BUSINESS ANALYSIS CASE STUDY:

GUINNESS NIGERIA
COURSE CODE: FBA429
COURSE TITLE: INTERNATIONAL BUSINESS
FROM: GROUP 13-

S/N NAMES MATRICULATION NUMBER

01. OMOSUYI ELIJAH
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 GUINNESS COMPANY OVERVIEW

HISTORICAL BACKGROUND
The story of Guinness remarks an incredible sense of belief and adventure. It all started in 1759
when Arthur Guinness signed a staggering 9,000-year lease on the unused St. James Gate
Brewery in Dublin (Wikipedia, 2024). It is clear now that his belief stemmed from a vision that
transcended many decades to come. Today, Guinness is brewed in over 50 countries and sold in
about 150, making it one of the most successful alcohol brands globally (Diageo, n.d.). However,
to truly understand its success, we must examine its early days and the remarkable efforts of
Arthur Guinness.
In 1769, Arthur made his first export, sending six and a half barrels of his ale to Great Britain
(Wikipedia, 2024). His quest for innovation began with the West Indie Porter in 1801 (Guinness,
n.d.). After many years of selling ale to Great Britain, Guinness brewed the West Indie Porter to
serve countries in the West Indies region. To preserve the beer over long-distance travels to these
countries, Arthur developed a recipe with a high quantity of alcohol and hops (Guinness, n.d.).
This brew remarks his dedication to commitment, excellence, and dedication.
Even after Guinness became a public company in 1886, its excellence and innovation persisted
over time as a crucial component of its culture (Wikipedia, 2024). From introducing nitrogen to
beer in 1959 (Guinness, n.d.) to building the world's first liquid carrier (Diageo, n.d.), MV
Miranda Guinness, in 1977, Guinness is still pushing the limits in the brewing industry.
Guinness merged with the Grand Metropolitan to form Diageo in 1997 (Tenon Tours, n.d.),
making Guinness one of the brands under Diageo plc. Still, after this merger, Diageo continued
to maintain the existing culture of innovation in the Guinness brand. In 2020, it introduced the
Guinness 0.0 (Diageo, n.d.), an alcohol-free variant, which offers the same unique blend, flavor,
and taste of Guinness without the alcohol. Similarly, in 2021, it introduced Guinness
MicroDraught (Diageo, 2021), a cutting-edge dispensing technology that allows small-scale
restaurants to serve Guinness by solving storage and cooling system complexities.
Guinness Nigeria's story begins in the 1940s-50s with Guinness product imports. The first
Guinness brewery outside the British Isles opened in Ikeja, Lagos, in 1962, a partnership
between Arthur Guinness Son & Co. and UAC. Guinness Nigeria Plc was listed on the Nigerian
Stock Exchange in 1965. In 2024, a majority of its shares were sold to Tolaram, marking a shift
from Diageo's ownership.

In retrospect, Guinness's long history is an adventure characterized by bold vision, unwavering

dedication to quality, and setting the stage for its prestigious standing in the brewing industry.

PURPOSE AND CULTURE

Diageo's mission (or purpose as they call it) is "Celebrating life, every day, everywhere." This
purpose is about celebrating life in every aspect and providing their people with the means to
keep improving and becoming better at work, at home, and in their communities (Diageo, n.d.).

Vision Statement: "To be the best performing, most trusted and respected consumer products
company in Nigeria." Its culture is deeply ingrained in its sense of purpose, partnerships with its
brands, its ambition to succeed in the marketplace, and belief in its people.

CORE VALUES
The following are the four core values of Diageo. Note that the statements in brackets are the
core values as stated by Diageo on their website (at: https://www.diageo.com/en/careers/why-
diageo/purpose-culture-and-values).
Devotion to Customers (Passionate about consumers and customers): Diageo demonstrates a
strong commitment to consumers and customers. Prioritizing customers and consumers, driven
by curiosity and insights, allows them to utilize data on consumer insights to drive growth and
revenue.

Mutual Respect (Value each other): At Diageo, people establish genuine relationships and
respect one another. Additionally, they value and consider diverse viewpoints and perspectives,
creating an atmosphere where every voice is heard, and people are encouraged to succeed.
Personal Development (Be Better): Diageo values hard work and personal improvement.
Employees are encouraged to continuously improve and grow, be innovative, take chances, and
learn from mistakes and successes.
Professional Pride (Proud of what we do): At Diageo, people are proud of their work, the way
they do it, and their overall impact on their customers and the business. The workforce is
responsible and upholds the highest moral and ethical standards.

