WHAT DOESN’T KILL YOU, MAKES YOU STRONGER: David Valencia talks about his first year as Nile Breweries’ MD and leading the brewer through the the pandemic stronger David Valencia was appointed last December 2020 to lead Nile Breweries Limited, replacing Thomas Kamphuis. Having arrived mid pandemic, David’s 7+ years in the beer industry, most of it in Africa was put to test. A little over 12 months later, he tells CEO East Africa Magazine’s Muhereza Kyamutetera that, although it has been a year of extremes, it has been very fulfilling, with some good numbers to look at. There is also a good reason to celebrate- Nile Special, the company’s flagship brand won its 21st Monde Gold Medal. Nile Special Stout, the company’s new baby on the market, also won gold.

It is just about a year since you assumed leadership of Nile Breweries Limited. What has been your experience so far? What’s your take on the Ugandan alcohol industry? How for example is it different from the Southern Africa and the South American markets where you have considerable experience?

I’m always happy to share a bit of our business performance and my experience in Uganda. It has been a year of extremes and I certainly feel very fulfilled!

Nile Breweries has certainly led the way in looking at challenges through a lens of opportunity. We have delivered on these opportunities always true to our principles of Bringing People Together for a Better World with uncompromising quality.

Despite considerable operating restrictions at the retail level and prolonged curfew and lockdowns which affect sellable hours, we have managed to invest in being part of the solution.

At the peak of the pandemic this year we supplied 300 oxygen cylinders to 17 referral hospitals in Uganda through the Nile Oxygen Campaign. Recently, we have in collaboration with the Ministry of Health and other public and private partners, supported the vaccination of over 20,000 lives across the country. We have also introduced energizing and bold campaigns like the Club Beat Coin. This campaign has helped reactivate the trade and industry as we invested billions in an initiative that benefited both consumers and the value chain. These are just a few examples of how Nile Breweries is emerging out of the pandemic stronger and more agile or as we call it internally, Mighty Like the Nile.

We operate in a highly competitive market that has a high degree of unfair competition derived from illicit trade. The magnitude of illicit is the main challenge and difference from the other markets I have operated in.

Uganda is a hot spot for illicit alcohol activity, research points that close to 65% of the market by volume is illicit. This places considerable pressure on growth and limits our ability to magnify our value chain impact. It is also a source of substantial fiscal loss amounting to USD458M (UGX1.63 trillion) per annum according to the 2021 Euromonitor report on illicit alcohol in Uganda.

We have seen no real evidence that tax stamps have delivered in formalizing the industry further. This challenge poses an enormous opportunity for all. Fiscal revenues can be accelerated with effective regulation on the illicit and incentives to accelerate the formal sector.

You came in at the centre of the pandemic and hit the ground running. How have you been impacted by the pandemic and how has Nile Breweries and the industry in general coped? What have you learned and or unlearned?

We had a strong Q1 2021. We delivered performance similar to pre-pandemic levels. Our commercial focus and execution delivered strong results which carried forward into the second quarter where we delivered solid double-digit growth.

However, the lockdown during mid-year affected our momentum and expectations for the year. The industry is far from its potential. We see retail and thousands of families struggling after almost two years of restrictions. We have been very deliberate in managing our costs to secure our people’s livelihoods, investing in their safety (over 90% of our people are vaccinated) as we guarantee our ability to be there for Uganda when it needs us most.

We have learned that our resilience is unmatched and that even in the toughest of circumstances we will always be a beacon of solidarity because we have a purpose: Bringing People Together for a Better World, a world with more cheers. We have a company that is extremely solid and will be here for the next 100 years. Stay tuned for some great innovations to come soon!

Prior to the pandemic, NBL was the market leader? Has this changed?

It’s a great question and I’m always fascinated by how this question always pops up. Clearly, Ugandans are competitive! Let me ask you a simple question, what constitutes a market leader in today’s world?

