The sales of soft drinks in Nigeria rose by 58.1 percent in one year despite price hike, according to a new report.
The report, titled ‘Soft drinks industry in Nigeria sees boost to sales’ by Euromonitor International, a London-based market research company, shows that the value of soft drink sales through off-trade channels increased to $33.2 billion in 2022, the highest in at least eight years, from $21 billion in 2021.
Off-trade channels are usually retail outlets such as supermarkets, convenience stores, mini markets, hypermarkets, kiosks and wines and spirits shops.
“Soft drinks unit prices rose significantly in 2022 in line with local double-digit inflation. This was largely due to the depreciation of the local currency which made it quite difficult and expensive to import raw materials (and parts for machinery), causing overall input costs to rise,” the report said.
It said there were several new launches spread across soft drinks in 2021 and 2022. “Consumers are willing to spend a portion of their disposable income on soft drinks, as they are a key part of most Nigerians’ lifestyles.”
Ibrahim Ahmed, an official at Coca-Cola Nigeria, said new and cheaper brands that have saturated the markets drove the improvement last year. “Most of the bigger brands had a marginal drop in their sales.”
In January 2022, the Federal Government introduced an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages, often called sugar tax, in a bid to raise revenues and discourage excessive consumption of sugar in beverages.
When the implementation of the sugar tax took effect in June, manufacturers deployed coping strategies including price increases to stay afloat. For example, the price of a 50cl PET drink of Coke, Pepsi, Sprite, and Fanta rose by 33.3 percent to N200 from N150. The price of 33cl Malt, which used to cost N200, rose to N250.
Cheaper brands like Rite Food’s Bigi Cola (60cl) bottles are priced between N100 and N150 and 35cl drinks from Coca-Cola brands are sold at N100.
According to the National Bureau of Statistics (NBS), food and non-alcoholic beverages contributed the most to the acceleration in Nigeria’s headline inflation rate, which quickened to a 17-year high of 22.41 percent in May 2023 from 22.22 percent in the previous month.
Health consciousness, trendy lifestyles, increasing varieties in the market and price differentiations have diversified the soft drinks market from what it used to be, said Uchenna Uzo, a consumer expert and faculty director at the Lagos Business School.
“Before, in the soft drinks space, it was more of big giants like Coca Cola, Pepsi and a few others. But with the health consciousness and trendy lifestyles we are seeing, a lot of people are bringing in things that you may call soft drinks but in the real sense are not, like smoothies and different drinks, which are now widening the playing field,” he said.
Data from the NBS show that in 2019, households spent N551.2 billion on non-alcoholic drinks, N205.5 billion on sugar, sweets, and confectionery, and N150.3 billion on alcoholic drinks.
According to Christopher Day, a research analyst at Euromonitor International, soft drinks are expected to see strong retail volume and value growth over the forecast period despite weaker economic growth and rising global inflation.
“Nigeria’s young and expanding population will underpin rising consumption of soft drinks alongside heavy marketing investment by local and international players. It is expected that manufacturers will continue to adapt to economic challenges, devising more creative strategies to sustain growth in soft drinks,” he said.
He added that manufacturers will concentrate more of their research and development on reducing the sugar and caffeine content in soft drinks.
“Rising health consciousness will also drive product development in this field. E-commerce is a growing channel in Nigeria and will continue to draw more consumers as the forecast period evolves,” he said.
Before manufacturers increased their prices between 2021and 2022, they were competing for sales by increasing the quantity of products without increasing their prices due to consumers’ weak purchasing power.
Between 2014 and 2015, Bigi Cola garnered increased patronage by introducing a bigger (60cl) bottle that cost N100. This raised competition in the market, as big brands like Coke and Pepsi stepped up the fight for market share.
Coca-Cola and Pepsi introduced their own 60cl plastic bottles and kept the price at N150 between 2016 and 2017.
With time, sustaining the volume at the same price became challenging. In September 2019, Coca-Cola reduced the volume of its 60cl pet drink, which was sold for N150 to 50cl for N100, and it also increased its 35cl PET drink to 50cl for the same price of N100. Earlier in 2020, Pepsi responded by reducing its 60cl drink, which was sold for N100, to 50cl, but still at the same price.
In 2021, the price increased to N120 and N150 due to the surge in international sugar prices and high inflationary pressures.