RELATIONSHIP BETWEEN DIAGEO AND GUINNESS

As stated in the historical background, Diageo came into existence through the merger of
Guinness and the Grand Metropolitan (Tenon Tours, n.d.). Grand Metropolitan plc was an
English leisure, manufacturing, and real estate company. Before its 1997 merger with Guinness
plc to become Diageo, the business was a part of the FTSE 100 Index and traded on the London
Stock Exchange (Wikipedia contributors, n.d.).
Currently, Guinness functions as a major brand within the Diageo portfolio, using its rich history
and name recognition in the worldwide alcoholic beverages industry, while Diageo acts as the
parent business supervising operations and strategy. As a brand under Diageo, Guinness gains
access to Diageo's resources, distribution channels, and marketing expertise. Diageo has multiple
production facilities and sells its products all over the world, which gives Guinness access to a
large market.
However, despite being under Diageo, Guinness maintains its distinct brand identity and legacy
even after joining Diageo. It continues to brew its well-known stouts and other beer styles,
preserving its unique flavor and appeal in the international market.

STRATEGIES ADOPTED BY DIAGEO

After a careful examination of Diageo and Guinness Nigeria’s strategic priorities, and business
activities, the following strategies were identified:
Historical Strategies: Guinness initially focused on large-scale production and international
exports, becoming one of the first global beer brands. In Nigeria, the strategy focused on brewing
and marketing Guinness Foreign Extra Stout, making Nigeria the world's second-largest
Guinness market.
Current Strategies: Today, Guinness focuses on innovation, such as developing new products
(e.g., Guinness Nitro IPA), expanding into new markets, and leveraging digital marketing. In
Nigeria, they've expanded their product portfolio beyond stouts and lagers, introducing drinks
like Malta Guinness and Smirnoff Ice. They also invest in local farming of brewing ingredients.
Sustainability Practices: The company emphasizes sustainable brewing practices, including water
conservation, renewable energy use, and reducing carbon emissions.
Responsible Drinking Policies: Guinness promotes responsible drinking through various
campaigns and supports initiatives to reduce alcohol misuse.

Growth Strategy: This strategy entails using product development, market penetration, market
development, and diversification to increase the company's profitability and market share. This
aligns with the business growth strategy of expanding market share and enhancing profitability,
as discussed by Ansoff (1957) in the product-market growth matrix. They do this by acquiring
both new and established beverage businesses. The following are examples of strategic
acquisitions that have been made as part of their growth strategy.
 Diageo acquired Seagram's wine and alcohol divisions in 2001.
 In 2003, Diageo paid Jose Cuervo $100 million for fifty percent of the Don Julio Tequila
brand.
 In February 2011, a US$2.1 billion deal was agreed for Diageo to purchase the Turkish
liquor business Mey Icki.
 In May 2012, Diageo paid £ 300 million to acquire Brazil's top-selling premium cachaça
brand, Ypióca.
 For £1.28 billion, Diageo purchased a 53.4% share in United Spirits, an Indian spirits
producer, in November 2012.
 In November 2014, José Cuervo paid Diageo $408 million to become the sole owner of
the Don Julio tequila brand and the Bushmills Irish whiskey.

Operational and Resource Efficiency: Fostering a mindset where staff consistently look for
ways to enhance operations and eliminate waste is at the heart of Diageo's everyday efficiency
culture. This is similar to the Lean Management concepts that Womack and Jones (1996), which
center on generating greater value with reduced labor. Diageo produces a "fuel" for reinvestment
through process and resource optimization, similar to Barney's (1991) Resource-Based View
(RBV) of the company, which emphasizes the significance of effectively utilizing a company's
resources and capabilities.
Corporate Social Responsibility Strategy: Diageo is dedicated to teaching people about the
negative effects of alcohol and encouraging moderation. This aligns with Carroll's (1991)
framework for CSR, which emphasizes a company's obligation to have a beneficial social
influence. Diageo's strategy, which aims to influence behaviors for social good, mirrors the
Social Marketing Theory (Kotler & Zaltman, 1971) through activities against underage drinking
and drunk driving.

Sustainability Strategy: Diageo promotes sustainable design, water conservation, and a

decrease in carbon footprint by the Sustainable Development Goals (SDGs) of the United
Nations, especially Goal 12 (Responsible Consumption and Production). The company's
endeavors to produce a greater number of drinks with fewer materials are in line with the
Circular Economy concepts (Ellen MacArthur Foundation, 2013), which promote resource
efficiency and waste reduction.

Sustainability Practices: The company emphasizes sustainable brewing practices, including water
conservation, renewable energy use, and reducing carbon emissions.
Responsible Drinking Policies: Guinness promotes responsible drinking through various
campaigns and supports initiatives to reduce alcohol misuse.

