The demand for local cooking ingredients and meals in Nigeria is on the rise as the prices of imported products have gone through the roof on the back of the continued depreciation of the naira.
According to a new 2021 cooking ingredients and meals report by Euromonitor International, a London-based strategic market research firm, the economic shocks of the COVID-19 pandemic had a longer-lasting effect, as it led to a sharp depreciation in the value of the naira, which made imported products more expensive.
“This fuelled acceleration in the rate of unit price growth in cooking ingredients and meals. And with a sharp increase in the cost of imported products, domestically produced offerings gained retail value share at their expense,” it said.
Food ingredients are substances that are added to foods to achieve the desired effect. Examples are salt, stock cubes and powders, dry herbs and spices, canned tomatoes, tomato paste and cooking oil.
Since the outbreak of the pandemic, Africa’s biggest economy, which depends on crude oil export proceeds, has been hammered by weak foreign inflows, resulting in a liquidity challenge in the country’s foreign exchange market.
This led the Central Bank of Nigeria in 2020 to devalue the naira twice from 306/$ to 361/$ and 379/$, weakening the value of the local currency against the dollar.
This year, the Russia-Ukraine crisis has worsened the country’s FX challenges as the naira has continued to depreciate against the dollar, dropping to as low as 440/$1 and 800/$1 in the official and parallel markets respectively.
Jennifer George, chief executive officer at Mai Foods said, said her business has witnessed more than 70 percent increase in patronage since it started in 2019. “People are realising that they can spend less and still eat healthily.”
“And in as much as locally produced products are readily available; some of them are still expensive but not as much as the imported ones due to customs charges, clearing charges and other hurdles,” George said.
She said there are a lot of diseases right now due to the influx of chemical additives that come into the country. “People are now coming back to traditional products.”
Read also: Weak naira, inflation and the Nigerian consumers
The surge in FX is also a major contributing factor to the country’s food inflation, which hit 23.72 percent in October – a 17-year high, according to the National Bureau of Statistics.
With the price of food items getting more expensive, more restaurants are turning to locally produced items to keep costs down, said Olumide Fayankin, chief operating officer and co-founder at Vendease, an online marketplace for Africa’s food service businesses.
“For example, we have seen an increase in the production of seasoning options that include crayfish and made-in-Nigeria products like Frolic ketchup and Kings Oil. These products are now among the most popular products purchased from us,” Fayankin said.
The sales value for the cooking ingredients and meals industry rose by 2o percent to N591 billion last year from N492.6 billion in 2020. It is expected to increase further by 24.6 percent to N736.6 billion in 2022, according to Euromonitor International.
“The categories with high imported products like ketchup, olive oil and ready meals saw strong volume declines,” said Anje du Plessis, senior analyst at Euromonitor international.
“Locally produced products showed more resilience to the rising prices of goods and either did not record declines or recorded marginal declines. They also ensure affordability and wider uptake,” she added.
The Euromonitor report identified TGI Distri Limited (Ltd), Nestlé Nigeria Plc and Promasidor Nigeria Ltd in stock cubes and powders, as well as Olam Nigeria Ltd and Sosaco Nigeria Ltd in tomato pastes purées as the notable players in the industry with significant domestic manufacturing operations.
“With the exception of Nestlé Nigeria, all of these players gained retail value share in the industry during both in 2020 and 2021,” it said.
“Conversely, Asian brands like Henan Lotus Flower Gourmet Powder Co Ltd’s Tasty Cubes, which had been growing in popularity in stock cubes and powders during the review period prior to the onset of COVID-19, lost momentum during 2020 and struggled to regain it in 2021.”
BusinessDay had earlier reported that supermarkets in the country were increasingly switching to local products as a result of the high cost of FX.
The high inflation and exchange rate are causing consumers to be looking for alternatives now in the retail space, said Uchenna Uzo, consumer expert and faculty director at Lagos Business School.
“And sourcing locally for retailers helps to manage prices easily, control the type of products that come in and out of the store, give feedback on the products so that they can be remodified and open up business opportunities for the producers,” Uzo said.
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