By Victoria Edem
Consumers in Nigeria are shifting their patronage from listed companies in the food, home and personal care sector to smaller ones which offer lower prices. This was contained in the 2019 Consumer Report of Coronation Research, a subsidiary of Coronation Asset Management Limited, released recently.
The report, titled ‘Power to the Price Point’, presents an in-depth analysis of the Nigerian food & consumer industry from data garnered from a detailed market study. The report, viewed as a radical re-interpretation of the developments in the industry, identifies the possible winners and losers in the sector.
The report showed that though Nigeria’s and urban population is growing at 2.6% and 4.6% per annum, respectively, the sales of listed food and consumer product companies are declining relative to population growth. “The sales of the main listed food and consumer product companies, when adjusted for inflation, are not growing in line with the country’s population figures,” the report said. The report, which examined the performance of some industry players, found that “Nestle Nigeria has shown positive inflation adjusted growth over the past eight years, but the record for Flour Mills of Nigeria, Unilever Nigeria and PZ Cussons Nigeria is open to question.”
Based on these findings, the research sought to know: “If Nigerian consumers are not buying the bulk of their food and consumer products from these companies, then who are they buying from, where, and at what prices?” According to the research, “The energy and momentum in the food and HPC industry appears to have shifted away from the large listed players towards a number of low-cost, low-price point competitors and entrants.”
To arrive at this conclusion, Coronation Research devised a model household living on a modest income in Lagos and sent them shopping in outer Lagos. The shopping basket they brought back showed that Nigerian consumers get the bulk of their purchases from an array of smaller companies and less from bigger and listed companies such as Nestle Nigeria, Flour Mills of Nigeria, Unilever Nigeria and PZ Cussons Nigeria, among others.
The report attributes this consumer preference to rising unemployment, poverty and declining wages. With the pressure on wages, consumers tend to be sensitive to prices in their purchase decisions, which explains their patronage of smaller companies which offer lower prices. “Our macro-economic research suggests that upper middle-class earnings are falling in real terms and that there is downward pressure on private sector wages generally. Price is the key battle ground and companies with the lowest price points are prospering,” the report said.