GUINNESS BRAND PRODUCT OFFERINGS

Guinness offers the following variety of beers to its customers. More details on this product can
be found on the Guinness website
Guinness Draught: This beer was brewed in 1959 to commemorate the 200th anniversary of
Arthur Guinness's 9,000-year lease signing on St. James's Gate Brewery. It has a 4.2% alcohol
content, with a perfect blend of ingredients like malted barley, barley, roasted barley, hops,
nitrogen, yeast and water.
Guinness Hop House 13: After a brewer famously said "Needs more hops," Hop House 13 was
born. In response to his request, his fellow brewers produced a crisp, full-flavored lager that was
bursting with distinct scents of fresh hops and subtle notes of apricot and peach. With a 4.1%
alcohol content and a bright golden appearance, this beer is a rich blend of malted Barley, hops
(obviously), yeast, and water.
Guinness Foreign Extra Stout: Once known as West India Porter, the Guinness Foreign Extra
Stout has changed over time, but its essence hasn't changed. A robust beverage with a bold
character was produced from the recipe, which was brewed with extra hops to preserve the beer
in the ship's holds during four- to five-week trips in tropical climes. It has the popular signature
black appearance with a frothy head. With a 7.5% alcohol content, this beer is a perfect blend of
malted barley, barley, roasted barley, hops, yeast and water.
Guinness Smooth: The Guinness Smooth has all the qualities of the Guinness stout with an
additional creamy and smooth taste. Guinness Smooth is not just about taste; it's also about
feeling. The perfect blend of malted barley, barley, roasted barley, sorghum, hops, yeast, and
water gives it a dark ruby-red appearance. With a 4.5% alcohol content, this beer is brewed to
deliver a smoother, more refreshing flavor with a precise blend of sweet and bitter undertones.
Guinness Clear: Well, the Guinness Clear is just water. According to brewmaster Joseph
Glendenning, Guinness Clear was produced to make people aware of the advantages of spacing
their drinks with water. It was introduced in 2019 as part of their responsible drinking campaign.

ORGANIZATIONAL STRUCTURE
Being a sizable multinational corporation, Diageo usually uses an organizational matrix. This
organizational structure combines product-based divisions (beer, spirits, wine) with functional
departments (marketing, finance, operations). Employees in a matrix organization report to both
a divisional manager and a functional manager, which increases flexibility and facilitates
collaboration between various products and areas while utilizing functional expertise (Galbraith,
1971). Diversified businesses, such as Diageo, which sells its products in several markets,
frequently use this configuration (e.g., Guinness, Johnnie Walker, Smirnoff). A detailed
organizational chart can be found here: https://theorg.com/org/diageo
Situation Analysis for Guinness Nigeria (2021-2023)
The purpose of this situation Analysis is to:

 Understand factors influencing Guinness's performance and strategic decisions.

 Provide insights for informed decision-making and strategy formulation.

FRAMEWORKS: The analysis in this report adopts the following approaches.

i. SWOT Analysis.
ii. PESTLE, Market.
iii. Competitive Analysis.
iv. Porter’s Five Forces model was also used to analyze its customers and suppliers.

I. SWOT Analysis

Strengths:

 Strong Brand Heritage and Global Recognition: Guinness has a rich history and
strong brand presence globally, which fosters customer loyalty and brand trust.
 Diverse Product Portfolio: The company offers a wide range of products including
stout, ale, and lager, catering to various consumer preferences and helping to mitigate
risks associated with a single product line.
 Robust Distribution Network: Guinness Nigeria benefits from an extensive and
efficient distribution network, ensuring product availability and market penetration across
different regions.

Weaknesses:

 Dependency on Mature Markets for Revenue: A significant portion of revenue is

derived from established markets, which may have slower growth rates compared to
emerging markets.
 Limited Product Diversification Compared to Competitors: While Guinness has a
strong portfolio, it is still less diversified than some competitors, potentially limiting its
market reach and adaptability.
 Vulnerability to Fluctuations in Raw Material Prices: The company's profitability can
be significantly impacted by changes in the prices of raw materials, such as barley and
hops, which are influenced by global supply and demand dynamics.

Opportunities:

 Expansion into Emerging Markets: With the growing consumption of beer in emerging
markets, there is a substantial opportunity for Guinness to increase its market share by
targeting these regions.
  Innovation in Product Offerings: There is potential for growth through the introduction
of new and innovative products, such as craft beers and flavored variants, which can
attract a broader consumer base.
 Increasing Consumer Interest in Sustainable and Ethical Practices: As consumers
become more environmentally conscious, Guinness can leverage this trend by adopting
and promoting sustainable practices, potentially enhancing its brand image and customer
loyalty.

