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Nigeria Food and Drink Report Q3 2010
Business Monitor International, June 2010, Pages: 43
Business Monitor International's Nigeria Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Nigeria's defence and security industry.
Coming off a strong 2009 where GDP growth of 6.9% was recorded, Nigeria is poised for another strong year with 7.5% growth anticipated. While this will be broadly good news for fast-moving consumer goods producers, we caution that consumer confidence ‘on the ground’ is perhaps not as strong as the GDP outlook suggests.
However, with real private consumption growth forecast to average 6.5% to 2014, key food and drink indicators are likely to spike off a low base as investment into the Nigerian consumer play gathers pace. Taking into account our long-term headline macroeconomic and industry outlook and the fact that Nigeria’s population stands at more than 150mn, Nigerian and multinational firms alike will look to pursue significant investment.
Headline Industry Data
- 2010 per capita food consumption = +17.11%; forecast to 2014 = +15.21%
- 2010 beer value sales = +17.26%; forecast to 2014 = +129.28%
- 2010 mass grocery retail sales = +12.69%; forecast to 2014 = +91.43%
Key Macroeconomic Data
- 2010 Real GDP growth = +7.5% (2009, +6.9%)
- 2010 Consumer Price Index = +11.8% chg y-o-y (period average) (2009, +12.4%)
- 2010 Unemployment Rate = 15.5% (end of period) (2009, 17.3%)
Key Company Trends
Strong Sales And Earnings Growth – Nigeria’s largest food companies have by in large been reporting strong financial results with sales revenues and headline earnings continuing to push up at a strong rate. Nestlé and Unilever have continued to perform particularly strongly. In March 2010, Nestlé reported year-end FY09 (12 months to December 2009) 16% year-on-year (y-o-y) increase in pre-tax income to NGN13.78bn (US$91.5mn).
Mixed Performance In Beer – One of the very few African markets to have attracted more than two major multinational brewers, the industry is led by Heineken-owned Nigerian Breweries. However, in April 2010 Heineken reported that Q110 Nigerian volume sales declined in the mid-single digits as a result of economic weakness (highlighting how things are still quite difficult at the real economy level) and security concerns (likely to impact supply).
Earlier in February 2010, Guinness Nigeria recorded a near one quarter increase in H1 (six months to December 2009) sales revenue.
Key Risks to Outlook
Security Escalation – Investing in Nigeria means taking on a considerable risk. Security issues can flare up and affect the flow of goods of services to the widespread consumer base. Dismal Business Environment – Nigeria’s business environment is at best unforthcoming to enterprise. Bureaucracy and corruption are rife while infrastructure is highly underdeveloped and unreliable, which inflates operating costs.
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