Guinness Nigeria Plc has informed the Nigerian Stock Exchange (NSE) that Diageo Plc has dropped plans to expand its stake in the company. Diageo had in September 2015 announced plans to buy up to 15.7% of equity stakes in Guinness Nigeria Plc.
Guinness Nigeria noted in its statement to the NSE that Diageo is dropping the plans for an additional stake due to “challenging market conditions in Nigeria over the past 12 months.”
On 20 September Guinness Nigeria announced its first major loss in Nigeria in over three decades. The company had announced that it made net loss of N2 billion for its full year results ended 30 September despite total sales of N102 billion from beer as well as International Premium Spirits (IPS) like Johnnie Walker and Baileys, following its acquisition of distribution rights from its parent company, Diageo in January this year.
Peter Ndegwa, Managing Director/Chief Executive Officer, Guinness Nigeria Plc had explained that the company’s loss was caused by “the very tough economic challenges around consumer spending, which is driving consumer preferences towards value brands across the sector, and the more significant factor being the effect of FX policy and the devaluation of the Naira.”
But the Chairman, Guinness Nigeria Plc,Babatunde Savage, also speaking the company’s performance expressed the consolation that despite the continuing deterioration in the operating environment, the core brands of Guinness FES and Malta Guinness are growing.
Diageo has also noted that despite dropping the plans to buy more stakes in Guinness Nigeria Plc, it still has a positive outlook for Nigeria in the longer term and it expects its market in Nigeria to continue to grow.
“Nigeria remains a key strategic market for Diageo which remain supportive of Guinness Nigeria, a company with long and rich history, its board and management and the actions taken by Guinness Nigeria to mitigate the impact of challenging market conditions”
In January 2016, Guinness Nigeria acquired the distribution rights for Diageo, its parent company’s International Premium Spirits (IPS) like Johnnie Walker, Ciroc and Baileys in Nigeria. Also in the course of the financial year, the company acquired the rights to distribute brands from India’s United Spirits Ltd (USL) for brands like McDowell’s whisky. Guinness has also announced an investment of 12 million pounds into its Benin plant for the manufacture of mainstream spirits, locally produced spirits that are offered at a lower price point when compared to imported spirits.
Diageo Guinness Overseas currently owns about 46% equity stakes in Guinness Nigeria and the additional stakes would have taken its stakes to a majority ownership of 61.7%.