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Business Intelligence & Beverage Market Competition Update

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Business Intelligence & Beverage Market Competition Update Business Intelligence & Beverage Market Competition Update …market trends and taking advantage of them Period Covered: July 25 – September 6, 2017 C O N T E N TS 20 29 27 14 10. Macro-economic Terrain 13. Alcoholic & Non Alcoholic Beverages . Articles and Opinions “If your stories are all about your products and services, that’s not storytelling. It’s a brochure. Give yourself permission to make the story bigger.” – Jay Baer News Highlights… Inflation soars on rising food prices and high import costs… 3 Inflation, Exchange Rate & External Reserves ▪ Now only 0.71% Indices 31-Jul 30-Jun Change (%) Inflation (YoY) 16.10% 16.25% 0.15 Exchange Rate (N/$) 305.65 305.90 0.08 Gross Foreign Reserves $30.77bn $30.27bn 1.65 Brent Crude $51.91 $47.94 8.28 Equity Market Cap 12.35 11.45 7.86 Aggregate GDP (Q1-17) N26.03trn 0.52 MPR (Jul - 17) 14.00% 0.00 Headline Inflation (%) 21.00 ▪ But still fragile 18.72 19.00 17.9 18.3 18.4 18.5 16.3 16.1 17.00 17.78 15.00 13.00 11.00 9.00 Core Inflation 7.00 Food Inflation YoY Inflation MoM inflation Market Summary & Highlights ▪ Oil prices spike to $52.8pb after a dreary month ▪ The CBN sustains Forex supply into the market 55.00 Brent Crude ($/b) 50.00 45.00 40.00 3 2 1 CBN ($bn) 0 ▪ Oil production stays above 1.7mbpd as OPEC frowns April'17 May'17 June'17 July'17* Oil Production (mbpd) 1.8 1.733 ▪ Average weekly supply was $379mn 1.7 1.68 1.6 1.55 1.564 1.5 1.506 1.456 1.4 1.3 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Leading Economic Indicators - Output LEI Jun’17 Jul’17 % Change Aug’ 2017* GDP Growth (%) -0.52 0.5 – 1 (Q2’17)* 1.52 1.00 (Q3’17) Oil Production (mbpd) 1.73 1.77* 2.72 1.8 Power (MW; avg) 3,462.30 3,379.71 -34.17 3,300 Consumer Confidence* 62.7 (Q1’ 17) 64.8 (Q2’17) 2.1 68 (Q3’17)* External Reserves ($bn) 30.27 30.77 1.65 30.2 Inflation (%) 16.1 16 0.2 16.3 Stock Market (N’trn) 11.45 12.35 7.86 12.0 Vacancy Factor Index* 69.3 (Q2’17) 66 3.3 65.2(Q3’17) *Consumer confidence is an economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. *Vacancy Factor Index is the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time. It is the opposite of the occupancy rate, which is the percentage of units in a rental property that are occupied. Source: CBN,NBS, EIU, FDC Think Tank, FBN Capital, NOI Polls FMCG’s Impressive Performance ▪ FMCG’s set for significant recovery in the latter part of the year. ▪ Positive earnings have been supported by improved FX liquidity and increased prices. (Average top line growth of released results stood at 55%) ▪ Companies battle with high finance cost Source: NSE, FDC ThinkTank FMCG’s Impressive Performance o Revenue o Revenue 52%- N121bn 15%- N181bn o o Gross Margin 48%- N48bn Gross Profit 10%- N81bn o OPEX o OPEX 22%- N21bn 9%- N44bn o o Finance Cost Finance Cost 38%- N4bn 50%- N7bn o Profit Before Tax o Profit Before Tax 33%- N34bn 2628%- N24bn o Share Price YTD o Share Price YTD 16%- N165 30%- N1,053 o N1,100 o Target Share Price N179 Target Share Price HOLD o Recommendation HOLD o Recommendation o Free Cash Flow 13%- N48bn o Free Cash Flow 20%- N18bn Source: NSE, FDC ThinkTank Retail News…"Brick and Click” Retail & E-Commerce Market Update Sharp drop in retail traffic in Lagos: Increased inventory from four weeks to six 01 weeks and attributable to high rainfall and drop in disposable income Consumers hold back demand as retailers still reluctant to reduce prices. Decline 02 in customer traffic to brick and mortar stores has led to increased online traffic Nigeria is the most promising country in Africa in terms of potential market opportunity and also ranked 1st in Africa for Business Environment Opportunity. 03 Number of Lagos households earning more than US$5,000 expected to grow by 96% (6.9m) by 2030 04 Increased smartphone usage driving strong growth in Africa’s e-commerce sector. Sector is estimated to be worth over US$75bn annually Fear of fraud, and poor transport and mobile infrastructure are some of the obstacles that beset the sector. Opinion: Is e-commerce the only way to go for FMCG players? E-commerce is ubiquitous in retail these days. In contrast with low FMCG increases globally, e-commerce continues to show sold growth. In Asia, e-commerce has managed to score significant shares in FMCG within North Asian markets –China, Taiwan, and Korea, posting strong annual growth. With this in mind, is e-commerce the only way to go for all players in Asia? Regardless of advancements in digital