• Friday, June 14, 2024
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BusinessDay

Why Indomie slashed prices amid rising inflation

Low patronage forces Indomie price slash amid rising inflation

Indomie Instant Noodles, a Dufil Prima Foods Limited brand, says it has reduced its price to keep the product affordable to Nigerians.

BusinessDay survey of some stores across Lagos shows that the price of 70g Indomie Regular Chicken noodles dropped to N250 from N300 last month. While it’s 40-pack carton of Indomie fell to N10,000 from N12,000.

Before Indomie reduced its price, it was higher than other brands like Mimee (N200) and Honeywell noodles (N250).

“It was because of the operational cost that we brought the price down,” Temitope Ashiwaju, the company’s group corporate communications & event manager told BusinessDay. “The operational cost went down in our favour, and we believe it is the responsibile thing to do to pass on the benefit to our customers. That was why the price was reduced.”

Ashiwaju pointed out that the company has been in Nigeria for a very long time and the brand understands it’s consumers, so it is taking the lead in price reduction to set example for others.

“We are never going to be taking advantage of the populace. We want to make profit, but in a fair way,” the spokesman added. “That is why we are determined to keep our products affordable to Nigerians.”

Asiwaju’s statement countered opinions that the price reduction was due to low patronage.

Dufil Prima’s move has been described as one that will lead other brands to also reduce their prices because “Indomie is the price setter in the noodles market,” a retail experts said.

Over the past nine months, the inflation rate in Africa’s biggest economy has accelerated to the highest largely on the back of the federal government reforms including the removal of petrol subsidy and naira devaluation.

Nigeria’s headline inflation rate rose for the 14th consecutive time in February to 31.70 percent from 29.90 percent in the previous month, according to the National Bureau of Statistics.

Food inflation, which constitutes 50 percent of the inflation rate, rose to 37.91 percent from 35.41 percent. And it is on course to hit an all-time high this month due to a combination of rising demand, higher transportation costs and worsening insecurity.

The World Bank’s latest Nigeria Development Update report revealed that rising inflation and sluggish growth in Africa’s most populous nation increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year.

This means that from January to November, an additional 14.2 million people fell into poverty

A recent report by Euromonitor International, a global market research provider, shows that the sales value of noodles in the country’s formal market rose year-on-year by 38.2 percent to N427.2 billion in 2023, the highest in at least six years.

Pasta sales rose by 26.1 percent to N404.0 billion, while that of rice rose by 14.4 percent to N494.0 billion.

The sales volume for noodles increased to 266,600 tonnes from 263,700 tonnes. Pasta sales volume dropped to 384,700 tonnes from 396,600 tonnes, while 520,400 tonnes of rice were sold as against 547,400 tonnes in 2022.

“Noodles was the only subcategory within rice, pasta and noodles to see growth in 2023, though this was marginal. While all staple foods struggled throughout the year, small pack sizes and minimal preparation time (three to five minutes) make noodles an affordable option in challenging times,” the report said.

It said noodles had become increasingly popular in food service due to convenience and low prices. “Indeed, in April, the leading noodles player Dufil Prima Foods Plc opened its eighth mono-brand foodservice outlet, Indomie Café, with plans to open more outlets in the future.”

A breakdown of the data shows that plain noodles recorded the same sales of N0.9 billion in 2023 and 2022. But instant noodles rose from N308.3 billion to N426.3 billion.

Analysts at SBM Intelligence said in a recent report that despite cost-cutting and inflation management measures, Nigerian households spent 97 percent of everything they earned solely on food.

“The Tinubu administration has its work cut out – arresting spiralling insecurity, tackling grinding poverty, enhancing economic opportunity and forging a sense of national consciousness. It is safe to say that it is not off to a great start,” they said.