• Tuesday, May 21, 2024
businessday logo


Nigeria’s market shake-up: P&G’s woes and lessons for success

Nigeria’s market shake-up: P&G’s woes and lessons for success

This P&G issue has been a subject of discourse amongst marketing colleagues since the news broke. There are many angles to look at the challenges. One of them is the Nigerian economy, whose per capita income has been on a decline since 2016. When per capita income declines, it is a sign that the average wealth of the individuals in the country is reducing. Nigeria has been having a double-digit inflation since 2016, which means the purchasing power of the people is reducing. These are macro-environmental factors that affect every organisation irrespective of size.

My analysis of the P&G exit will be from the micro-environmental point of view. The challenge with P&G started pre-2013, when consumers were complaining about the quality of their diapers. It was not meeting the desired standard of consumers. At this time, consumers were always looking for the Turkish brand (Pampers produced in Turkey) as it was of higher quality than the ones produced in Nigeria. When a product is no longer meeting the expectations of the consumers, the consumers begin to look for alternatives.

As at 2016, P&G was holding some 76% of the diaper market while a Turkish company called Hayat Kimya was holding 4% of the market. Hayat Kimya came into Nigeria and got the price point right. As of this period, Nigeria was in her season of recession, and inflation has eroded the purchasing power of the citizens. Hayat Kimya (makers of Molfix) offered consumers diapers of better quality and at a competitive price. That was how the company started to eat into the market share of Pampers.

Companies had problems getting the price point right, especially when Nigerians started having affordability issues due to macro-environmental factors. This was also what Bigi Cola [a local company] did when they struck and dealt with Coke. Bigi Cola (a local company) came in 2016, Big Cola (a Peruvian company) came in 2015, RC Cola (an American company) came in 2018. Many more bottling companies have come into Nigeria since that time, including Pop Cola in Kano.

In marketing, you have what you call the 4P’s of marketing. You have the product, the price, the place, and the promotion. P&G failed in two or three out of these four. Their product was having a problem. That was the quality issue. The price was becoming unaffordable for Nigerians, as the price point was high. Their distribution also was having a problem because, in the whole of Nigeria, they had very limited distributors. They were using the mega distributor model.

What did Hayat Kimya (Molfix) do? Molfix came in with a lower price. They came in with a product better than Pampers. They have distributors in every city. Regarding distribution, they beat Pampers to it. By 2020, Pampers had crashed from 76% of the market share to 30% of the market share, while Molfix moved from 4% to 60% of the market within those four years.

The entrance of new players has posed a serious challenge to Molfix. These new players have factories set up in Nigeria. This was the same principle that AB InBev used to push Guinness to No. 3 in Nigeria. AB InBev is now strong No. 2 after Heineken (Nigerian Breweries). The above buttresses the fact that you must get your pricing right in a country where a lot of people can’t afford these goods. The last market share analysis I saw, AB InBev was close to Nigerian Breweries. Guinness was strong No. 2 before the entrance of AB InBev in the market. AB InBev was able to use a penetration strategy, and it worked because consumer purchasing power is declining. They were the ones in charge of Trophy in the South West of Nigeria and Hero in the Eastern part of Nigeria.

When companies are unable to bring down the prices of their product as a way of adapting to changes in the micro and macro environment, their market share is taken over by new entrants who are ready to adapt. If Coke hadn’t brought down the price of their PET bottle to N100 from N150 in Q4 2019, Bigi Cola would have eaten further into their market share. Between 2016 and 2019, Bigi Cola took almost 20% from Coke and Pepsi, but Coke suffered more.

For emphasis, there are two people you must give focus to when you want to succeed in any market: The consumers and the competitors. You must watch the actions and inactions of your competitors. You must watch the behaviour of your consumers. You must also watch their preferences, their choices, and their ability to purchase your products. When consumers are unable to buy your products again because of your price point, your company is going down. On the other hand, if you are unable to maintain a price point that will make you competitive because of your huge operating cost, then you are screwed. This is one of the reasons companies must look into cost leadership strategy and work on lean production.

Furthermore, the cost of raw materials as a result of a high FX rate is a critical factor for companies because many of them import their raw materials. It is indeed a tough time for companies in Nigeria. The experience with these companies currently is such that consumers are even rejecting their products because of the high prices. For instance, in the last three years, the milk market [dairy market], and the vegetable oil market have been on a decline. That shows that the number of people buying milk and vegetables may have reduced or the volume each family is buying has reduced. The same thing goes for some other products.

What then is the solution? Our economy needs to expand. Affordability of people needs to go up. This will give opportunities to these organisations to be able to sell their product and make more profit. More companies will see the Nigerian market potential and come in and make more money and people will get jobs. It will increase our per capita income and then everybody will be fine.


Oluwole Dada is the Head of Sales and Marketing at SecureID Limited. He can be reached on www.oluwoledada.com