• Wednesday, December 06, 2023
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Retailers woo consumers with promos amid weak demand

Retailers in the Nigerian fast food industry are devising several ways to entice consumers amid weak demand occasioned by surging inflation, which has dampened purchasing power.

BusinessDay findings show that some retail outlets have in recent weeks been carrying out trade promotions such as discounts, ‘Buy One, Get One Free’ and free deliveries.

For example, every Tuesday, Chicken Republic does a ‘Buy One, Get One Free’ deal that allows customers to purchase its rice and beans meal (N1,350) and get a free meal in selected locations across Nigeria.

It is also offering a 30 percent discount on its ‘citizen meal with spicy rice or fried rice’ and its ‘citizen meal with rice and beans’, which were previously sold for N2,000 and N2,100 respectively.

Mama Cass has a 20 percent discount on its Ofada rice and ‘swallow Combo meal’, which were previously sold for N2,215. The restaurant also discounted the price of its jollof rice combo to N1,400 from N1,750.

Burger King’s ‘Steak King Deal’, which contains a steakhouse burger, a pack of fries and a drink, has been reduced to N4, 500 from N6, 000. It also introduced its ‘budgEat menu’, where a chicken wrap, hamburger, cheeseburger, chicken burger and rodeo burger are sold for N900, N1,100, N1,300, N1,300 and N2,000 respectively.

Cold Stone Creamery is offering free deliveries for two of its ‘Like It’ cups of ice cream sold for N3,500.

“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.

Read also: Nigerian retailers face tough choices as inflationary pressure persists

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.

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

There has been some increasing excitement about trade promotions because retailers are trying to take advantage of their off-peak periods where they don’t have much traffic, said Uchenna Uzo, professor of marketing and faculty director at Lagos Business School.

“They are doing promotions by making use of their idle capacity. So, it is more of a capacity utilisation thing. But there are some promotions that one can run for some time while others must be seasonal and not be the same as their competitors. If not, it will not work,” he added.

An X user, @Morris_Monye, said via his handle: “Where you will know things are bad is when Titus Sardine began adverts.

“I met their sales representative on Wednesday and she told me that sales were very low so they had to start advertising or they would fold up. Cheaper (not so quality) sardine brands were threatening to push them off.”

Read also: Meet Nigerian couple who built food empire in UK

On May 29, President Bola Tinubu announced the removal of the petrol subsidy, and pump prices have surged to as high as N617 per litre from N184, while the value of the naira has plunged following the floating of the currency in June.

The high cost of dollars and the implementation of a 7.5 percent value added tax on diesel imports have pushed its pump price by about 20 percent to as high as N870 per litre.

The country’s inflation rate quickened for the seventh consecutive month to 24.08 percent in July 2023 from 22.79 percent in June, according to the National Bureau of Statistics.

Inflation pushed an estimated four million more Nigerians into poverty in the first five months of this year, the World Bank said in June.

“In the immediate term, the removal of the petrol subsidy had caused an increase in prices, adversely affecting poor and economically insecure Nigerian households,” it said.

According to Gbolahan Ologunro, portfolio manager at FBNQuest, when consumers experience a persistent increase in food and utilities costs, they tend to cut back on discretionary spending, making businesses in the discretionary space come up with ways of enticing consumers.

“That is why you are seeing a lot of innovations with marketing campaigns. The weak demand has compelled companies to look inwards and devise means of enticing consumers,” he said.

A recent report by NielsenIQ, a global consumer intelligence company, noted that Nigerian consumers are prioritising future planning, physical wellness, saving for unforeseen circumstances and mental healthiness above every other need in the next 12 months.

Read also: Why modern retail operators must reposition sector in response to tough economic cycle Basorun

“Consumers will be shifting their wallets to spend more on education, health and wellness, childcare, transport, utilities, savings and investments,” it said.

According to an official of the Manufacturers Association of Nigeria who spoke on condition of anonymity, manufacturers are battling with a lot of inventory of unsold finished products.

“People are not buying because of the high inflation rate. And for the fact that manufacturers produce with high cost of input, the prices go up, making it unaffordable for the people,” he said.

Business activity in the country dropped to 51.7 in July, the lowest in four months, from 53.2 in the previous month, according to the latest Purchasing Managers’ Index by Stanbic IBTC Bank.

“Rising price pressures impacted demand, with growth of both new orders and business activity softening as the second half of the year got underway,” it said.

BusinessDay reported recently that manufacturers were adopting coping measures in a bid to survive the economic shocks caused by the removal of the petrol subsidy and naira devaluation.

The measures include reducing production capacity and staff strength, lowering costs of power, cutting the number of working hours for non-productive staff and combining procurements, increasing production of smaller quantities of products, divesting to food-related items and agriculture, re-evaluating suppliers and renegotiating contracts with international suppliers to get upfront supplies.