Beverages industry faces hard time as Covid-19 impacts sales, workforce
By Oludare Mayowa
Nigeria’s beverages manufacturing companies are yet to come out with the quantum of losses incurred during lockdown caused by government efforts to curtail the spread of coronavirus in the country, but experts say the industry is reeling under huge drop in patronage as people stayed home.
Big names like Nigeria Bottling Company, 7Up Bottling companies, Nigerian Breweries, Guinness Nigeria, and other breweries firms are currently weighing the options of downsizing their large workforce in view of the sharp drop in sales due to restrictions in movements which impacted on the consumption of their products.
Investigations carried out by Global Financial Digest showed that most of the beverage companies have sent off duty more than 70 percent of their workforce without pay since the announcement of the lockdown in March, while some are gradually reopening operations as some states lift the restrictions.
“Sales have dropped drastically across all products,” a source within a major producer told one of our reporters. “You know the restrictions affected large gathering of people and many ceremonies where our products are consumed have been suspended or canceled since the outbreak of the pandemic.”
Also, major distributors of products such as Coca-Cola, 7Up, Biggie and fruit juice, including breweries are operating at low capacity due to drop in patronage.
Analysts said job loss in the sector could be as high as 80 percent as most event centres, cinemas houses and other recreation centres shut down to observe the protocols on containing the spread of coronavirus in the country cut back on productions and sales.
In a report on the impact of Covid-19 on the beverage industry, Deloitte wrote; “Consumer Products food & beverage companies are facing significantly reduced consumption as well as disrupted supply chains.
“At-home consumption has increased, but out-of-home consumption – which historically generates the highest margin – has come to nearly a standstill,” the report said.
Also, a survey by Research and Markets indicated that the key factors that affect the food & beverage industry after the pandemic include the shutdowns of the restaurants and other seating areas.
Though the top beverage companies listed on the Nigerian Stock exchange (NSE); Guinness Nigeria Plc and Nigerian Breweries Plc are yet to file their first-quarter financial report to the Exchange, analysts are already predicting poor outing by the giants in the industry as the drop in both sales and productions take a toll on their financials.
This may not also be the best of time for investors in the sector while their expectations of capital gains or improve dividends may have vanished, for now, leaving some discerning investors moving their funds into other channels of investment.
Nigerian Breweries Plc shares closed at N42.50 on Thursday while Guinness Nigeria Plc traded at N17.50 per share at the close of business on Thursday.
Nigerian Breweries Plc share has shed 28.8 percent year-to-date, while its main rival Guinness Nigeria Plc has dropped 41.8 percent in share value year-to-date as investors took a flight to safety to protect their investment due to the impact of Covid-19 on the sector.
The figure at the end of the day could be higher as more investors are expected to sell down their holdings to cut back on losses.
The negative impact of the disease is not only on the beverage firms alone, but major distributors of their products are also affected as sales dwindle so is profit and threat to their business continuities.
However, analysts said as the restrictions are gradually being eased across the country, there may be a steady recovery in the sector, but life may not return to the same immediately as the impact of the economic downturn could also be another factor consumers may have to contend with in their choice of purchases.