Guinness Nigeria’s Decision To Halt Sale Of Premium Spirits: Could There Be More To It?
Guinness Nigeria Plc, a subsidiary of Diageo Plc, recently announced its decision to cease the importation and sale of certain Diageo international premium spirits like Johnnie Walker, Baileys, Singleton, and others.
Guinness Nigeria, in its notification, reassured stakeholders that it will continue to manufacture and distribute its full portfolio of non-alcoholic drinks, beer, and locally produced spirits, including Orijin, Captain Morgan Gold, Gordon’s Moringa, and Smirnoff X1 Choco, while fully utilizing its existing assets.
However, the decision to withdraw from the premium spirits market raises questions about the company’s future direction. While Guinness Nigeria maintains that this decision is part of its long-term strategy, Industry insiders suggest that this explanation may only scratch the surface of the real motives behind the move, raising further concerns about the broader implications of this move for the company’s product portfolio and market positioning.
One of the insiders who requested anonymity offers a different perspective. According to this insider, the primary driving force behind Guinness Nigeria’s decision lies in the ongoing exchange rate challenges and the devaluation of the Nigerian Naira. These factors are reportedly making it increasingly difficult to sustain the sales and distribution of premium spirits. The insider asserts that this predicament is not unique to Guinness Nigeria, as other spirits brands are grappling with similar difficulties.
“The claim by Guinness Nigeria that it is establishing a separate entity to oversee the sale and distribution of premium spirit brands appears to be a narrative it has skillfully designed for public consumption under the guise of management information. Let’s be clear, Guinness Nigeria is a very big player in this economy and it has contributed in no small way to the development of this segment.
“To be fair to them and other players in this market, it has not been easy doing business in Nigeria. Why will some manufacturers relocate to other West African countries, leaving their biggest market? The cost of production for them over there is relatively cheaper! The stark reality is that challenges from exchange rate fluctuations and the devaluation of the Naira are rendering the continued sales and distribution of premium products increasingly unsustainable, and I don’t blame them.”
Another insider who also pleaded anonymity added, “What is happening is not uniquely exclusive to Guinness Nigeria; indeed, it is a shared conundrum within the entire spirits industry. You will agree with me that Guinness has found a level of comfort in focusing on domestically distilled mainstream spirit brands like McDowell and Gordon’s, primarily due to their ability to better manage costs.
“The struggles faced by retail giants like Shoprite in Nigeria and some of the biggest FMCG players like Unilever Nigeria that had to rest major home and personal care brands like Sunlight, Omo, and Lux, show you the broader economic challenges at play. Nigeria continues to grapple with the lingering effects of past administrations on the economy, and the recent certificate forgery scandal associated with the Tinubu presidency only adds to the country’s woes. These cumulative factors are casting Nigeria as a pariah nation, making it unattractive for serious international business engagements,” lamented the insider.
Yet another insider opined that Guinness is acutely aware of the importance of maintaining its brand image and preventing any negative impact on its stock market performance. Consequently, the company exercises caution in managing information to avoid conveying the wrong impression of facing financial difficulties.
“In the upcoming weeks, there will be significant developments to watch in relation to our country’s economy. It’s hard to overlook the fact that it is mostly players in the financial sector who have been declaring profits recently. This shows an underlying issue: the vital cogs and components of our economy, the ones responsible for driving its growth, are facing severe challenges. Importing anything into the country has become a challenge to manufacturers due to the ongoing economic pressure.
“Because of this pressure, it’s evident that some businesses are resorting to unethical practices to navigate the challenging economic conditions. One such tactic is “shrinkflation,” where companies reduce the size or quantity of their products while maintaining the same price, essentially offering consumers less for the same cost, while many others have raised their prices in response to the current economic climate,” she said.
These measures are indicative of the immense pressure that companies are facing to maintain profitability and financial viability. While these practices may offer short-term relief, studies have shown that they can erode consumer trust and have long-term consequences for a company’s reputation and brand image.
So, in this context, Guinness Nigeria’s decision can be seen as a bold and prudent move, given the circumstances. It won’t be surprising if other companies follow a similar path in the coming weeks. “The evolving economic landscape demands adaptability, and we are likely to witness further strategic shifts in the business world. Only time will reveal the extent of these transformations.
“The brewing industry is in a state of flux, and the evolving strategies of companies like Guinness Nigeria reflect the broader challenges faced by Fast-Moving Consumer Goods (FMCG) companies in the current economic climate. These challenges are exacerbated by what the insiders have labeled poor economic management in the nation.
In the face of these complexities, only time will reveal Guinness Nigeria’s forthcoming frontline strategy. The hope remains that Nigeria and its citizens will weather these economic storms, as businesses adapt to changing circumstances and consumers continue to enjoy diverse beverage options.