technology, the most important thing is that FMCG players focus on what their consumers want most. Across Asia, we see that shoppers seek convenience in every aspect of their life-choices are based on… Read more… Alcoholic Beverages News – Headlines Nigeria Breweries launches Ab Inbev Nigeria donates patrol Lagos to Host International Ace Desire, a Zobo- vehicles to police, road safety in Drinks Festival in December flavoured Spirit Drink Anambra Onitsha-based Intafact Beverages December promises to be fun in Lagos Nigeria Breweries has added to its Limited, a subsidiary of global brewer as the city is set to host the first ever range of alcoholic drinks with the AB InBev, on Wednesday donated six International Drinks Festival in a launch of Ace Desire, a zobo flavoured Hilux patrol trucks to the Nigerian gathering of stakeholders in the alcoholic drink into the Nigerian Police, Anambra State and Delta State alcohol/beverage industry. Brand market. Command and the Federal Road owners, retailers, drink lovers and According to the Managing Director, Safety Commission (FRSC). holiday fun seekers will besiege the Nigerian Breweries Plc, Mr. Franco At the handover ceremony at the heart of the city to experience Maria Maggi, Read more Read more...… Read more...… Moet boss says Nigeria is its biggest Champagne market in Africa In what many may take as a sign of Nigerians love for imported items, Moet and Chandon Global Ambassador Pierre Louis Arraud says Nigeria may be its biggest market in Africa, ahead of South Africa and Kenya. Nigeria according to him, has the largest economy in Africa, as well as population. The company plans to introduce premium versions of champagne into the market. What this means ? Arraud’s statement clearly shows Nigerians have maintained their appetite for imported goods, despite a recession, and policies by the Central Bank of Nigeria (CBN) to control the demand for foreign exchange. Read more… News – Headlines Nigeria media commended Diageo sees earnings, sales Nigeria: The next frontier for harvest of entry for rise on currency tailwinds for craft beer producers golden pen award Diageo PLC (DEO) on Thursday Nigerian Breweries Plc has From pale ale with tangs of passion reported improved earnings for the commended the media for rallying fruit and mango to a heady stout with year and raised its target for profit support for the huge harvest of 10 percent alcohol, a pioneering craft margin growth as the world’s largest entries for the 9thGolden Pen Awards brewer in Nigeria is seeking to expand spirits maker benefited from strong sponsored by the company. and grab more of a market dominated currency tailwinds and logged broad- Submission of entries for the 9th by Heineken and Diageo. Bature based sales growth across its major edition of the Awards, which started Brewery has… regions. on Monday, July 3, 2017, closed on Read more Read more...… Read more...… Nigerian Breweries Q2 2017 Results Review - Maintaining Underperform Rating Retaining UP rating despite 28% increase to our price target Nigerian Breweries’ (NB) Q2 2017 results showed marked y/y growth across key headline items. The results were mainly boosted by higher pricing relative to the prior year. On its Q2 2017 conference call, the management of Heineken (NB’s parent) disclosed that unit volumes for its Nigerian business operations declined y/y. Although the quantum of decline was not specified, we estimate that unit volumes declined by mid-single-digits y/y due to inflationary cost pressures on consumer discretionary spending. Relative to our forecasts, the results were broadly in line. As such, we have barely changed our 2017E EPS forecast. Read more… News – Headlines M.I Abaga headlines Legend Extra First Quarter profit fall at 10 More Entrepreneurs get Stout real deal experience music International Breweries as Life Lager’s Progress Booster tour in Abuja input costs rise grant International Breweries Plc reported a 10 more entrepreneurs have received One of Nigeria’s iconic rappers, M.I profit decline of 18% for the first cheques of N300, 000 each to grow Abaga, is set to headline Legend Extra quarter of 2017/2018 financial year their business at the Life Progress Stout’s signature nationwide music despite seeing a record 37% surge in Booster Show, an initiative of Life tour, Real Deal Experience, in Abuja sales to N9.4bn, from N6.9bn. The Lager Beer, a brand committed to come Sunday, the 2nd of September, company which makes Trophy Lager supporting small and medium scale 2017 at The Palms, Galadimawa, and Betamalt said that profit fell to entrepreneurs in South-East Nigeria.
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