Despite the challenging operating environment, the Nigerian consumer market remains an attractive space for investors.
In recent times, there has been increased activity in the food and ready-to-eat segment of the consumer goods market. In this market segment, biscuits, a ready-to-eat snack, which are widely eaten among young children and even adults, have continued to remain relevant.
Nigeria is home to several local and international manufacturers of biscuits. Interestingly, the local manufacturers are holding their own in the struggle for market share, as they easily have command of over 50 percent.
KPMG report puts the size of the Nigerian biscuit segment at US$617 million having grown at a Compound Annual Growth Rate (CAGR) of 16 percent in the past five years. Annual production is estimated at 152,490 tons, with an estimated annual consumption put at 500,000 tons.
Operating margins in the segment remain thin, given the volume-driven nature of the business. Price elasticity of demand is also high, owing to the wide availability of substitute products, and aggressive competition among market participants.
Hence, biscuit manufacturers are unable to pass on significant increases in the cost of production to the final consumers. In spite of the various challenges and the shrinking wallet of consumers, the outlook for the Biscuit market is very positive, driven by product affordability, ease of purchase and Nigeria’s large and growing population.
The increase in the number of retail stores and supermarkets around major cities has led to increased visibility of various biscuits brand. Mrs. Adaeze, a retailer, while giving the reason for the relatively low prices of biscuits, noted that makers of Biscuits have come to understand that biscuit is a convenient snack, which people take to the office, take with tea and pack in children’s snack packs and any attempt to increase price will see consumers switch loyalty to cheaper brands. She, however, noted that the introduction of Pure Bliss brand into the market has revived low and medium income earners’ interest in biscuits.
Confirming this assertion, a hawker at Ojota, Ibrahim, noted that Pure Bliss sells even faster than sausage rolls these days.
“I used to hawk sausage roll inside traffic before now but people going to work or coming from work love this Pure Bliss Brand because it is very sweet,” he said.
The market has also witnessed huge inflows of foreign investors into the country ready to benefit from the huge potentials in the Nigerian market.
The major local and international biscuit manufacturers in Nigeria include Beloxxi Industries Limited, Niger Biscuit Company Limited, Yale Foods Limited, Newbisco Limited, Major Biscuit Company, Global Beverages Nigeria Limited, Nasco Food Nigeria Limited, Ok Foods Limited, Julie’s Biscuit Nigeria, A&P Foods Limited and Deli Foods Limited.
The KPMG report ranked Sumal Foods Limited, makers of the Yale brand, with about 37% market share, trailed by Ok Foods-makers of Pure Bliss Biscuits with 20%, A&P Foods with 14%, Niger Biscuit Co Ltd with 5%, Deli Food and Beloxxi Industries, with 9% and 4% respectively.
Sadly, Traditional brands such as the Okin brands are nowhere to be found. Harsh business environment, intense competition from new entrants into the market, led to the eventual collapse of the Kwara-state based Okin Biscuit factory.
Beloxxi, makers of the Cream Crackers brand, had in 2017 received an investment of about $80 million from a group of private equity investors led by rock star, Bob Geldof.
Also, United Biscuits, one of the world’s largest biscuit market and makers of the Mcvities brand, purchased a stake in A&P Foods in 2014, one of the leading biscuit manufacturers in Nigeria. A&P Foods produces biscuits from Ikeja, Lagos and is owned by the Assudamal Group. The company owns the Haansbro biscuits brand, and also produces chewing gums, boiled sweets, and toffees.
Olam also acquired Titanium Holding Company SA (owners of OK Foods) in 2012. While in 2010, the Tiger Brands, a South African company, acquired a majority stake in Deli Foods. Foreign manufacturers are also not left out in the acquisition race, Italian chocolate giant Ferrero announced plans to buy the biscuit and snack business-arm of American Kellogg Company for $1.3 billion.
OLUFIKAYO OWOEYE
