The packaged foods market in Nigeria has been on the upward swing in recent times, owing to rising sophistication of the consuming public. The growth of the market has remained strong and steady, a development that analysts attribute to the country’s large population which translates to growing demand for the products.
Analysts note that increasingly, medium income earners now patronise grocery stores which hitherto seemed to be the exclusive preserve of the higher income class.
“The increasing sophistication of Nigerian consumers and improved product quality are growth drivers in this market. As a result, an average Nigerian spends more on packaged foods, especially on items previously regarded as luxuries.
Food items that are fast and convenient, such as pasta and noodles, will continue to experience dynamic growth in Nigeria,” Cedric Bra, a retail market analyst with Euromonitor, observed.
Bra said the Nigerian retail market would experience more growth due to several other factors, including political stability, economic recovery, higher disposable incomes and increasing company advertising.
According to him, packaged food is one of the most dynamic markets in Nigeria, with many new entrants and products each year, by both domestic and foreign companies. He further observes that multinationals dominate the market, except where local companies are protected by legislation.
This view is supported by the number of retail firms coming into the country to do business. South African Shoprite said the Nigerian market can support up to 700 new outlets, while another South African retailer Massmart, which currently runs two stores in the country, said it sees scope for 20 stores in Nigeria.
“We have identified five or six cities in Nigeria and we see the potential of between 10 and 20 Game Stores”, its chief executive, Grant Pattison, said on Wednesday in a conference call.
He added: “By all simple metrics, Nigeria has the potential to be larger than South Africa, but it has some way to go in terms of infrastructure and political stability.
“Several cities in Nigeria have populations of more than eight million people. I can’t say all of them have the same spending power, but Nigeria can support the same number of supermarkets as South Africa,” Shoprite chief executive, Whitey Basson told Reuters in an interview.
“Even if you have 60 percent of the population living in poverty, 40 percent of the Nigerian population is still bigger than the South African population.”
Shoprite runs about 950 supermarkets with 729 of those in South Africa and two stores in Nigeria.
It plans to open 12 more stores outside of South Africa by the end of June, including in Illorin and Abuja.
Uche Nzeka, Agricultural Marketing Specialist with the Global Agricultural Information Network, also observes that the increasing demand in the market has spurred more importation of packaged products, estimated at $750 million in 2010 and increasing above 20 percent in 2011.
“Changing demographics and lifestyles are resulting in increasing consumer demand and preference for packaged retail foods. Domestic food processing is underdeveloped and there is greater reliance on imports. The EU, Asian and South African suppliers are dominant,” Nzeka noted.
Some of the outstanding players in this market include Cadbury Nigeria Plc, Nestle Nigeria Plc, UAC Foods, De-United Foods Industries, Dangote Industries Ltd etc, while there are other international companies that formed alliances with Nigerian companies to repackage and/or market their products in the country.
