Harsh Economy: Guinness owners, Diageo set to exit Nigeria

 

Maureen Aguta

 

As Nigeria’s harsh economic climate bits harder, Diageo, owners of Guinness Nigeria after over 70 years in the country set leave the country where it has operated the biggest brewery in Africa over the years.

Indication is that the company is off-loading its 58.2 per cent shareholding in Guinness Nigeria and Tolaram is acquiring the stake as now the core investor in the company. A statement by Director Legal/Company Secretary, Guinness, Mrs. Abidemi Ademola disclosed that the company will not enter into long-term license and royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands. The transaction is expected to be completed during the 2025 fiscal year, subject to obtaining the requisite regulatory approvals in Nigeria.

The statement noted that Diageo remains deeply committed to Nigeria and will retain ownership of the Guinness brand, which will be licensed to Guinness Nigeria for the long-term, enabling the next phase of growth and development of Guinness Nigeria under the stewardship of Tolaram.

“With a five-decade presence in Africa, Tolaram is one of the largest consumer packaged goods companies on the continent and has forged joint venture partnerships with several leading consumer multinational companies.”

It further said that in partnership with Guinness Nigeria and Tolaram, Diageo will continue to drive the brand and marketing strategy for Guinness in Nigeria, to ensure Diageo’s exceptional capabilities in brand building and innovation continue to drive long-term growth for Guinness in Nigeria.

It was also disclosed that following completion of this transaction, Guinness Nigeria will remain listed on the Nigerian Exchange Ltd. and, subject to regulatory approvals; this is it was disclosed that Tolaram intends to launch a mandatory takeover offer in compliance with local law requirements.

Omobola Johnson, Board Chair, Guinness Nigeria, said: “Today’s announcement represents a significant opportunity for the next phase of growth for Guinness Nigeria. This partnership brings together Tolaram’s deep expertise in manufacturing and distribution, and Diageo’s exceptional capabilities in brand building and innovation. I believe this is a winning combination which leaves Guinness Nigeria extremely well placed to drive further growth in this market.”

Adebayo Alli, Managing Director/Chief Executive Officer, Guinness Nigeria, said: “Today’s announcement marks an exciting moment for Guinness Nigeria, our employees and our customers. I look forward to working alongside Tolaram, which is one of the largest and most respected consumer goods companies in Africa, and I am pleased to note Tolaram’s alignment with Guinness Nigeria’s values and its strong commitment to build an enduring and sustainable business”.

Haresh Aswani, Managing Director, Tolaram Africa, said: “We are thrilled to welcome Guinness Nigeria, a company with such a rich legacy and strong consumer loyalty, into our ecosystem. This strategic move will expand our significant footprint in the Nigerian market and presents an opportunity to leverage our combined strengths to foster innovation and deliver immense value to our customers and shareholders across the nation.”

Advocacy Times notes that after a long period of speculation on the future of Guinness Nigeria in view of harsh operating business environment in Nigeria, Diageo has just joined the long list of multinational companies that have fled Nigeria.

Bloomberg in its report on the exit of Diageo from Nigeria, noted that operating in Nigeria, now back rated as Africa’s fourth-biggest economy has become increasingly challenging because of a decline in disposable incomes due to an almost 70 per cent depreciation in the naira since June and decades-high inflation. A near complete absence of a reliable electricity supply and congestion at Nigeria’s ports are compounding the malaise.

“Things are tight for Diageo in the country,” Ayodeji Ajilore, an analyst at ARM Investment Managers, said by phone. “They will be looking at other places to reshuffle their portfolio and get better results from their asset.”

In the nine-months to March, Guinness Nigeria reported a loss after tax of N61.65 billion compared with a N5.87 billion profit a year earlier.

“The market needs the kind of input that the likes of Tolaram can bring and survive. They have a more local understanding of the market,” said Ajilore. “Despite the economic headwinds the products of Tolaram are doing relatively well. They have competence they can use to grow the asset further.”