Brewers move to pass extra alcohol duty to consumers
Unable to bear the burden of excise duty on their businesses and another proposed upward review in alcohol tax, brewing firms are exploring modalities to pass on costs to consumers, having paid over N50 billion to the Federal Government in the last nine months.
The government had introduced a new excise regime on June 4, 2018, to address shortfalls in revenue, leading to an increase of more than N30 per litre of alcohol consumed in the country.
The effect of a fresh increase would take the tally to N35 per litre if the current administration begins implementation next month.
Based on the financial results obtained by The Guardian, Nigerian Breweries paid about N34 billion within the period (N25.8 billion in 2018 and N8.1 billion in Q1 2019); International Breweries (N1.53 billion as at September 2018); Champion Breweries (N311.3 million as at December 2018) while Guinness Nigeria Plc that controls the second largest market share did not reveal how much it remitted, though industry sources put its duty at slightly at par with Nigerian Breweries.
For new entrant, Anheuser-Busch InBev, $18 million was earmarked for excise duty last year. The firm noted in its Q1 2019 report that Nigeria continues to lead the way with revenue per hectolitre expansion and double-digit volume growth fuelled by the core portfolio and Budweiser in the premium segment.
With the impending review, many operators are deepening their local raw material sourcing and readjusting their marketing and sales strategies.
To improve operational efficiency, brewers in the last one year adopted aggressive cost-optimisation measures such as layoffs, while others are just simply delaying their expansion plans.
If government eventually makes good its intention, the decision would reverse some of the gains recorded by the food, beverage and tobacco sub-sector.
The leading brewers and distillers will be the biggest losers, as most of them had embarked on aggressive expansion plans in anticipation of improved demand.
This could also intensify unhealthy rivalry among the players, thus further eroding margins.
Though brewers had at the onset accepted to bear the extra increase, findings by The Guardian however showed that competition among peers and imported wines, shift in consumer preference for cheaper alternatives, operating environment and inflation were prompting operators to revisit their options and share the cost with consumers.