Threats:

 Intense Competition: Guinness faces strong competition from both global beer brands
and local producers, which can impact its market share and pricing strategies.
 Regulatory Changes: Changes in regulations related to alcohol sales, advertising, and
health guidelines can pose significant challenges to the company's operations and
marketing strategies.
 Economic Downturns: Economic instability and downturns can lead to reduced
disposable income and lower consumer spending on non-essential items like alcoholic
beverages, affecting sales and profitability.

As seen from the above SWOT analysis of Guinness Nigeria from 2021 to 2023 highlights
the company's strong brand and product diversity as key strengths, while also identifying areas
such as dependency on mature markets and exposure to raw material price fluctuations as
weaknesses. Opportunities lie in market expansion and product innovation, whereas threats
include intense competition and regulatory changes. This analysis provides a comprehensive
understanding of the factors influencing Guinness's performance and strategic decisions, offering
valuable insights for future strategy formulation and decision-making.

II. PESTEL Analysis

The PESTEL analysis of Guinness Nigeria highlights the multifaceted external
factors influencing the company's operations and strategic decisions. Political
regulations and taxation, economic recovery and currency fluctuations, social trends
towards health and sustainability, technological advancements, environmental
impacts, and legal compliance collectively shape the business environment.
Understanding these factors provides valuable insights for informed decision-making
and strategic planning.
 Political:

 Regulations: Stringent regulations on alcohol advertising and marketing in key markets

like the EU and the US limit promotional strategies and necessitate compliance with
various legal frameworks.
 Taxation: Fluctuating alcohol taxes impacts pricing strategies and consumer
affordability globally, influencing market competitiveness and profit margins.
 Government Policies: Changing government policies regarding alcohol consumption,
licensing, and trade agreements can affect market entry and operational strategies.
 Economic:

 Global Economic Recovery: The post-pandemic economic recovery is influencing

consumer spending on premium products like Guinness, potentially boosting sales in
economically recovering regions.
 Currency Fluctuations: Exchange rate volatility affects export revenues and
profitability, particularly in regions with unstable currencies.
 Inflation Rates: Rising inflation rates can increase production costs and affect consumer
purchasing power, impacting overall sales.
 Market Growth: Emerging markets with increasing disposable incomes present
opportunities for expansion and revenue growth.

 Social:

 Health Consciousness: An increasing trend towards healthier lifestyles is impacting

alcohol consumption patterns, with some consumers reducing or eliminating alcohol
intake.
 Sustainability: Rising consumer demand for environmentally sustainable products
affects production and packaging choices, requiring companies to adopt greener
practices.
 Cultural Preferences: Varied cultural attitudes towards alcohol consumption necessitate
tailored marketing strategies to cater to diverse consumer bases.

 Technological:

 Brewing Technology: Advances in brewing technology enhance production efficiency

and product consistency, leading to cost savings and higher quality products.
 Digital Marketing: Leveraging digital platforms for targeted marketing and consumer
engagement allows for more personalized and effective communication strategies.
 E-commerce: Growth in e-commerce platforms provides new channels for product
distribution and consumer interaction, increasing market reach.

 Environmental:

 Climate Change Impact: Vulnerability to climate-related disruptions in barley

production and water resources can affect raw material availability and production costs.
 Sustainability Initiatives: There is pressure to reduce carbon footprints and adopt
sustainable practices throughout the supply chain, from sourcing ingredients to packaging
and distribution.
 Resource Management: Efficient management of natural resources, including water and
energy, is crucial for maintaining sustainable operations and meeting regulatory
standards.

 Legal:
 Regulatory Compliance: Adherence to stringent local and international alcohol
regulations impacts operations and expansion plans, requiring continuous monitoring and
adaptation.
 Intellectual Property: Protection of trademarks and branding amidst global competition
is essential to maintaining brand integrity and market position.
 Labor Laws: Compliance with labor laws and regulations in different regions ensures
fair labor practices and prevents legal disputes.
 Health and Safety Standards: Meeting health and safety standards in production and
distribution processes is critical for consumer safety and brand reputation.

III. Market Analysis

The market analysis for Guinness Nigeria reveals a robust global beer market with
substantial growth opportunities. Guinness's strong market share and brand
recognition position it well to capitalize on these opportunities. By focusing on
innovation, tailored marketing strategies, and urban-centric consumer engagement,
Guinness Nigeria can strengthen its market position and drive future growth.
Understanding market size, growth trends, and consumer segmentation is crucial for
informed strategic planning and decision-making.

