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Discontinuation of spirits’ import will reduce forex demand

cea rotimi odusola x

Guinness Nigeria Plc has said that with its discontinuation of the importation of spirits from the multinational alcoholic beverage company, Diageo, its requirements for foreign exchange will reduce.

This was disclosed in a corporate notice to the Nigerian Exchange Limited on Thursday, titled ‘Notification Of Change In Distribution Model For Imported Diageo International Premium Spirit Brands.’

“This strategic change reduces the company’s foreign exchange requirements and mitigates the negative impacts of lingering foreign exchange scarcity and exchange rate volatility on the financial performance of the company,” part of the statement signed by Company Secretary/Corporate Relations Director, Rotimi Odusola, said.

Also, Diageo will be setting up a Nigerian arm come 2024 due to the discontinuation of the importation of its spirits. Guinness Nigeria which is a subsidiary of Diageo incurred N49bn in exchange rate loss in its 2023 half-year operations and had in August revealed challenges with accessing forex for its operations despite the harmonisation of the segments of the currency market by the Central Bank of Nigeria in June.

In the statement, it was revealed that Diageo’s new Nigerian business will be solely spirits-focused. Some of the popular products of the brand include Johnnie Walker, Singleton, and Baileys and others.

Guinness had been importing the spirits under its 2016 Sale & Distribution Agreement with Diageo plc, however, importation will stop in April 2024.

“This move is in line with Guinness Nigeria’s long-term growth strategy, and it is also in alignment with Diageo plc’s decision to establish a new, wholly owned spirits-focused business to manage the importation and distribution of its international premium spirits portfolio in West and Central Africa, with Nigeria as one of the hubs.

“In the financial year ended 30 June 2023, the revenue related to Guinness Nigeria’s portfolio of imported Diageo international premium spirit products was NGN14bn, constituting approximately six per cent of Guinness Nigeria’s total revenues,” the statement read.

The brewer added that it will continue to manufacture and distribute its non-alcoholic drinks, beer, ready-to-drink and locally-produced spirits.

Touting the benefits of the arrangement, Guinness Nigeria said it will be better positioned to “focus on its core business and its strength in the manufacturing, marketing and distribution of non-alcoholic drinks, beer, RTDs and its locally produced spirits, thus enhancing sustainability, growth, and value creation for all stakeholders of Guinness Nigeria and the change will enable the full utilisation of Guinness Nigeria’s asset base and will accelerate innovation in local spirits products.”

It was added that there are no changes to Diageo plc’s shareholding in Guinness Nigeria, and Diageo remains a key shareholder of Guinness Nigeria.