FBT Industry contributes N4.2trn to Nigeria’s GDP in 2014

BRIU’s food, beverages & tobacco (FBT) report entails a broad coverage of major segments of the beverages sub-sector on the one hand, food segment on the other, as well as the tobacco industry. In the food and beverage segments, the report will cover the processed food and drink products, as well as brands of major manufacturers operating within our local environment as well as globally. The products and brands covered in the report often overlap as most of the major players’ profiled produce across several brand segments.

Food, beverage and tobacco industry includes players in beer, starch, flavouring, soft drinks and carbonated water, flour and grain milling, as well as tea, coffee and dairy products. The sub-sector also encompasses manufacturers in industries such as fruit juice, tobacco, biscuits and bakery products, sugar, distillery and blending of spirit, among others. The categorisation above is based on the Manufacturers Association of Nigeria (MAN) product and manufacturing classification. Though categorised under the food services & hospitality industry, the report also comprises the fast food and quick service restaurant players. Subsequently, the FBT sector can be summarised as an industry of industries comprising several stand-alone segments.

Nigeria’s food, beverages & tobacco (FBT) industry is a component of the manufacturing sector, which contributed 13 percent or N8.7 trillion to the country’s gross domestic product (GDP in current prices) in 2014 (2013: 11 percent or N3.8 trillion) and also accelerated by an impressive 20 percent year-on-year growth. The FBT is the major component and contributed 49 percent or N4.2 trillion (2013: 53 percent or N3.8 trillion) to the manufacturing sector’s GDP.

This is significant reflecting that the FBT sector accounts for the bulk of the output of the entire non-oil manufacturing industry in Nigeria though its share of the total manufacturing yield declined. This was on account of the textile, apparel and footwear sector, which improved its total production over the same period.

Furthermore, while most of the industrial segments grew significantly, the FBT sector had the second lowest increase of 11 percent following the Electrical & Electronics segment, which rose by 10 percent. Despite this, growth in the FBT sector was tremendously better than the Oil Refining industry, the only segment that witnessed negative growth of 6 percent in 2014. This is the first time in 3 years that the FBT segment has experienced marginal decline in output considering that the sector grew by 12 percent in 2013 and 7 percent in 2012.

There appears to be a tremendous improvement in production patterns in the light of the strong growth in all the segments of the country’s manufacturing output vis-a-vis the food, beverages & tobacco sector. The marginal development in the FBT industry throughout 2014 could be attributable to improved but still relatively weak consumer disposable income/spending partly caused by prolonged unemployment within the economy pointed out by analysts as the top two factors hindering significant industry growth. Despite this, the FBT represents about 23 percent of the manufacturing sector and 65 percent of total consumption expenditure.

Nigeria’s F&B sector is undoubtedly the largest segment of the Nigerian manufacturing industry generating an estimated 1.5 million jobs employing approximately 5 percent of the nation’s workforce. In 2014, the industry and the manufacturing sector engaged a total of 230,654 jobs. Unsurprisingly, the sector and the manufacturing industry as whole have always been male-dominated and 2014 was no exception with the industry employing 77 percent males and 23 percent females in the period under review.

The largest fresh employee batch took place in the first and second quarters of 2014 with about 183,675 new jobs, according to data from the Nigerian Bureau of Statistics (NBS). Overall, the sector accounted for a significant 67 percent of new employees in 2014, which was the bulk of the manufacturing industry.

There are more than 20 food and beverage companies quoted on the Nigerian Stock Exchange (NSE), mainly captured by the fast moving consumer goods (FMCG) asset class on the NSE. In addition to quoted companies, many privately owned and unlisted companies exist. Investors in this sector have benefited significantly from protectionist government policies, such as import bans and restrictions, high import tariffs and levies that are meant to foster the growth of infant industries and promote local manufacturing. In addition, start-up businesses in the sector enjoy tax holidays, as they are considered to be “pioneers”.

The beverage market is largely dominated by the beer and carbonated soft drinks (CSD), processed juice, spirit and wines and other ‘Ready-to-drink’ beverages (RTDs) cover the balance.  However, the processed juice market is gaining traction in considerable competition with the CSD segment.

Awareness about health and nutritional needs fuelled by increased knowledge and education about the associated risks of increased sugar intake resulting in diabetes, obesity and heart diseases. Other distinguishing characteristics include the busier lifestyles of the emerging middle class consumer segment with more working mothers looking to convenience in juice consumption to ensure the balanced nutritional needs and requirements of family members. 

The food segment is dominated by multinationals though there are several formidable domestic giants such as Dangote Foods and Honeywell, to mention a few. Some of the major players in the industry are Dangote Group (Sugar, Flour, Noodles, Juice, among others), Flour Mills of Nigeria, Honeywell Flour Mills, Nestlé, Cadbury, Promasidor, the Nigerian Breweries, Guinness, Nigerian Bottling Company, De-United Foods, among others.

The Nigerian food and beverage sector has an oligopolistic market structure: about 15 percent of the market players control 80 percent of the market share and revenues, while the remaining 85 percent are small and medium sized enterprises (SMEs) and account for only 20 percent of total sales volume. Foreign investment is largest in the beverages segment of the industry while the food segment is dominated by imports of packaged goods on one hand, and the domestic emergence of processing and packaging of local foods on the other.

OMOSOMI OMOMIA