…innovation boosts sales by 1.8 times- NielsenlQ’s study
As the Nigerian economy continues to grapple with inflationary pressures and rising production costs, consumer goods firms are increasingly turning to innovation to stay afloat.
In a friendly and educative discussion at the NielsenlQ breakfast Conference, themed, growing around “The Big Squeeze” in Nigeria’s commercial capital, experts said businesses are adopting new strategies to remain competitive and profitable amid shrinking consumer purchasing power and heightened competition.
Bayonle Oseni, head of innovation insights (BASES), East & West Africa at NielsenlQ said manufacturers are facing increasing pressure to deliver growth.
“Innovation opens highly viable pathways towards achieving this,” Oseni said at the event.
A study by NielsenlQ, which analyzed data from the home care, personal care, confectionery & snacks, non-alcoholic beverages, and food industries, found that manufacturers who use innovation as a tool are likely to grow twice as much compared to those that have stagnant or declining innovation
Home care and personal care manufacturers saw the most significant impact, with innovation boosting sales by 4.2 times and 2.9 times, respectively.
Contrary to the widely held assumption that innovation success rates hover between five percent and 15 percent, the study found that innovation vitality is significantly higher across various FMCG categories.
The research, which analyzed over 60,000 innovations spanning four or more years, showed 52 percent of innovations led to sales growth in the second year compared to the first.
This finding challenges the conventional wisdom surrounding innovation in the FMCG industry and underscores its critical role in driving business success.
The study further delved into category-specific innovation vitality rates, uncovering notable disparities. Personal care and food products emerged as the frontrunners, with innovation vitality rates reaching 56 percent and 66 percent respectively.
Non-alcoholic beverages and snacks & confectioneries followed closely behind, while home care products exhibited the lowest rate at 39 percent.
“By prioritising innovation and investing in research and development, businesses can unlock significant growth opportunities,” Oseni said.
Olufemi Awoyemi, chairman of Proshare, changing economic cycles, trends, and consumer tastes have birthed a new business ecosystem that reflects the world’s current state and future direction.
“In this rapidly changing world, foresight is essential,” Awoyemi said.
He added, “We are not just dealing with traditional threats from new competitors, substitute products, shifts in the market, or the overexuberance of market players—we are equally seeing entire industries turned on their heads in very short periods”.
Faith Wanderi, managing director of NielsenIQ (East and West Africa) said businesses need to understand consumer behaviour and the shifts that have occurred to make informed decisions on whether to change price strategy, brand extension or focus on distribution targeted at consumers.
She noted that consumers will continue switching brands as they are not loyal to any brands currently, but manufacturers can search out ways or moments to connect to them through various innovative ways like offering bigger or smaller sizes of their products among other options.
“Moving into 2024, manufacturers and retailers must continue to innovate their products and explore better value-for-money options or offerings that can still meet the needs of the already stretched and challenged consumer, who has little or no extra income to spend,” Wanderi said.
Joyce Nwachukwu, associate director of West Africa at NielsenlQ said the Nigerian Fast-Moving Consumer Goods (FMCG) market is facing a challenging period, grappling with declining consumer purchasing power and rising inflation.
According to the latest data from NielsenlQ, the FMCG market experienced a 2.6percent decline in transactions in 2023, followed by a further 2.9 percent drop in 2024.
“Consumers are feeling the pinch as they pay more for less, with volumes decreasing by 4 percent in 2023 and a staggering 17.4percent in 2024. This stark decline in purchasing power is a direct consequence of Nigeria’s high inflation rate, which reached 34.19 in June 2024,” Nwachukwu said.
Despite the challenging market conditions, Nwachukwu noted that the value of the FMCG market has seen growth, increasing by 21.6percent in 2023 and further accelerating to 24.8percent in 2024.
“This indicates that while consumers are buying less, they are spending more on essential goods, driving up the overall value of the market,” Nwachukwu said.
For Tosin Onayemi, senior manager CMI East & West Africa at NielsenlQ, the cost-of-living crisis is having a devastating impact on Nigerian consumers, with 75 percent of people reporting that they are worse off this year than last.
The main drivers of this crisis are rising costs, particularly for fuel and food, as well as the economic slowdown.
“This has had a knock-on effect on the cost of living, as it has pushed up the prices of goods and services,” Onayemi said.
