing technology stressing that this entire ultra-modern facility is managed and operated 100% by Nigerians.

   It could be recalled that the NB registered in Nigeria in 1946, brewed its first bottle of Star beer in 1949 in Lagos but later  saw the need to extend  operations to Aba, while presently having the biggest Sorghum Malting Plant in Africa and thus  bringing  together  the total  number of breweries owned by NB in Nigeria to eleven with two Malting Plants.

   “Perhaps, it was the success of Aba brewery that sharpened the company’s courage to push further culminating in today’s enviable spread that enabled it to serve diverse consumer needs across the country with well-loved brands”, he explained.

   “The expansion of the Aba brewery therefore was described as a celebration of the common heritage and age-long partnership between the company and the people of Aba and Abia state as a whole.

   “Also, the commissioning is, in a sense, an opportunity to showcase another example of NB long-standing and continuing commitment to “ winning with Nigeria with our investments, our footprint, our people and our socio-economic impact” said Vervelde at the commissioning.

   It was gathered that during the expansion works, inputs came from twelve countries. 

   President Goodluck Jonathan who was represented by the Minister of Industry, Trade and Investment, Olusegun  Aganga commended Aba and Abia state for effectively hosting the NB, while commending the company for staying on course since 1946 it took off in Nigeria pointing out that by continuing to expand  its operations and generating employment and creating wealth in the country, the NB has demonstrated its unshakable resolve to  Nigeria’s national development.

    According to him “the N18 billion brewery expansion is evidence that even after 70 years operation, NB still has so much to offer Nigerians. Projects like this show investors’ confidence in Nigeria and that this government is best prepared to take Nigeria into the future”.

   Elated by the expanded brewery, the  Abia State Governor, Theodore Orji attributed the thriving of businesses in the state especially in Aba to the conducive operational environment especially the all round security  which he asserted, is the greatest legacy he is bequeathing to the state after his eight years on May  29 2015 as governor.

   He described the expanded brewery as ‘a clear testimony of a perfect partnership between government and the private sector’ remarking that this project would not have been accomplished during the kidnapping and insecurity era, which he successfully fought.

   He advised those that assess performance to consider both tangible and intangible aspects stressing that it is the intangible ones like guaranteeing of security that propel the tangible ones.

  The governor further remarked that while many government breweries  failed and died, the NB continued to record growth and expansion and pledged to give the company the support it requires from government even as he expressed appreciation to the company for offering direct and indirect employment to indigenes of Abia and  for its various Corporate Social Responsibility activities in the state.

   Chairman of the Nigerian Breweries’ Board of Directors, Chief Kola Jamodu in his address said that over the years, the company has been very active in supporting Nigeria’s national development aspirations which is exemplified in its continuous identification and response to major challenges confronting the nation through corporate social investments especially in the areas of education, environment, water, youth empowerment, talent development and sports among others.

   According to him “our socio economic impact report shows that in 2013 alone, the value added by NB to the Nigerian Economy stood at N292 billion Value Added or 0.4 % of GDP. N98 billion or 0.1% of GDP out of this stood as direct support.

   “Our company supported 279,000 jobs directly and indirectly. Of the above indicated Value Added and employment supported by NB, more than 85,000 jobs can be directly attributed to our company’s production and local procurement activities”.

   He thanked President Jonathan for performing the formal commissioning of the expanded brewery and governor Orji “for his wholehearted support for this project apart from providing new access Onyeador and factory roads to the brewery and ensuring a safe and secure atmosphere for the project and  the required enabling  environment for business to thrive in Aba and Abia state in general”.

   Describing the day  as one to celebrate the common heritage and age-long  partnership between the NB and  people of Aba and Abia state , the NB Managing Director/Chief Executive Officer, Nicolaas Vervelde said the commissioning  was an opportunity to showcase another example of NB long-standing and continued commitment to winning with Nigeria with NB investments, our footprint, our people and our socio-economic impact.

   He said that this journey commenced in 1946 with the registration of the company and has continued today with a footprint of eleven Breweries and two Malting Plants strategically spread out across Nigeria adding that Aba brewery built in 1957, was the second after and outside Lagos.