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What AB InBev’s takeover of SABMiller could mean for Nigeria’s beer market

20 Oct 2015, 06:14 pm
Chibuike Oguh
What AB InBev’s takeover of SABMiller could mean for Nigeria’s beer market

News Highlight

- AB InBev is the world’s largest beer producer.

- SABMiller may be poised to expand its operations across Nigeria.

Trophy lager, one of SABMiller's brands

After weeks of intense negotiations, Anheuser-Busch InBev (AB InBev), the world’s largest beer producer, agreed to takeover SABMiller, the second largest, in a $106 billion deal, last week.

AB InBev, Belgium’s largest company by market size, agreed to pay $67 per share for SABMiller, a 50 percent premium above its share price before the reports of the merger emerged.

AB InBev and SABMiller have largely complementary geographical footprints. AB InBev has operations mainly in the more established European and U.S. markets, while SABMiller has operations mainly in emerging markets such as Africa, Asia and Latin America.

The combined entity will be the world’s biggest brewer by far, earning half the industry’s profits and making one in three beers worldwide, according to the Economist.

SABMiller in Africa

A South African beverage company with headquarters in London and listed on the London Stock Exchange, SABMiller has operations in 15 African countries and a stake in 21 others through its alliance with Castel, a French drinks firm. The company is also a leading bottler of Coca-Cola in several African countries. The company earns 29 percent of its profits in Africa and declared a profit of $3.3 billion in 2014.

SABMiller in Nigeria

SABMiller is the third largest brewer in Nigeria after Heineken’s Nigerian Breweries and Diageo’s Guinness Nigeria. Unlike other brewers, SABMiller made a late entry into the Nigerian beer market in 2009.

But the company moved swiftly, buying Port Harcourt-based Pabod Breweries, makers of Grand lager beer, and Ilesa-based International Breweries, makers of Trophy lager. In 2012, SABMiller established a $100 million brewery in Onitsha, which makes Hero lager.

SABMiller has been pursuing a regional strategy in Nigeria rather than taking on its more nationally established competitors head on. The company also sells low-cost products; for instance, its beers are about 40 percent cheaper than its rivals.

Just like in other African countries, SABMiller is targeting the informal beer market, which is dominated by home brewers and bootleggers. These cheap, and mostly unhygienic, local brewers supply more than two-thirds of all beer consumed in Africa. SABMiller estimates that the informal beer market in Africa is worth up to $3 billion.

With the impending AB InBev merger, SABMiller may be poised to expand its operations across Nigeria, now Africa’s largest beer market, and challenge its much larger rivals for national market share.

Chibuike Oguh is a Financial Nigeria Staff Writer


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