Market Size and Market Growth

 Global Market Valuation: The global beer market was valued at approximately $630
billion in 2023, growing at a compound annual growth rate (CAGR) of 3.1%. This
growth reflects the steady demand for beer and the potential for revenue expansion in
various markets.
 Guinness Market Share: Guinness's market share within the global beer market is
estimated at 1.5%. This indicates a significant presence, given the competitive landscape
with numerous global and local brands vying for market share.

Market Size and Market Growth Implications for Guinness Nigeria

 Revenue Opportunities: With the global beer market experiencing steady growth,
Guinness Nigeria has the opportunity to capitalize on increasing consumer demand. The
company's established brand and diverse product portfolio can help it capture a larger
share of this expanding market.
 Market Positioning: Maintaining a 1.5% market share in a highly competitive global
market underscores the strength and recognition of the Guinness brand. Guinness Nigeria
can leverage this strong brand equity to enhance its market positioning and attract new
consumers.
 Investment in Innovation: To sustain and potentially increase its market share,
Guinness Nigeria should invest in product innovation and diversification. Introducing
new beer variants, such as craft beers and flavored options, can cater to evolving
consumer preferences and drive growth.

Market Segmentation & Target Market

  Segments: The market is segmented into beer enthusiasts, occasional drinkers, and
premium beer consumers. Each segment represents a distinct consumer group with
unique preferences and consumption patterns.
 Target Market: The primary target market for Guinness Nigeria is individuals aged 25-
40, urban residents with disposable income. This demographic is likely to have a higher
propensity for premium beer consumption and brand loyalty.

Implications for Guinness Nigeria Based on the Market Segmentation & Target Market

 Tailored Marketing Strategies: Understanding the distinct needs and preferences of

different market segments allows Guinness Nigeria to develop tailored marketing
strategies. For instance, targeted advertising campaigns and promotions can be designed
to appeal specifically to beer enthusiasts or premium beer consumers.
 Urban Focus: By focusing on urban residents aged 25-40, Guinness Nigeria can
optimize its marketing and distribution efforts. Urban areas typically have higher
disposable incomes and a greater concentration of potential consumers, making them
ideal targets for premium products.
 Consumer Engagement: Engaging with the target demographic through digital
platforms and social media can enhance brand visibility and loyalty. Interactive
campaigns, influencer partnerships, and online promotions can effectively reach and
resonate with this tech-savvy audience.

Competitive Analysis
Guinness Plc operates primarily in the alcoholic beverages industry, which is characterized by
significant global competition and evolving consumer preferences (Euromonitor International,
2023). The market is influenced by regulatory environments, economic conditions, and shifts in
consumer behavior toward premiumization and health-conscious choices (Datamonitor, 2022).
The competitive analysis of Guinness Nigeria reveals a strong market position supported by the
global brand strength of Diageo. Despite intense competition from major players like AB InBev
and Heineken, Guinness Nigeria can leverage its brand equity, innovative product offerings, and
strategic market insights to maintain and grow its market share. Understanding the strengths and
weaknesses of competitors, alongside detailed consumer insights, provides a solid foundation for
informed strategic planning and competitive positioning.

Key Competitors: Identification and Analysis

Guinness Plc faces competition from several major players in the global alcoholic beverages
market. Key competitors include:
 1. Diageo plc: Diageo is a multinational alcoholic beverages company and the parent
company of Guinness Plc. Although Diageo is the parent company, it holds a diverse
portfolio of brands across spirits, beer, and wine, including Johnnie Walker, Smirnoff,
and Baileys (Datamonitor, 2022). These brands indirectly compete against themselves by
vying for consumer attention within the same market segments.
2. Anheuser-Busch InBev (AB InBev): AB InBev is one of the largest beer companies
globally, with a broad portfolio that includes Budweiser, Corona, and Stella Artois. The
company's extensive distribution network and strong brand equity pose significant
competitive challenges (Euromonitor International, 2023). AB InBev’s aggressive
marketing strategies and economies of scale enable competitive pricing and market
penetration.
3. Heineken NV: Heineken is another major competitor known for its premium beer
offerings and global presence. The company's strategic acquisitions, like the purchase of
Lagunitas and other regional breweries, and innovations in sustainability and packaging
have bolstered its market position (Euromonitor International, 2023). Heineken’s
commitment to quality and premium branding attracts a loyal customer base.

Market Share, Strengths, and Weaknesses

Detailed market share data specific to Guinness Plc was not disclosed in the sources reviewed.
However, competitors generally maintain strong market positions through extensive brand
recognition, diverse product portfolios, and global distribution networks.

