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Diageo’s Orijin Herbs help Guinness maker beat Nigerian woes

15 May 2015   |   5:19 am
AT the noisy Lascofis bar in the Nigerian commercial hub of Lagos, Elvis Nnanna sips from a bottle of Orijin and dreams of his home village about 600 kilometers (373 miles) to the South East.
Diageo's Orijin Herbs

Diageo’s Orijin Herbs

AT the noisy Lascofis bar in the Nigerian commercial hub of Lagos, Elvis Nnanna sips from a bottle of Orijin and dreams of his home village about 600 kilometers (373 miles) to the South East.

“It’s just like I am taking my local tea,” Nnanna, a 35-year-old photographer from Abia State, said alongside his friend, Agnes Okoli, who is also drinking a bottle of the fruity, herbal, six per cent-alcoholic drink. “When I go home, there are certain roots my parents pour in their gin before they can drink it. I always shared that with them.”

Orijin is made by Diageo Plc, the world’s biggest distiller, and is seen by the London-based company as a faster-growing addition in Nigeria to its flagship Guinness Stout. Since its introduction in Africa’s biggest economy in 2013, Orijin has more than 50 per cent of the market for non-beer bottled drinks with a similar alcohol strength, according to data tracker, Nielsen Nigeria. Competitors, including Heineken NV, have raced to create similar beverages.

“Orijin has been hugely successful for us in Nigeria,” Chris Stagg, Diageo’s General Manager for Innovation, said by phone from London on May 1, declining to give sales figures as it isn’t company policy. “That’s caused us to look aggressively at how we bring this particular brand to other consumers in Africa.” The drink is now also being sold in Ghana and Kenya, he said.

Economic Slowdown
A 40 per cent slump in oil prices since June is expected to curb economic growth in Nigeria to 4.8 per cent this year from 6.3 per cent in 2014, the International Monetary Fund (IMF) said on April 28. That’s had an impact on disposable incomes in Africa’s largest crude producer, with drinkers switching from Guinness to cheaper brands of beer and lager, Diageo’s Lagos-based unit, Guinness Nigeria Plc, said last year.

Guinness Nigeria’s net income declined to N5.2 billion ($26.4 million) in the nine months through March, compared with N5.9 billion in the same period in 2014, the company said on April 24. The shares gained 3.2 per cent to N160 as of 1.08 p.m. in Lagos, paring the year’s decline to 4.9 per cent. That compares with a 0.9 per cent fall on the Nigerian Stock Exchange’s All Share Index.

Nigerian Investment
About 44 per cent of Nigeria’s population of 177 million are under 15, compared with 28 per cent in South Africa, the continent’s second-biggest economy, according to U.S. Census Bureau data. That presents an investment opportunity for consumer-focused companies such as Diageo, South African wireless carrier MTN Group Ltd. and U.S. retailer Wal-Mart Stores Inc.

“With Nigerian consumers being surrounded by such rapid change in a global culture, it’s really important to be modern and progressive and stay connected with a Nigerian identity,” Stagg said.

Orijin is a “runaway success,” Diageo’s Chief Executive Officer Ivan Menezes said in a January interview. Demand for Orijin Bitters, a sister product with 30 per cent alcohol content, exceeded supply two months after it was introduced in Nigeria, the company said. Yet the brand is one of the few success stories right now at Diageo, which reported an unexpected drop in third-quarter sales as every one of the company’s geographic units missed analysts’ estimates.

Government’s anti-corruption measures have curbed demand for scotch and Baijiu liquor in China, where expensive drinks and brands have been used for bribes, at a time when the company is also battling weakness in demand across Europe and North America.

Kenyan Beer
Diageo’s Kenya unit, East African Breweries Ltd., introduced Orijin in March in the expectation its Nigerian success story would be replicated in East Africa’s biggest economy – where a new excise tax has hampered sales of its low-cost Senator lager. EABL, more than 50 per cent owned by Diageo, is seeing faster sales growth in spirits such as Johnnie Walker whisky and Smirnoff vodka, the company said in February.

In Nigeria, Diageo’s competitors in the beer market are introducing their own herbal drinks to tap into Orijin’s popularity. Nigerian Breweries Plc, the local unit of Amsterdam-based Heineken, started selling ACE Passion, an apple-flavoured bottled beverage, in late 2014. ACE Roots, an herbal variant, followed earlier this year. They are the company’s first offerings to be categorized as ready-to-drink, or non-beer beverages that don’t need to be served with a mixer.

Orijin Inroads
“Diageo, with its Orijin, has made big inroads” in Nigeria, Heineken’s former Chief Financial Officer Rene Hooft Graafland told reporters on a conference call on April 22. “The overall beer market is down around five per cent, six per cent. But including the ready-to-drinks, the decline is much less.”

Initial sales of ACE have helped Nigerian Breweries offset the downturn in consumer spending, according to Managing Director Nicolaas Vervelde.

Meanwhile in Lascofis, Nnanna is planning to drink one last bottle of Orijin before he heads home for the night.

“I don’t know the kind of root or herbs they put in brewing Orijin” but it doesn’t lead to a hangover, he said. “The point is that as I drink, I like the taste and when I leave here, my body is fit.”

•Culled from Yahoo News