The macroeconomic environment has been menacingly scotching for Fast Moving Consumer Goods Firms (FMCGs) as they are finding it practically difficult to break even.
Reports from sundry investment house shows analysts and economists concur that the industry is the most susceptible to a sluggish economy.
Double taxation, low consumer purchasing power, poor regulations, multiple levies, and decrepit infrastructure like the Apapa grid lock, are the monsters tormenting industry operators.
However, amid these myriad of challenges, some firms are thriving, thanks to the introduction of innovative products, deleveraging exercise, cost control mechanism, and investment in Research and Development (R and D).
For instance, Nestle Nigeria Plc, the third largest firm by market capitalization, has been leveraging its R and D capacity as it continues to develop a relevant wide range of high quality nutritional offering to meet consumer need.
These products have continued to contribute to earnings and margin expansion, thanks to strong growth in the Beverage business, as the Milo Ready To Drink (RTD) pack and Maggi seasoning continues to gain widespread acceptance in the market place.
Last year, the company opened a N4.10 billion RTD factory in Agbara Ogun State, and it has invested N74.10 billion on its operations in 5 years.
Nestles’ net income 22.34 percent to N26.24 billion in the period under review as against N21.45 billion in June 2019, while gross margins moved to 46.57 percent in June 2019 from 41.10 percent the previous year.
Cabury Nigeria Plc, recorded its best performance in 5 years, a stellar performance it attributes cost-cutting measures, effective marketing strategy and superlative performance of its product brands. For instance, Cadbury re-launched its iconic cocoa beverage drink, Bournvita, with a new improved taste in line with consumers’ tastes and preferences.
The company’s Cadbury Hot Chocolate 3-in-1 brand, its treat portfolio, recorded substantial growth, driven by its unique offering, while the gum and candy brands also recorded success in their respective categories.
Cadbury’s gross margins increased to 21.29 percent in June 2019 from 16.02 percent the previous year while it recorded a profit after tax of N669.93 million as against a loss of N423.67 million the previous year.
Flour Mills Nigeria Plc, the largest miller by market capitalization, had raised rights issue to reduce debt and bolster earnings. The strategy has yielded fruit as finance cost has fallen by 26.51 percent to N4.55 billion in the period under review while net income jumped by 16.08 percent to N4.23 billion as at June 2019; earnings were also supported by the large food products portfolio.
In order to magnify its share of the market and deliver higher returns to shareholders, the management of Nacon Allied Industries plans to increased refined salt capacity by 250kMT in 2019.
Analysts at Cordros Securities Limited in a recent note to client said they see a strong opportunity for sector players in the refined salt space following the implementation of higher Import duty on refined salt, by the federal government to 70 percent.
NASCON expanded its seasonings production capacity by 1.5kMT (lifting the overall capacity to 5.24kMT/yr) in the first quarter (Q1) of 19 to take advantage of the growth potentials in that segment.
While Unilever Nigeria Plc has no plan to launch new product, it intends to move into non saturated market. It launched its “Everyday Essentials” store on the JUMIA platform in order to drive sales.
The sluggish economy and weak consumer spending has forced a lot companies to roll out sachet product so as to penetrate the low income market.
“Nestlé introduced single serve packs as a strategy to ensure that consumers continue to have access to the nutritious food they need even in the current economic reality. This is in line with our purpose to enhance quality of life and contribute to a healthier future,” Victoria Uwadoka, Corporate Communications and Public Affairs Manager at Nestlé told BusinessDay.
BALA AUGIE
