How Beer Industry Powers Global Economy

A report by Oxford Economics on the economic impact of beer industries around the world found that beer is an indispensible component of the Nigerian and global economy,writes Dike Onwuamaeze

How much does the beer industry contribute to Nigeria’s economy and indeed the world economy? The first-ever worldwide report to assess the beer industry’s global economic impact, which was released by the World Breweries Alliance (WBA) on March 3, 2021, found that one in every 110 jobs in the world is linked through direct, indirect, or induced impact channels to the beer sector. It also revealed that the beer industry contributed $555 billion to global GDP, generated 23.1 million jobs and contributed $262 billion governments’ revenue globally in 2019.

This report covered 70 countries, including Nigeria, which controlled 89 per cent of global beer market. The report was titled “Beer’s Global Economic Footprint.” It was written by Oxford Economics for the Worldwide Breweries Alliance (WBA).

The report also showed that the beer industry contributed $2.294 billion to Nigeria’s GDP, generated 309,200 jobs and contributed $526.2 million into Nigeria’s government revenue in 2019. It also ranked Nigeria 30th out of 70 top beer markets in the world that were covered by the report. 

A breakdown of the economic impact of beer market on Nigerian economy, according to the report, further revealed the beer industry made $897.5 million indirect impact on the Nigeria’s GDP while its induced and direct impacts were estimated at $466.5 million and $875.4 million respectively.

Furthermore, the report showed that of the 209,200 jobs generated by the beer industry in Nigerian economy in 2019 is made up of 148,423 indirect jobs, 87,508 induced jobs and 73,233 direct jobs.

Impact of beer industry

 The Oxford Economics study of the impact of beer industry on Nigeria economy also gave a breakdown of the $526. 2 million that the sub-sector contributed to government’s tax revenue. It stated that its direct impact on government revenue in 2019 was $442,180,705 while $60,890,639 and $23,154,849 were as a result of indirect and induced impact on tax revenues respectively.

It also stated that the $2.294 billion the beer industry contributed to Nigeria’s GDP in 2019 came from activities in the brewer and upstream sector and the downstream sector. The economic footprint of the upstream value chain of the beer industry was put at $1.6 billion, which is made up of $598.7 million, $695.9 million and $347.5 million from direct, indirect and induced activities respectively.

The report stated that the economic footprint of the beer sub-sector in the downstream value chain in Nigeria comprised industry’s impact on “on-trade” such as bars, pubs, clubs, sports arenas and restaurants as well as the “off-trade” activities like retailers

The downstream segment contributed $284.7 million, $201.6 million and $119 million via direct, indirect and induced activities respectively.  

The report said that domestic beer sector’s GDP multiplier captured the level of activity supported in the rest of the economy for every $1 contributed by the beer sector to GDP. It should be noted this only refers to domestic activity, and excludes international trade and supply chain effects.

The Oxford Economics said: “The production and consumption of beer reaches all parts of the global economy.

“For the first time this website and report quantify the total economic impact of the global brewing sector between 2015 and 2019.

‘The study relies on 2019 data rather than 2020 because of the distortions caused by COVID-19. The effects of the pandemic mean that 2019 is more representative of a normal year for the beer sector.

“The global data cover 70 countries representing 89 per cent of global beer volumes. The data were supplied by four major brewers: Anheuser-Busch InBev, Carlsberg Group, Heineken, and Molson Coors Beverage Company.”

All monetary values are expressed in United States of America Dollars in constant 2019 prices and exchange rates.

The Chief Executive Officer of the Oxford Economics, Mr. Adrian Cooper, who presented the report during a webinar, said that the beer sector is primed to contribute to post COVID global economic recovery as its economic significance is larger in faster growing economies and is triggering substantial economic activities in the agriculture, distributive trade and hospitality industry.

Beer value chain

 The Oxford Economics asserted that the beer sector is important to economies all over the world and impacted all aspects of the beer value chain, from brewers, distributors, retailers, and the hospitality industry, to the suppliers each relied on.

It said that the study relied “on 2019 data (instead of 2020). We demonstrate this because of the distortions caused by COVID-19. The effects of the pandemic mean that 2019 is more representative of a normal year for the beer sector.”

