Emerging trend in Nigeria’s diary industry
Nigeria’s diary industry comprises producers of milk, yoghurt, ice cream, butter, cheese and infant formula. The industry has seen only a moderate spike, with an estimated compounded annual growth rate (CAGR) of 8 percent over the last three years.
Diary is the second largest industry in the country’s food and beverage sector, raking in revenue of about N347 billion in 2013.
Key drivers include Nigeria’s demography, rapid urbanisation and growth of retail stores. Others are growing westernisation, temperature and availability of products in small packs. In fact, analysts point to demography as the biggest driver of the diary industry and market (including imports), as Nigeria has a large population (174 million today), dominated by youths and children.
“You cannot underestimate the growth of the middle-class and a population growth rate of 2.8 percent,” Ike Ibeauchi, CEO, MD Services Limited, told Real Sector Watch.
“The age structure of Nigeria’s population shows that those between zero and 24 years make up about 63 percent. This is a key driver for the diary market,” Ibeabuchi added.
Players in the industry are Friesmland Campina, Promasidor, Nestle, Fan Milk, CHI Limited, UAC, Viju Industries Limited and Shagalinku, among others.
Agusto &Co’s research shows that milk has continued to dominate the industry, contributing 61 percent to the sector’s revenue in 2013.
Within the year, demand for milk totalled 1.7 million tons, less than 1.2 million tons in excess of domestic supply of 591,470 tons.
Local milk production is stymied by imports, which make up 75 percent of the market. Nigeria plans to push annual national milk output from 469,000 metric tons (MT) to 1.1 million MT, while also moving production from the current 500 litres per day per lactation to 2000 litres per day per lactation cow.
There has been little government effort to spike local production and curb cheap imported milk products so far.
Local milk producers are challenged by low milk output from cows, infrastructure gap, poor storage and processing equipment as well as unsanitary methods of milk. Other hiccups in the industry include poor handling, exchange rate volatility, lack of policy push, inefficient milk collection and logistics, among others.
Euromonitor International projected Promasidor Nigeria’s retail value share in 2014 at 22 percent, given that the company was the among the first to pay a closer attention to smaller packaging for its products, which appealed more to price-sensitive consumers and children of school age.
In terms of ice cream, sales rose 14 percent in current retail value terms in 2014. UAC Foods has remained the leader in the segment since 2013, claiming a value share of 50 percent with its Supreme range, according to Euromonitor.
Fan Milk, with its Fan Ice brand, is second, with a value share of 24 percent, while Provita Vitaforce Foods with Golden Scoop comes third with 14 percent share.
Fan Milk launched three different brands of FanRoyale Ice Cream, which included ‘Vanilla Strawberry Stripping’, ‘Cappuccino Chocolate Chip’, and ‘Rum and Raisins’.
Steen Hadsbjerg, managing director, Fan Milk, said during the launch that the firm tested the market before launching the brands.
Fan Milk’s market share of the yoghurt market is put at about 38 percent. Euromonitor says the company operates an effective distribution network nationwide, and has a wide variety of products.
“Because of the network of roads in Nigeria, traffic in the major cities is bad, and commuters spend hours in their cars daily. Street hawkers take advantage of this to sell to consumers, who buy such drinks as a refreshing and nourishing snack which is preferable to soft drinks, which do not nourish or help to prevent hunger,” says Euromonitor International.
‘Kunnu’, another type of local yoghurt, is produced at a small- scale and informally. Its packaging in drinkable forms presents it as an alternative to normal soft drinks.
Cheese is not yet popular with Nigerian consumers as its market remains small. An increased presence of expatriates and rapid increase in the number of supermarkets and hypermarkets such as Spar and Shoprite is helping to spur growth. Similarly, the rise of online outlets such as Konga, Jumia, Buyam.com and Supermart is also a key growth driver.
Euromonitor says Peak is the dominant brand in condensed/evaporated milk in Nigeria as the brand has been etched in the minds of Nigeria consumers due to its long presence.
Analysts say the diary industry in the country is promising but regret that it is not expanding aggressively like other industries in the food and beverages such as flour, sugar, beer and noodles, among others.
ODINAKA ANUDU