Spar investing in local produce and courting domestic producers – CEO

Tobias Washmuht, CEO, Spar International, who was in Lagos recently and spoke to BusinessDay exclusively, said the unique strategy of his retail firm lies in investing in local produce and consciously courting the local producers.

“Over 70 percent of the products we pack are locally manufactured. Where we want to move this and it is very important for the future at the top of the supply chain, is working with Nigerian producers and investing in them. We have significant experience with farmers, sourcing fresh produce. Where our point of difference will be is in fresh fruits because that is vital to driving traffic into the store. That’s what we will keep driving and we have other key initiatives that we are driving with the small scale farmers,” said Washmuht.

A recent report from PricewaterhouseCoopers confirmed the dominance of the informal trade in Africa and Nigeria as whole.

As much of 90 percent of sales are made through informal channels.

Notwithstanding, analysts are of the opinion that the Nigeria’s consumer market is still underserved.

“If you look at Nigeria, it is obviously the largest economy in Africa. Looking at it from a macro-point of view, the demography is truly young and growing and from any retail point of view it is very important to have a young customer base,” Washmuht said.

With a growing middle class of over 40 million, there is opportunity for retail investment in Nigeria as majority of the people within the bracket are not able to access the quality of products and service that they require.

Statistics show that over 40 million Nigerians are in the middle class with an income of $7,500 and that makes it an extremely attractive market for many retailers who are to expand in Africa.

“You have South Africa where there is a fifty million population with over 5,000 modern supermarkets and modern trade stores. So if you compare that with Nigeria with its population and scale, there is a lot of opportunity. The demand is here and the opportunity to have a better lifestyle in everyday life,” Washmuht said.

Despite the economic crisis that has rocked the country from slumping oil prices, Nigeria’s economy is projected to grow by the end of 2016.

Retail giants like Spar Nigeria expects an inevitable but gradual transition from informal to formal retail marketing.

“South Africa has 60 percent formal and 40 percent informal retail market. And that has changed only in the last two decades. It is moving with the economy. As the economy develops and the infrastructure develops, as living standards and living quality requirement change, we have a move to organised retail, which brings with it consistency in safety, standards and what comes with development,” Washmuht said.

“Today, we (Spar) are at the beginning of that in Nigeria. Many numbers are put in, but these are estimates because it will be really difficult to capture today how large the informal market in Nigeria is. In terms of the trend, there will be a shift increasingly because there will be demand by the people of Nigeria and the customers. The question is when the shift will happen,” said Washmuht.

CHINWE AGBAEZE AND FRANK ELEANYA