Strengths of Competitors:

 Diageo plc: Strong brand portfolio and global reach allow it to diversify risk and
capitalize on various market segments.
 AB InBev: Extensive distribution network and economies of scale enable competitive
pricing and efficient market penetration.
 Heineken NV: Premium brand image and innovation in sustainable practices attract
environmentally conscious consumers and enhance brand loyalty.

Weaknesses of Competitors:

 Diageo plc: Vulnerability to economic fluctuations and regulatory changes can impact
profitability, especially in volatile markets.
 AB InBev: Dependency on the beer segment makes it susceptible to market shifts and
trends away from beer consumption; exposure to currency risks can affect international
earnings.
 Heineken NV: Limited exposure to emerging markets compared to competitors restricts
its growth potential in rapidly developing regions.

Competitive Positioning: Guinness Plc's Market Position Relative to Competitors

Guinness Nigeria, a subsidiary of Guinness Plc, holds a significant market position in Nigeria's
alcoholic beverages market. Known for its stout and other beer brands, Guinness Nigeria benefits
from Diageo's global brand strength and local market knowledge. The company faces
competition primarily from local and international beer brands, leveraging its strong brand equity
and distribution network to maintain market leadership in certain segments (Euromonitor
International, 2023).

 Strategic Advantages: Guinness Nigeria's affiliation with Diageo provides access to a

vast array of resources, including marketing expertise, financial support, and innovative
technologies. Its deep understanding of the local market helps tailor products and
marketing strategies to Nigerian consumers.
 Market Challenges: Despite its strong position, Guinness Nigeria must navigate
challenges such as regulatory constraints, fluctuating consumer preferences, and intense
competition from both established and emerging brands.

Consumer Analysis

Customer Demographics

Guinness Plc's consumers are predominantly adults aged 18 and above, with a skew towards
males in many markets. The brand attracts consumers across various income levels, particularly
those seeking quality and heritage in their beverage choices (Euromonitor International, 2023).

Customer Behavior: Buying Patterns, Preferences, and Brand Loyalty

Consumer behavior trends indicate a growing preference for premium and craft beverages among
certain demographics, alongside a sustained demand for established brands like Guinness Stout.
The company's ability to innovate with new product offerings and adapt to changing consumer
tastes influences its market presence and consumer loyalty (Datamonitor, 2022).

 Premiumization Trend: There is a noticeable shift towards premium and craft beer,
with consumers willing to pay more for quality and unique flavors. Guinness’s reputation
for quality positions it well to benefit from this trend.
 Brand Loyalty: Established brands like Guinness enjoy strong brand loyalty, but this
must be continually nurtured through consistent product quality and engaging marketing.

Customer Feedback: Insights from Customer Reviews, Surveys, and Feedback

Customer feedback collected through surveys and reviews highlights positive perceptions of
Guinness Plc's product quality, heritage appeal, and brand image. Areas for improvement often
include pricing strategies to remain competitive in diverse market segments and enhanced
sustainability practices to align with evolving consumer expectations (Euromonitor International,
2023).

 Positive Feedback: Customers frequently commend the rich flavor and consistency of
Guinness products, as well as the brand’s heritage and iconic status.
  Areas for Improvement: Pricing remains a critical factor, with some consumers finding
premium products too expensive. Additionally, increasing focus on sustainability could
help attract environmentally conscious consumers.

To perform a Porter's Five Forces analysis of Guinness Nigeria, we need to examine the
following forces: the bargaining power of customers, the bargaining power of suppliers, the
threat of new entrants, the threat of substitute products, and the intensity of competitive rivalry.
Your SWOT, PESTEL, Market, and Competitive analyses provide a solid foundation. Let's delve
into the specific areas of customer and supplier power.

IV. Porter's Five Forces Analysis for Guinness Nigeria

1. Bargaining Power of Customers

Customers’ Characteristics and Impact:

 Customer Segmentation: Guinness Nigeria's primary customers include beer

enthusiasts, occasional drinkers, and premium beer consumers, predominantly urban
residents aged 25-40 with disposable incomes. This segmentation points to a varied
customer base with differing demands and price sensitivities.
 Customer Loyalty: Strong brand heritage and recognition foster significant customer
loyalty, particularly among beer enthusiasts and premium consumers. However, shifting
consumer preferences, especially toward health consciousness and sustainable products,
could alter loyalty dynamics.
 Switching Costs: The cost for consumers to switch to another beer brand is relatively
low. However, brand loyalty and product differentiation (e.g., taste, quality, heritage)
play a crucial role in retaining customers.

