Back in 2013 during my NYSC sojourn in Ekiti State, I shared my residence with a girlfriend who had some interesting purchasing habits. Whereas I was used to buying food and supplies in bulk and storing them in a fridge or cabinet, she always used to buy everything in small sachets immediately before the point of need – and I really do mean everything. Soap, spices, tomato puree, snacks, toothpaste – she bought everything in a sachet.
Ever the amateur anthropologist, I found this fascinating and confusing in equal measure, as the incongruity of our different backgrounds manifested very clearly whenever it was time to do the shopping. I always wondered, “Why must this girl always buy everything in a sachet?” Sometimes this would lead to pointed disagreements that would subsequently find (temporary) resolution in a horny blaze of early 20-something-year-old glory. I didn’t realise it, but those were good times – the joys of youth and all that. I digress.
It wasn’t until 2 years later when I was working at BHM Group, which is arguably Nigeria’s most influential marketing agency, that I finally discovered the surprisingly lucid reason behind the sachet love-in. Apparently, it is a time-tested FMCG strategy in low-income markets to lower the unit cost of products by reducing the size of a retail pack – typically to that of a small plastic sachet. This allows the lower end of the market to buy the product despite their low purchasing power, while the brand keeps its regular (non-sachet) packaging for the higher end of the market.
“Wealth at the bottom of the pyramid”: A seductive idea
This simple but brilliant crossover of Sales, Marketing and Consumer Psychology has been comprehensively studied and theorised as a sure means of obtaining value from the bottom of the consumer pyramid. If you Google “bottom of the pyramid wealth,” you will find thousands of articles, resources and research papers explaining the genius of breaking down FMCG retail packaging into small bite sizes optimised for people earning under $2 a day who make up the bulk of Nigeria’s consumption.
If you believe Nigeria’s official population statistics, this would mean that of the alleged 200 million Nigerian consumers in existence, sachetisation gives FMCG brands optimal access to Nigeria’s tier 4 population, made up of as many as 140 million people. It is very easy to see why the narrative is a very seductive and successful one. Even better, ambitious sales managers with annual targets to hit often point out that sachetisation will typically lead to increased profits as well as revenue. This is because standard FMCG practise is to quietly front load sachets with margins too small to affect price-sensitive consumers, but sizable enough to add up to a nice premium.
Read Also: Poverty, high cost seen as main drivers of protein deficiency in Nigeria; Report
The bottom of the pyramid in Nigeria is already financially irrelevant to many of the brands now trying to jump on the ongoing sachetisation wave
For example, where consumers cannot afford a standard pack of 20 cigarettes selling for N400, the brand will offer sachets with 2 or 5 cigarette sticks in each one. Instead of selling the 2-unit sachet for N40, it will likely sell it for N50. The Tier-4 consumer is happy to avoid spending N400 to buy cigarettes and will pay N50 happily, but is in fact paying more than the consumer who buys the standard 20-pack.
This scenario explains why my NYSC girlfriend mentioned at the outset would rather buy a small sachet of detergent for N30 instead of a standard-sized pack for N200. It also explains why so many Nigerian brands today are putting everything they have into developing a sachetised offering for the bottom of the pyramid consumer. It is a brilliant, intuitive concept that has just one huge and glaring flaw.
Increasing sachetisation in Nigeria should ring alarm bells
While sachetisation would appear to be a sound business strategy, not least because population growth always happens most rapidly in the tier 4 consumer sector, it makes one fundamental assumption that can either vindicate it or render it superfluous. The assumption is that the tier 4 population in question has stable or growing spending power. In the event that a tier 4 population’s income suffers negative growth (Nigeria from 2015 to date), developing sachetised offerings of tier 2 and 3 products for the bottom of the pyramid suddenly stops making sense.
On the surface, Nigeria should not fit this profile. In 2001, Nigeria’s per capita national income stood at a pathetic $590. 20 years later, it has nearly quadrupled to $2,150. On paper, this 4x growth in 2 decades makes Nigeria an ideal launching ground for a sachetisation blitzkrieg as tier 4 incomes rise out of absolute poverty and inch toward the magic $2/day mark. The problem is that – to put it gently – Nigeria’s tier 4 incomes are not rising. The 4x national GDP growth since the turn of the millenium, led by Olusegun Obasanjo and Goodluck Jonathan’s market-led reforms have actually mostly grown the incomes of tiers 3, 2 and 1 in ascending order of growth.
The poorest segment of Nigeria’s population – which makes up the vast majority of the population – is only marginally better off in 2021 than in 2001. This is the population which according to NCC data, is still oscillating between basic GSM telephones and internet-enabled feature phones because N15,000 Android smartphones are still beyond its reach. These people are not buying sachetised high-end ice cream sold in N500 scoops at the roadside. They are not buying sachetised pizzas hawked in traffic. The people making these purchases are still the tier 2 and tier 3 folks who are currently going through the second great wealth destruction event in Nigerian history – ironically under the same president as the first one in the early 1980s.
In other words, the bottom of the pyramid in Nigeria is already financially irrelevant to many of the brands now trying to jump on the ongoing sachetisation wave, and their incomes are certainly not growing. It is in fact the middle classes who are being impoverished and are thus turning to sachet consumption. Nigeria’s tier 2 and 3 are being crushed downward into one sea of tier 4 poverty. And in case anyone reading this thinks that this downward movement is good news for the sachet economy in the short term, I will close by pointing something out.
Eventually, we will all be too poor to buy the sachets anyway.
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