Many Troubles With IB Plc

  The   takeover of the  International Breweries  Plc  by Belgium’s AB InBev , the  beer giant  and the world’s largest brewer,   indeed, cast  for it  a shadow bigger than its size. In a manner smacks  of a preplanned  move to conquer  the Nigeria’s   brewery industry and displace the incumbents   ,   AB InBev    acquired SAB Miller Nigeria, former owner of International Breweries, Pabod Breweries and Intafact Breweries  in 2016  and later adopted  its current name  purposely for that .Observers and analysts are not thinking differently ; they believe    the  initiative  may  signal  the end of decades of dominance of the brewery industry by Nigerian Breweries and Guinness ,Nigeria Plc     .   Indeed  , the new owner  of IB Plc did  not hide   the  fire in its  belly   .  Its  Managing Director,  Mr. Hugo Dias Rocha  stated this more clearly in what could be called  its  corporate strategic intent     : “Our dream of achieving market leadership of the beer industry in Nigeria remains unshaken as we are confident in our abilities and commitment as a team.”   . The takeover ,indeed  ,  sent   jitters down the spines of the incumbent market leaders in the industry .     


 Both the observers and the current owner are  wrong  and  the fear has disappeared  ;it  failed to translate its dream to realty . Against the hope raised and stakeholders expectations , the portents are increasingly gloomy .More and more signals are pointing to  the opposite directions  ; despite this intimidating image , to the surprise  of  industry analysts ,the company has only become  a mere serial losers ; for its inability to translate its huge potentials to the expected fortunes   but  instead sustaining back to back losses in the last five  consecutive financial years ,the company   has turned  itself to  an albatross for its shareholders   ,creating more fears  than dreams on their  faces  ;for  AB InBev, it is now clear that its leadership ambition is a mere dream  and probably a drain on its investments .            .

  Its 2021 FY Audited Financial Statement, revealed  a loss after tax of N17.66 billion ; before this , the brewery had  declared bottom line loss for three consecutive years since 2018, posting a loss of N3.93 billion. In 2019, the loss declared spiraled by an overwhelming 607% to N27.79 billion ;  its loss ,however ,declined  in 2020 to N16.08 billion. Within the three years,  ironically , the company grew its revenue by over 51% on the back of inflationary pressures driven by increases in prices of goods and services over the years.  This implication is clear :  this potentially giant brewer is making money but finds it difficult to translate to net income or bottom line

In the ongoing financial year, a glitter of hope surfaced in the first quarter . International Breweries Plc in its first quarter ended March 31, 2022 reported stronger growth in revenue backed by consumer demand for its brands to migrate into impressive earnings and positioned to deliver  enhanced profits in 2022 financial year. The volume growth was ahead of industry expectations that drove revenue by 48 per cent in the first quarter of 2022 and contributed to the company’s migration from loss to positive results in the period under review. The unaudited first quarter, 2022 financial result and accounts of International Breweries showed N57.52 billion  revenue  from N38.96 billion reported in Q1 2021. 

 But this hope dramatically fizzled out in the second  and third quarters signaling another doom in 2022 .Although ,  International Breweries Plc ,makers of “Hero” Lager ,  reported a Profit After Tax of N336.20mn for the half year period ended 30 June, 2022, a 102.2% upward push from the N13.88bn loss it reported for the same period in 2021,it was on the strength of the first quarter result .This is because in three months ,between April and June , it  recorded  another loss of  N384.97m . This loss ,however , could not be covered again in the third quarter; its loss for the period for that period was N3.15b and for the nine months was N2.81b in 2022 as against N2.22b and  N14.00b  losses in 2021 respectively .

    .Its shareholders have been at the receiving end of the above miserable scenario with nether dividend nor any appreciable capital gain  .

 What is the problem with the International Breweries? is its  resources  inadequate or  the   manner of their deployment  by its leadership  to generate adequate competencies or capabilities  to outperform its competitors below expectations or its products not competitive ?

