In Nigeria, the allure of entrepreneurship is stronger than ever due to limited employment opportunities. Many aspiring entrepreneurs are drawn to starting their own Consumer Packaged Goods (CPG) brands because of the relatively low startup costs and barriers to entry. Encouraged by family and friends, these budding entrepreneurs hope to commercialise homemade recipes or innovations in food, skincare, haircare, cleaning products, and more. To be clear, CPG products are those consumed frequently, making them an attractive option for new business ventures.
The challenges of scaling
Seven years ago, I ventured into the CPG world with my own brand. My journey, like many others, began with a homemade snack and a dream. However, I quickly found that transforming that product into a nationally recognised brand required more than passion. Here, I will discuss the path to success for startup CPG founders that want to grow beyond the typical microbusinesses.
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Distribution: The make-or-break factor
I call distribution the make-or-break factor. One might wonder why my number one priority isn’t the actual product itself. Here’s why: having the best chinchin, oatmeal cookies, or Ayamase sauce means little if consumers can’t find them. Distribution is crucial with a capital C. Customers almost always settle for mediocre products they can easily access over superior ones that are hard to find. For a CPG startup to succeed, its products must be available in channels where consumers already shop for similar items. If customers have to go out of their way to get your product, they are unlikely to make the effort. Identify the best distribution channels for your product and integrate seamlessly into them. This means placing your product where your target consumers are already trained to find them.
A stellar product
While distribution is key, it does not diminish the importance of having a high-quality product. A mediocre product with excellent distribution might find initial success but won’t retain customers. Your product must meet or exceed customer expectations to drive repeat purchases and foster brand loyalty.
CPG companies should focus on practicality. For example, a unique savoury fo-Riro chip might be tempting to create, but to be successful in today’s CPG world, focussing on existing, proven categories is crucial. Consumers are increasingly drawn to modern versions of familiar products. For instance, the development of breakfast bars stemmed from understanding consumers’ need for convenient, nutritious snacks that fit an active on-the-go lifestyle. Today, the Nigerian market is ripe for similar innovations across various categories.
Adapt to market dynamics
Scaling a CPG brand involves constant adaptation to market conditions. This includes responding to inflationary pressures, adjusting pricing, and understanding sales velocity—the rate at which products are purchased and repurchased. One significant factor shaping this landscape is food inflation. With rapidly rising prices and shrinking disposable incomes, consumers are spending a huge portion of their incomes on groceries and therefore prioritising value more than ever.
Today’s Nigerian consumer wants value, and as much as possible, at the lowest price. They seek products that are priced right and competitively. Any premium offerings must be indulgent or have better-for-you attributes to cater to the needs of the consumer who could afford imported brands a short while ago. This willingness to pay more for premium value is primarily evident in categories like snack foods, where indulgence is more valued. Lower disposable incomes and high competition will likely impact sales velocity, and unfortunately, in these economic climes, only established brands might be able to afford aggressive price promotions to drive higher velocity.
My advice for new CPG founders is to focus on multifunctionality during product development. I once had a founder share a sample cocoyam thickener with me. I advised her against developing a product with utility limited to local soups and recommended that she test her product’s successful application in curries or as a baking flour replacement. Multifunctional products drive sales velocity, making it easier to scale distribution. Products that can be used frequently have a higher chance of success compared to those used sparingly, and this is a major factor to be considered.
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Iterating to growth
At Bonita Foods, the CPG startup I founded, we adopted an iterative approach to growth. Our goal was to grow retail sales, and I hypothesised that selling through brick-and-mortar retail channels would be most effective, given the product’s intended use as a grocery item, complementing yoghurt, cereal, baked goods, and salty snacks. We tested different channels, including open markets, identified high-performing ones, and focused on optimising those channels through pricing, merchandising, promotions, and shelf placement. Supermarkets, hypermarkets, and pharmacies emerged as the best channels for our product.
Building leverage for distribution
Especially in whitespace categories (a market segment or product category that is currently underdeveloped or underserved by existing products, representing an opportunity for new brands or products to enter and fulfil unmet consumer needs or desires), I have found that startups need to do the heavy lifting first before seeking to attract wholesale distributors. New brands need leverage, and the best leverage is proven velocity. Then distributors want in on the action. Think about distributors like opportunists; they want to come to the table when dinner is set, not during prepping. They are not really interested in building brands to scale. Bringing them early to the table is likely to result in very unfavourable terms. Generating sales through e-commerce or independent stores creates a signal that your brand is in demand. Building an engaged community around your product also helps. A loyal customer base can advocate for your product in stores, acting as your best salespeople.
Final thoughts
Scaling a CPG startup in Nigeria is challenging but can be rewarding. It requires a strategic focus on distribution, product quality, and utility and adapting to market dynamics. By innovating within existing categories and creating modern versions of proven products, CPG entrepreneurs can navigate the complexities of the market and build thriving brands. We certainly need more of these entrepreneurs with big aspirations willing to take on the challenge.