Overall Customer Bargaining Power: Moderate. While the brand loyalty and product
differentiation provide some leverage to Guinness, the low switching costs and diverse consumer
preferences give customers moderate bargaining power.

2. Bargaining Power of Suppliers

Suppliers’ Characteristics and Impact:

 Key Inputs: The primary raw materials for Guinness include barley, hops, water, and
packaging materials. Quality and consistency in these materials are critical to maintaining
product standards.
 Supplier Concentration: The market for raw materials like barley and hops can be
concentrated, giving suppliers some power, especially during shortages or price hikes
influenced by global supply and demand dynamics.
 Switching Costs: Switching suppliers may incur costs related to ensuring consistent
quality and supply reliability, which can be significant given the importance of
maintaining product standards.
  Vertical Integration: Guinness Nigeria benefits from Diageo’s extensive global supply
chain, which can help in negotiating better terms and reducing dependency on any single
supplier.

Overall Supplier Bargaining Power: Moderate. The concentration of key raw material
suppliers and the importance of these inputs provide suppliers with some power, but Diageo’s
global supply chain network helps mitigate this to an extent.

3. Threat of New Entrants

 Barriers to Entry: High. Significant brand equity, established distribution networks, and
economies of scale present substantial barriers to new entrants. Additionally, regulatory
requirements and the need for substantial capital investment further deter new entrants.
 Brand Loyalty and Product Differentiation: Strong brand loyalty and product
differentiation based on quality and heritage create additional hurdles for new
competitors trying to capture market share.

Overall Threat of New Entrants: Low. The combination of high entry barriers and strong
brand loyalty significantly reduces the threat of new entrants.

4. Threat of Substitute Products

 Substitute Products: The primary substitutes for beer include other alcoholic beverages
(wine, spirits) and non-alcoholic beverages (soft drinks, juices). The growing trend
towards health consciousness also brings in non-alcoholic and low-alcohol beer variants
as substitutes.
 Consumer Preferences: Increasing health awareness and a shift towards sustainable
products can drive consumers to explore these substitutes, especially if they perceive
them as healthier or more ethically produced options.

Overall Threat of Substitutes: Moderate. While strong brand loyalty to Guinness mitigates
some risk, changing consumer preferences towards health and sustainability could enhance the
threat of substitutes.

5. Intensity of Competitive Rivalry

 Key Competitors: Major competitors include AB InBev, Heineken, and local breweries.
The competitive landscape is characterized by aggressive marketing strategies, strong
brand portfolios, and extensive distribution networks.
 Market Position: Guinness Nigeria holds a significant market position, supported by its
strong brand and product diversity. However, intense competition necessitates continuous
innovation and effective marketing strategies to maintain and grow market share.

Overall Intensity of Competitive Rivalry: High. The presence of strong global and local
competitors, coupled with aggressive marketing and continuous innovation, creates a highly
competitive environment.
RESULTS OF PORTER’S FIVE FORCES MODEL ON GUINNESS NIGERIA

 Bargaining Power of Customers: Moderate

 Bargaining Power of Suppliers: Moderate
 Threat of New Entrants: Low
 Threat of Substitutes: Moderate
 Intensity of Competitive Rivalry: High

This analysis indicates that while Guinness Nigeria enjoys strong brand equity and significant
market presence, it must continuously innovate and adapt to changing consumer preferences and
competitive pressures to sustain its market position.
FINANCIAL ANALYSIS
COMPANY RATIOS

RATIO 2023 2022 2021

Profitability ratios:
Gross profit margin 34.1% 35.1% 28.5%
Operating profit margin 10.2% 11.6% 6.2%
Net profit margin -7.9% 7.6% 0.8%
Return on Assets -7.5% 7.3% 0.7%
Return on Equity -20.2% 17.4% 1.7%
Liquidity ratios:
Current ratio 0.77:1 1.03:1 0.9:1
Quick ratio 0.57:1 0.73:1 0.6:1
Solvency ratios:
Debt to equity ratio 76.66% 58.27% 56.15%
Interest coverage 0.44 times 11.22 times 2.13 times
Historical
performance
Revenue growth 10.94% 28.93% 53.69%
Net income growth -216.08% 1146.78% 110%

COMPANY AVERAGE RATIOS

RATIO Average of 2021 Average of 2022

Gross profit margin 0.285 0.351
Operating profit margin 0.062 0.116
Return on Equity 0.017 0.174
Net profit margin 0.008 0.076
Return on Assets 0.007 0.073
Grand Total 0.0758 0.158
 Debt to equity ratio

90%
80% 76.66%
70%
58.27% 56.15%
60%
50%
40%
30%
20%
10%
0%
0.44 times 11.22 times 2.13 times
Interest coverage

