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Nigeria Food and Drink Report Q4 2010
Business Monitor International, Sep 2010, Pages: 40
The Nigeria Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Nigeria's food and drink industry.
With a population in excess of 150mn, an underdeveloped food and drink industry and a strong macroeconomic outlook, Nigeria looks like a phenomenally promising consumer goods market long-term. However, there will be plenty of hurdles to overcome in the coming years if Nigeria is to even get close to realising some of this potential. Although it definitely has more risks than smaller (in terms of population) regional outperformers (politically and economically) such as Ghana, where operating costs are lower and institutions are better developed, the raw potential of Nigeria is unmatched on a pan-African level.
Headline Industry Data
- 2010 per capita food consumption = +18.31%; forecast to 2014 = +133.04%
- 2010 beer volume sales = +8%; forecast to 2014 = +37.92%
- 2010 mass grocery retail sales = +18.54%; forecast to 2014 = +320.31%
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
Grocery Retail Investment Finally Forthcoming – Nigeria is attracting investment attention from South Africa’s leading retailers. Its grocery retail industry remains immensely promising with huge scope for long-term growth. In August 2010, Spar launched its first supermarket in Nigeria with plans to launch a further four stores over H210 (calendar) in partnership with the domestic retailer Park n' Shop. 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). Meanwhile, 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 board considerable risk. Security issues can emerge and affect impact on the distribution of goods and services. 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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