Nigeria’s food vendor industry shrinks 16% on pandemic impact

Nigeria’s eatery industry shrinks 16 percent as COVID-19 lockdown brought activities in the sector to a near standstill in Africa’s biggest economy, a new report by Euromonitor International, a London-based market research company, notes.

The report states that the industry declined to $12.3 million in 2020 from $14.6 million in 2019, as lockdown measures used to curb the spread of the virus halted eat-in food services.

“Even after it was eased, many consumers significantly reduced their discretionary spending as a result of the economic shock of the pandemic. Some remained reluctant to eat in restaurants due to the perceived risk of contagion,” the report says.

The report also notes that the virus triggered a shift from eat-in consumer foodservice to takeaway, as “this was particularly the case for limited-service consumer foodservice, as many of these outlets are located in residential areas and thus more accessible to consumers.”

The consumer food-service industry comprises cafés/bars, full-service restaurants, limited-service restaurants, self-service cafeterias, and street stalls/kiosks.

Last year, BusinessDay investigated how restaurants were faring from the impact of the COVID-19 pandemic. Results from the findings showed that for five months (March-July), the sector saw up to 60 percent drop in sales as they were not generating enough take-outs (prepared food packaged to be consumed away from its place of sale) and food deliveries services.

According to Wale Abioye, a manager at Sweet Sensation, a Lagos-based fast food restaurant, operators generate more revenue from dine-in services than take-outs because the more people that stay in their restaurants, the more purchases they make, unlike one-time purchases from take-outs.

“Government regulations and the fear of COVID-19 are a challenge because there is no continuous purchase. A lot of people that do repeated purchases through deliveries, which cost money, don’t get the full value of their money for what they are spending on because they pay that part of the value for deliveries,” says Abioye.

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Similarly, Stephine Emeruwa, a manager at Ketchup, an Abuja-based restaurant, notes that it was a struggle for them as sales had dropped below 50 percent, and as a result they had to lay off half of their staff.

In March 2020, when the number of new cases of COVID-19 started to increase, restaurants limited dine-in table service to only 20 people, while others who were more than 20 were offered take-outs instead.

When there was a full lockdown in April, some restaurants were not opened, while others that opened only offered limited menus. After the lockdown was partially eased on May 4, the government directed them to offer only take-out services.

On August 14, they were now allowed to operate dine-in services on the condition that they maintain 50 percent capacity.

“There was a decline in the number of consumer food-service outlets in Nigeria during 2020 due to the economic shock of the pandemic. In general, there were more closures among independent restaurants than their chained counterparts in 2020,” the report states.

By December, the foodservice outlets were allowed to fully open to the public and operate at full capacity.

The report further highlights that chained outlets were better able to weather the pandemic than their independent counterparts due to economies of scale.

For example, Eat ‘n’ Go Limited utilised the Jumia Food on-demand delivery app to offer discounted prices and promotions to consumers. Despite the pandemic, they continued to expand the number of restaurants it operated under the Domino’s Pizza, Coldstone Creamery and Pinkberry banners, the report further highlights.

Ayorinde Akinloye, an analyst at United Capital plc, states that the year 2020 eroded consumers’ income and purchasing power, making them switch from some premium outlets to cheaper ones.

“And it will be difficult for the consumer food service industry to get to the pre-COVID level until consumers’ incomes improve and they have that confidence to spend more,” he states.

For the industry to get to pre-COVID levels or exceed it, Uchenna Uzo, a consumer expert and the faculty director at Lagos Business School, says it will require thinking through their retail model again to ensure that they have a strong service capacity that is built based on technical analysis and training the staff to know what it means to deliver top-notch service to customers.

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