15.00%

10.00%

5.00%

0.00%

-5.00%

-10.00%
2023 2022 2021

Operating profit margin Return on Assets Return on Equity

INDUSTRY AVERAGES

RATIO 2023 2022 2021

Profitability ratios:
Gross profit margin 34.8% 30.2% 25.2%
Operating profit 8.9% 8.5% 5.2%
margin
Net profit margin -10.1% 8.2% 1.2%
Return on Assets -4.8% 4.2% 1.4%
Return on Equity -6.8% 13.6% 10.2%
Liquidity ratios:
Current ratio 0.9:1 0.8:1 0.7:1
Quick ratio 0.65:1 0.53:1 0.42:1
COMMENTS:
Profitability ratios:
The gross profit margin of Guiness Nigeria plc showed a significant improvement from 2021 to
2022, increasing from 28.5% to 35.1%. This indicates a notable enhancement in the company's
ability to manage production costs relative to its revenue, potentially due to higher sales prices,
reduced costs of goods sold, or improved operational efficiency.
In 2023, the gross profit margin slightly decreased to 34.1%, which, while still higher than 2021,
suggests a minor decline in cost management efficiency compared to 2022. This could be due to
various factors, such as increased production costs, changes in market conditions, or pricing
strategies.
The case is the same for the operating profit margin which showed a notable improvement from
2021 to 2022 and remained relatively stable in 2023, only experiencing a slight dip. Both the
gross profit margin and operating profit margin outperformed the industry average over the 3
year period, which indicates a strong market position in the beverage industry.
The net profit posted a significant increase from 2021 to 2022. However, it experience a huge
decline from an increase of 7.6% in 2022 to a decline of 7.9% in 2023. Upon further
investigation, this sharp decline is attributed to a huge increase of 2401.6% in its finance costs as
a result of increased loans obtained.
Overall, the company demonstrated a strong improvement in profitability from 2021 to 2022,
maintaining a relatively high gross profit margin and operating profit margin in 2023 despite the
slight dip. The consistent performance in the past two years reflects the company's resilience and
ability to sustain a solid profit margin in a potentially challenging market environment. However,
the increase loans is a concern that needs to be controlled in order for it not to affect its liquidity
position.

Liquidity ratios:
In 2021, the current ratio was 0.9:1, indicating the company had slightly fewer current assets
than liabilities, suggesting a potential liquidity issue.
In 2022, the current ratio improved to 1.03:1, indicating a better liquidity position where the
company had more current assets than liabilities.
In 2023, the current ratio decreased significantly to 0.77:1, indicating a deterioration in liquidity
and that the company had considerably fewer current assets than liabilities.
In 2021, the quick ratio was 0.6:1, suggesting that the company had limited liquid assets to cover
its short-term liabilities.
In 2022, the quick ratio improved to 0.73:1, showing a better liquidity position but still below the
ideal level.
In 2023, the quick ratio dropped to 0.57:1, indicating a worsening liquidity position and
increased reliance on inventory to meet short-term obligations.
Overall, the liquidity position of Guiness Nigeria plc improved from 2021 to 2022, as reflected
by the increases in both current and quick ratios. However, there was a notable decline in both
ratios in 2023, indicating a significant deterioration in the company's ability to meet its short-
term obligations. This trend suggests that the company may face challenges in managing its
liquidity and could struggle to pay its liabilities as they come due without improving its current
asset management or reducing its short-term liabilities.

Solvency ratios:
In 2021, the debt to equity ratio was 56.15%, indicating a moderate level of debt relative to
equity.
In 2022, the ratio increased slightly to 58.27%, showing a marginal rise in debt usage.
In 2023, the ratio surged to 76.66%, indicating a significant increase in the company's reliance on
debt financing, which could pose higher financial risk.
The interest coverage ratio in 2021 was 2.13 times, suggesting the company could cover its
interest expenses slightly over twice with its earning. The ratio improved dramatically to 11.22
times, indicating a strong ability to cover interest expenses and a significant improvement in
earnings relative to interest obligations. In 2023, the ratio plummeted to 0.44 times, indicating
that the company could not cover its interest expenses with its earnings, signaling severe
financial distress and potential insolvency risk.
Overall, the liquidity position of Guineas Nigeria plc improved from 2021 to 2022, as reflected
by the increases in both current and quick ratios. However, there was a notable decline in both
ratios in 2023, indicating a significant deterioration in the company's ability to meet its short-
term obligations. This trend suggests that the company may face challenges in managing its
liquidity and could struggle to pay its liabilities as they come due without improving its current
asset management or reducing its short-term liabilities.

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