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Nigeria Food and Drink Report Q2 2009
Business Monitor International, April 2009, Pages: 41
The Nigeria Food and Drink Report provides independent forecasts and competitive intelligence on Nigeria's food and drink industry.
Nigeria has held on to joint 44th position out of a possible 53 countries in the Global Food & Drink Business Environment Ratings table for Q209. Despite the fact that a notoriously poor operating environment weighs down on its score, Nigeria boasts a large and mostly untapped market. Even though over 90% of Nigerians continue to live on less than US$2 a day, its potential has attracted Cadbury and Nestlé, two of the world’s most notable food and drink companies. Nestlé Nigeria reported official 2008 earnings while Cadbury Nigeria released forecasted earnings in Q109 as discussed in the recently published Nigeria Food & Drink Report for Q209.
Nestlé Nigeria reported after tax profits of NGN8.33bn (US$56.57mn) – year-on-year (y-o-y) growth of 53.13%. The company produces a wide variety of infant foods, drinks and confectionary products. Despite our forecast that Nigerian GDP is set to contract in 2009, the low base from which sales are growing and the continued feed-through effect of the economic boom of the last few years should allow the company to post respectable earnings in 2009.
While Nestlé made impressive headway in 2008, Cadbury Nigeria continued to struggle despite enjoying a healthy market share. The company forecasted its losses at NGN2.88bn (US$19.46mn) and has yet to truly recover from an accounting scandal in 2006 that forced it to write down a number of its assets. Looking forward, we forecast a 39.71% increase in food consumption through to 2013, which although significant, does not mask the fact that food and drink consumption remains desperately low. We estimate that per capita food consumption was a mere US$200.6 in 2008.
Notwithstanding the fact that widespread poverty means most of Nigeria’s population continues to be out of reach for most food and drink manufacturers, the imminent expansion of the country’s mass grocery retail (MGR) sector will alert potential new entrants. The announcement by South African retailer Shoprite that it plans to open 50 stores by 2013 will also come as a welcome relief to existing manufacturers who have been longing for a more defined route to consumers.
Similarly, government initiatives to bolster the neglected agricultural sector and its ambitious 2020 plan aimed at transforming Nigeria into a top 20 world economy by 2020 are the sort of noises investors want to hear.
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