The report said that “while making and delivering the beer people love, the activities of the beer sector sustain considerable amounts of GDP, jobs, and government revenue in economies around the globe. Brewers and beer’s downstream value chain make important direct contributions, deliver substantial indirect impacts by buying goods and services from their suppliers, and induce further economic activity by paying wages and supporting wages along the supply chain.

“Based on our detailed analysis across 70 countries, we estimate that, in 2019, the beer sector’s total economic impact amounted to $555 billion gross value added (GVA) contribution to global GDP, supporting 23 million jobs. In total, the beer sector supported 0.8 per cent of GDP across the 70 countries, or $1 for every $131 of GDP generated in these economies in 2019. To put that in context, beer sector’s GVA contribution to global GDP is comparable with Belgium’s economy in 2019 ($533 billion) and the number of jobs supported is equal to the entire Italian labour force of 23 million people.”

The report stated that it is important to note that the economic significance of the beer sector is larger for lower income countries.

It said: “While in high-income countries the beer sector contributed an average 0.9 per cent to national GDP, in low-income economies the equivalent figure is 1.6 per cent. Similarly, the beer sector supports a proportionally larger number of jobs in lower income than in high-income countries (1.4 per cent vs. 1.1 per cent of national employment). The beer sector also supports significant tax payments for global governments.

“Combined, we estimate that brewers and their downstream value chain made and supported $262 billion in tax payments to governments around the world. Of the total tax contribution, $109 billion are made up of VAT and excise duties paid on beer sales.”

Global economic impact

The Chief Executive Officer and President of the WBA, Mr. Justin Kissinger, explained that the report was the first holistic view of the global economic impact of the beer sector.

Kissinger said: “While many previous studies exist for individual countries, none have ever attempted a rigorous, coherent estimate of the global impact with the same metrics at the same moment, nor have they fully considered elements of international trade like the importance of barley and hops from certain countries. What is apparent from the report is the positive role that beer plays in the economy.”

Kissinger enthused that what was apparent from the report is the positive role that beer had been playing in the global economy. “We have learned things we suspected, but never previously had data to verify: brewing is a highly productive activity, with spillovers of human capital into the wider economy. 

“It underpins jobs and GDP throughout local communities both upstream and downstream. And while the impact is large everywhere, it is greatest in lower income countries where development is so important to rising incomes. Our commitment to the long-term success of our communities spans economic, social and environmental development.

“Beer is a naturally low-alcohol, perishable product, that remains close to its agricultural roots and depends on local storage and distribution to get to consumers. Even as consumers’ love for beer has created an international industry, the total global impact remains concentrated in local impacts at national level in each country.

“As the lowest strength alcohol option for consumers, beer can play a positive role in social development. With innovative products like low- and no alcohol options and brand-led messaging that empower and encourage consumers to make responsible choices, beer can be part of the solution for reducing the harmful use of alcohol. 

“In addition, we are investing to reduce water use, energy consumption and CO2 emissions within breweries and across the extended supply chain. At the heart of this global impact are brewers themselves. 

“When COVID19 caused unprecedented disruption in the global economy, it became apparent how central we as brewers are to the success of our communities. We stepped forward to support a value chain running from agriculture and distribution to retail and hospitality that was disproportionately hurt by the restrictions the pandemic response required. At a moment when the global economy seems to be on the cusp of recovering, ‘Beer’s Global Economic Footprint’ highlights our potential to invigorate the economy through our core work. 

“Brewers aren’t just building back. We have the ambition to build forward. Our aim is to leverage our role as brewers, employers, and as partners, to continue to responsibly contribute to our communities and society. This report strengthens the foundation to move that vision forward,” Kissinger said.

Beer Industry in H1 2021

Speaking in the same vein, the Chief Operating Officer of Americas for the IWSR Drinks Market Analysis, Ms. Brandy Rand, said that the beer sector has been able to grow its market and experience a relatively better H1 2021 than spirits and wine but still remained behind its H1 2019.

Rand stated that “no and low alcoholic beer is the most resilient and fastest growing segment of beer as moderation trend solidifies.”