If you look at reputation, being a force for good, bold initiatives, comprehensive economic value-added as well as the company with the strongest and most loved local brands; I think the answer is very clear!

On a more serious note, competition is great for us and the country. Overall, we see strong competitor activity with solid investment, and we have indeed felt pressure primarily on our lower margin affordable portfolio. However, as we speak, our Club and Nile Special brands will be closing the year at an all-time 12 month rolling high. According to external sources we retained our leadership in the last 12 months.

On another note, bottom line performance is key during crisis moments as it dictates a company’s ability to perform in the long term and emerge stronger than before. From this perspective, we are delivering solid growth this year without sacrificing the world-class profitability we possess.

The Standard Bank PMI report indicates that the private sector has turned to heavy discounting this year in desperation to deliver top-line results to cover costs and stay afloat at an expense of profitability. Having strong bottom lines in the private sector is key so that we can support economic reignition post-pandemic.

In your view and the industry’s view- what do you think needs to be done to spur the industry’s come-back and growth?

We hint at this every time we can, it is very important! We were very clear on our perspective during the Economic Forum we held in August this year. We are well integrated into a broad value chain allowing us to play our role in strengthening several areas of the Ugandan economy.

There is a need for careful balancing of short-term windfalls with the potential for significant long-term value, fiscal and employment creation. For Nile Breweries to execute capital investment plans, a stable excise and corporate tax rate and lower Digital Tax Stamps costs are fundamental. We believe that better enforcement on the informal alcohol sector and fair pricing of the digital tax stamps are key in both government revenue target achievements and NBL’s continued growth.

Further, it is imperative the economy reopens. The night economy is a key component in economic reignition. There are thousands of livelihoods at stake. Trading restrictions and reopening of the night economy is an urgent matter. We are committed to supporting a safe reopening and above all, I’d like also to take the opportunity to thank the government for trusting us and allowing us to continue to operate during the pandemic.

Recently, Nile Breweries, under your Nile Special brand, launched the “Unmatched in Gold” Campaign— what is the campaign about?

Nile Breweries’ most awarded beer, Nile Special has over the years received international recognition at the annual Monde Selection Awards by the “International Quality Institute” in Belgium. The campaign celebrates its consistent and world-class recognised quality. It also takes the opportunity to meet gold with gold as we recognise Ugandans who have brought pride to the country like Olympic medalist Joshua Cheptegei. With 21 Monde Gold Wards, Nile Special is simply Unmatched in Gold!

Nile Special, with 21 Monde Gold medals, is arguably the most awarded beer internationally. For the uninitiated- what is the Monde Gold medal about and what goes into the winning of this Gold Medal? Why is this important for the consumer?

I would say with confidence that Nile Special is indeed amongst the most awarded internationally, and I would dare to say that it is perhaps the most awarded in the East African region. It is truly Ugandan pride from the source, brewed with 99% local material, recognized globally by the “International Quality Institute” in Belgium.

Our number one brewing pillar is quality first. Quality is not an accident; it is a process that everyone in NBL owns. This is why several of our brands have been recognized with Monde Gold awards. However, what sets Nile Special apart is its unmatched streak of 21 Gold Medals. For the consumer, this amazing achievement means that our loved Nile Special is uncompromised in quality, it is world-class and it is proudly Ugandan.  

Why launch the campaign now? Are you responding to any particular movements in the competitive landscape?

Despite 2021 challenges, Uganda has reasons to celebrate. What better moment to celebrate achievements than the special festive season of December? Let us come together and celebrate a better world with responsibility, with the most awarded beer in Uganda.

Just about this time in 2019, Nile Breweries launched Nile Special Stout, a sub-brand of the successful Nile Special. How has been the market reception and performance?

Speaking of Gold, did you know Nile Special Stout was also awarded this year by the Monde International quality institute? Nile Special Stout has a winning liquid loved by those who experience it. We have high expectations on the Ugandan Stout by Nile Special as the economy reopens!