• Friday, June 21, 2024
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Restaurants boost sales to 4-yr high amid rising prices

Restaurants boost sales to 4-yr high amid rising prices

Despite surging inflation, which has dampened consumers’ purchasing power, sales volume of restaurants in Nigeria rose to the highest in four years, according to a new report by a global market research provider.

The report, titled ‘Consumer foodservice in 2023: The big picture’, by Euromonitor International, shows that the sales volume in the formal market increased marginally by 1.27 percent to 87.8 million last year from 86.7 million in 2022, while the value grew by 10.4 percent to N260.5 billion.

But the increase in volume last year was lower than the 2.73 percent growth in 2022.

“Low consumer purchasing power impacted sales transactions in 2023, forcing most chained quick service restaurants to offer deals and promotions. Chicken Republic, for instance, is offering ‘buy one get one free’ meal deals, while Mama Cass is offering a 20 percent discount on various meals,” the report said.

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It said Burger King introduced the budgEat menu for as low as N900, and Coldstone Creamery is offering free delivery for its ‘like it up’ ice cream.

“Quick service restaurants (QSR) are adopting technology to deliver end-to-end services to consumers, from ordering to delivery and payment,” it added.

According to Euromonitor, the growing generation Z and millennials like to eat out and, supported by the increase in internet penetration, are boosting online ordering and delivery. “The multi-category app Glovo is partnering with the leading QSR brands such as Chicken Republic, ensuring a quicker and more efficient food delivery service.”

Uchenna Uzo, professor of marketing and faculty director at Lagos Business School, said food takes more than 60 percent of the average Nigerian wallet, adding that no matter how hard the economy is, people still need to have access to food to survive.

“It is encouraging to see that marginal growth despite last year being a tough one for many businesses. And I think what drove that growth is that the QSRs are getting wise in terms of the adjustments of menus that they are offering and how they source their local products because food shortage is still a big problem,” he said.

He added that the restaurants are scaling down on their operations to ensure that they have the right number of people and equipment and that the e-commerce side of the business is also picking up.

BusinessDay reported last year that retailers in the fast-food industry were devising several ways to entice consumers amid weak demand.

Between last July-August, some retail outlets did trade promotions such as discounts, ‘Buy One, Get One Free’ and free deliveries to woo consumers.

“It is basically a reaction to the current realities in the economy. The high inflationary pressures, which are already reducing consumption volumes, are making retailers do direct promotions to drive or increase volumes,” Tola Chukwu, a Lagos-based consumer goods analyst, said.

She said consumers have re-prioritised their spending habits while retailers are looking at how to drive consumption. “Now you are seeing promotions increasing more, not because they have new products but to increase volumes.”

Trade promotions are marketing activities or campaigns conducted by brands to boost sales and profits, expand their customer bases and encourage customers’ loyalty.

Read also: Global food prices fall for seventh straight month in February

They are usually attractive incentives that come in the form of discounts, free products, price protection, and other forms of compensation.

Authors of the Euromonitor report revealed that many chained limited foodservice restaurants continued to increase their outlet numbers in 2023 in order to meet the needs of consumers in untapped markets.

“Kilimanjaro, for instance, has expanded into Kaduna in the north of the country, whilst Burger King opened six outlets in Lagos and Abuja, and Eat N Go opened a new outlet in Jos. Other brands that have expanded in 2023 include The Place restaurant, and the largest player and leading brand, Chicken Republic, which has over 300 outlets in Nigeria,” they added.

Over the past nine months, the inflation rate in Africa’s biggest economy has accelerated to a record high largely on the back of the Federal Government reforms including the removal of petrol subsidy and naira devaluation.

According to the National Bureau of Statistics, Nigeria’s headline inflation rate rose for the 13th consecutive time in January to 29.90 percent from 28.92 percent in the previous month.

Food inflation, which constitutes 50 percent of the inflation rate, rose to 35.41 percent from 33.93 percent.

The World Bank’s latest Nigeria Development Update report said rising inflation and sluggish growth in Africa’s most populous economy increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year.

This means that from January to November, an additional 14.2 million people fell into poverty.

“Inflation has reduced the buying power of consumers and the volumes that are being purchased. This is causing some of these service-oriented companies to start shrinking in size while others are closing down just because of the high inflationary pressures,” Jide Adedeji, founder and CEO at Easysauces Nigeria Limited, said.

With dwindling purchasing power in a time of high inflation, Nigerian consumers looked for affordable and filling food such as that offered by the rising number of street stalls/kiosks, according to the consumer service report.

“Other independent foodservice operators, however, had a tough time due to high inflation, which weakened their sales growth. Independent operators offering international cuisines were further impacted by the high cost of importing raw materials into Nigeria,” it said.

Read also: Prices of top eight rice brands in Nigeria

It projects that the growing middle class, generation Z and millennials, who demand convenience due to their busy lifestyles, are expected to drive growth of online delivery services.

“This will be supported by innovation from operators to enhance consumers’ satisfaction. More third-party food delivery apps are expected to be launched going forward, and Glovo is set to expand its delivery services to partner with more foodservice operators, leveraging on its earlier partnership with Chicken Republic,” it said.

The report added that an increasing number of promotions and deals by the major chained operators and further outlet expansion are expected to boost volume transactions over the forecast period.