Low Purchasing Power: Consumers Reduce Spending On Alcoholic Drinks

By Nse Anthony-Uko
(Sundiata Post) – Nigerian consumers have shifted their preferences from top notch alcoholic drinks to cheaper ones as high inflation rate alongside low  minimum wage make less funds available for such luxury items, BusinessDay reports.
The Nigerian economy, which experienced an eight consecutive decline in its inflation rate to 15.91 per cent still, is below the central bank’s 6 per cent and 9 per cent target.
The country’s minimum wage of N18,000 ($59), which has been stagnant for a period of two years, raises concerns about the ability of consumers to cope with increase in the price of liquor as producers shift the higher costs of production to consumers.
The resultant effect of high inflation combined with slow wage growth will reduce the purchasing power of a consumer’s income, according to Ayo Akinwumi head of research FSDH Merchant bank.
From the consumers/household perspective, Frank Odumegu A-55-year old civil servant told BusinessDay that expenses such as house rent, transportation, school fees and feeding has eroded his monthly income leaving him with less money to buy larger beer.
“Whisky and larger beer was my brand, however since I do not have enough money to buy such luxury drinks, I have to resort to taking sachet alcoholic drinks whose prices are lower,” said Odumegu.
According to ARM Research Limited’s Urban Retail Tracker, average beer price expanded for the second consecutive month by 2.3 percent Month on Month (MoM) to N2,725 per crate in November.
“Our survey shows increases in price of all products in our brewery basket. Specifically, Trophy (+4.9% MoM) and Guinness (+3.3% MoM) recorded the peak price increase. Other price increases include Star (+0.5% MoM), Malta Guinness (+1.3% MoM), Goldberg (+3.2% MoM) and Satzenbrau (+1.1% MoM),” said analysts at ARM Research.
A research conducted by a Nigerian-based marketing research company, MRIC in November 2015, indicated that most alcohol consumers in the country are now switching to herbal mixed alcoholic drinks.
This trend saw a rise in the alcoholic brand such as Alomo bitters, Origin Zero and Origin, Star herbal and many other brands in this category
“When there is weak purchasing power, people will move away from what is a bit expensive to a cheaper one so that they can still satisfy their urge for that particular product,” said Akinwumi.
Beer makers in Africa most populous nation had increased the price of key products in order to cover for rising production costs as a weaker currency balloon cost of production since firms import between 45 and 55 percent of raw materials.
Recent report by a market research group, Global data, indicates that Africa is by far the fastest growing region for beer consumption.
According to the report, alcohol consumption in Africa is estimated to expand by a five percent annual growth rate between 2015 and 2020.
Nigeria is the second largest beer market in Africa and consumes some 16 million hectolitres of beer a year, about half as much as in South Africa, the continent’s biggest beer market.
The country’s per capita beer consumption is about 10 litres a year, compared to a global average of 35-40 litres, according to Morgan Stanley.
An expanding Nigerian middle class and youthful population is helping drive beer demand, according to Euromonitor, which estimates the market was worth about N837 billion or $2.7 billion as at the end of 2016.


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