Investment opportunities abound in Nigeria’s packaged food market

Whether raw, partially or fully processed, when packaged attractively and labelled, even the most ‘ordinary’ food in Nigeria takes on a Unique Selling Point. So, from gari, to ogbono, dry ugwu leaves, crayfish, raw fish, to raw meat to fully processed beverages and soft drinks and so on, the investor is assured of constant sales at reasonable prices.

These foods, which hitherto were sold only in the open markets, now have very wide acceptance. The neat packaging and labelling bearing the name of the company and contact details no doubt give the consumers, which usually belong to Nigeria’s middle and upper classes, an assurance of hygiene and by implication safety in consumption.

Virtually all packaged foods in Nigeria enjoy huge patronage. For instance, by selling locally produced live catfish in hampers – plastic boxes filled with water and perforated at the top – fish farmers are able to sell directly to the high-end market rather than marketers who usually short-change them on price.

Tunde Sanni, a fish farmer, owner of Tee Ess Farm, says: “A catfish hamper with the fish is sold for N15,000. We put two very big live catfish in the hamper weighing 5kg altogether. Customers who buy usually give them as gifts to high net-worth individuals like managing directors of blue-chip companies and monarchs.”

If sold to market women who are marketers or middlemen, farmers hardly get up to N5,000 for 5kg of catfish, so they are able to make more money.

According to Sanni, it is also a means of promoting the brand of a farm as the plastic boxes usually carry the label of the farm, and this leads to repeated sales.

Edobong Akpabio, chief executive of Visionage Agro-tech Farms, also a consultant, says: “High net- worth individuals have little time for shopping and many of them are not good at haggling in the markets. So, they appreciate the delivery to their offices, homes and so on. But I have observed that these customers like value-added services such as safe packaging, delivery method, and billing. With these good packaging and labelling, Nigeria’s indigenous foods have also found their way to supermarkets run by foreign and local retailers as well as to the export market.”

Also, Royal Siblings Ventures Limited, owned by Fausat Sanni-Yusuf, is one of such small-sized food packaging companies that enjoy more patronage packaging indigenous foods. The firm sells ofada rice, pure natural honey, cassava flakes (garri) and yam flour (elubo). Due to the demands of the clientele, Sanni-Yusuf says: “We have also introduced pure natural honey fortified with garlic and ginger, or ginger alone to meet the specific health needs of some clientele. We also have different flavours. These products have been prepared under controlled hygienic conditions.”

For these packaging companies, whether they actually produce the food or not, the essential thing is to ensure that the health needs of the customer is not compromised at the point of production or processing. The processing of the country’s indigenous foods usually only involves washing, removal of impurities, sorting, cooking and so on. Some of these food packaging firms buy from the open markets while some buy from farmers.

Nigeria’s indigenous foods started enjoying the kind of patronage that packaged imported and locally produced highly processed foods enjoy when they started getting packaged like these highly processed foods.

According to Euromonitor, a leading international independent provider of strategic market research, the packaged food market in Nigeria is very competitive. Euromonitor reveals that only one company, FrieslandCampina WAMCO Nigeria plc, held a value share of over 10 percent of the market in 2014. Euromonitor notes that multinationals generally dominate except in categories where domestic players are protected by legislation, such as biscuits. Fortunately, multinational companies in the country do not compete with small firms in packaging of raw indigenous foods.

Other notable players include Nestlé Nigeria plc, Yale Foods Nigeria Limited, De-United Foods Industries, UAC Foods and Chi Limited. Companies such as Flourmills of Nigeria also enjoy huge patronage from its packaged foods offerings.

Euromonitor notes that the last few years have seen more foreign companies entering into the market through acquisition or joint ventures, particularly in the biscuits category. It stresses that it is necessary for such large international companies to form alliances with Nigerian companies to repackage and/or market their products in Nigeria. This lowers the risks associated with market entry. It also enables the international company to benefit from the existing marketing and distribution capabilities of the Nigerian company.

According to Euromonitor, traditional retail is giving way to modern retail. Open markets and kiosks, which comprise other grocery retailers in Nigeria, are traditionally the primary distribution channel for packaged foods in Nigeria. However, their share is declining as governments clamp down on informal retailing and as consumers seek more convenient retail experiences.

The second biggest channel is independent small grocers, which are primarily small neighbourhood stores and these are increasing share as open markets decline. Supermarkets and hypermarkets are the fastest-growing channels in packaged food in Nigeria. These channels offer greater convenience in terms of shopping as well as a wide range of packaged food products.

The growth in population, particularly of the young and urbanised, will be a major driver for packaged food. With an increase in formal working culture as well as in the number of women in such employment, the desire for convenient and quickly-prepared foods will lead to sustained demand for packaged food products.

However, in the near term the market will be largely mass based, as although Nigerian GDP is growing well, this does not appear to translate into strong income growth for a large proportion of the population. Nevertheless, a segment of the population within the middle to upper classes, often those involved in banking and real estate development, is seeing good growth in incomes and will demand higher-priced products, particularly those available in modern retail channels.

Euromonitor, a leading independent provider of strategic market research, creates data and analysis on thousands of products and services around the world. Its international extensive network of in-country analysts provides the depth of local business information required in today’s international business environment.

OLUYINKA ALAWODE