  The miserable performances of IB Plc have continued to generate mixed reactions. For the management of IB Plc , the above  uninspiring  performances over its five years  operations  could simply be traced  or attributed to institutional factors. Perhaps  getting jittery over another disastrous performance on the horizon  , the  top management , in a recent  press release titled   : “International Breweries Reports  Third Quarter and Nine Months 2022 Results’’ ,  tried hard in a bid   to defend itself  and assuage its disenchanted  stakeholders attributed another loss in  the third quarter 2022  results  to the prevailing macro-economic headwinds.   

   The company blamed the challenging quarter  on the  industry contraction and supply chain constraints  as the single-digit top-line growth  recorded by was knocked out  by elevated cost pressures.        “Following a strong first half of the year, our volumes declined in the third quarter of 2022 due to a soft industry and ongoing supply chain constraints. The last three months have been characterized by elevated inflationary pressure which has had an impact on consumer disposable income. The period experienced especially severe weather with a longer rainy season and floods in key markets.” 

    Hugo Dias Rocha  explained  further  ,  “despite the difficult quarter, we remain focused our winning commercial strategy. Year-to-date, our brands remain resilient and continue to deliver Net Revenue growth. We remain committed to returning to profitability and creating value for our stakeholders consist.”  .   “We remained resilient during the period led by our core brands, premium portfolio and innovation. As part of our “Beyond Beer” strategy, we launched Flying Fish during the quarter to address incremental occasions and consumer needs. This has been well received and continues to gain acceptance in the market.”

Its top-line grew by mid-single single digits (5.6%) ,the company  explained , was driven by revenue management initiatives.  It , however , noted  that its gross profit and margins declined on elevated costs largely due to higher energy prices, FX illiquidity, commodity costs headwinds, severe weather, and overall inflationary pressures.      Its   , however, explained   that its   EBITDA   which is positive was driven on the back of prudent resource allocation and cost management.  Its concluded the release that by saying its   “Year-to-date, top-line grew driven by revenue management initiatives. We remain positive on the industry’s outlook and remain confident   in the future growth of our business and will continue to invest and strengthen our brand portfolio across all segments.” 

 But the problem with IB Plc is more than captured by its CEO   . Institutional factors  could and are known to  impact  negatively and positively  on a company’s performance    There is no doubt that monetary and fiscal policy, trade and industrial policy, national levels of educational achievement, the structure of corporate ownership, and the social norms and values that predominate in a particular nation have an impact on the competitiveness of firms therein domiciled.

   However , the role of institutional factors Institutional factors  or the environmental milieu in which a firm operates   in competitive disease  often    is believed to be exaggerated.  There is another side to a coin. Every player faces one barrier or the other and opportunities as well in any environment,   but the degree of the fortunes exploited or   the gravity and intensity of how these institutional factors are impacting it negatively depends on strategic capabilities  or competencies  of  the management  ;  there are also avenues open to a firm confronting insurmountable barriers to competitiveness.

To overcome the above  challenges , some strategic leaders are known to redraw industry boundaries so that what are now attractive lies outside the former barriers.  This is done by radically shifting the basis for competitive advantage in the industry   or creating entirely new industry space ideally suited to one’s own strengths; firms eager to overturn the present industry order challenge “accepted practice,” redraw segment boundaries, set new price-performance expectations and reinvent the product or service concept. Moreover, foresight, stretch, and leverage provide the energy and rationale for proactive advantage building and industry re-engineering.  These are what enable   a company  to  provide  products or services to customers that are valued or might be valued in the future .it may be at threshold level or with threshold features or at critical success factors level ;   what a company or a strategic leader needs to tame are  those threats and exploits the available opportunities and consequently   deliver products that are valued by customers  and these involve  the ability to manage cost and product features ,  understand performance standard and the importance robustness of resources and competencies and the extent to which they are easy or difficult to imitate .

Show More

Related Articles

Leave a Reply

Back to top button