Manufacturing recovery fuelled by expansion in food, beverage industry
The Nigerian manufacturing sector is seeing a gradual recovery after more than four quarters of recession due to expansion in investments and sales in the food and beverage industry, BusinessDay checks show.
Nigeria’s food and beverage industry constitutes about 45 percent of the entire manufacturing sector, made up of players in beer, starch, palm oil, flour, flavourings, soft drinks, carbonated water, tea, coffee and other beverages.
It also involves manufacturers in dairy products, fruit juice, biscuits and bakery products, animal feeds, sugar, cocoa, chocolate, vegetable and edible oil, as well as poultry group.
The food and beverage industry is the only sub-sector in manufacturing that grew above four percent in the first quarter of 2017, according to the National Bureau of Statistics (NBS) data.
“The future of food and beverage industry in Nigeria looks bright and the sub-sector will continue to grow. The industry is supported by Nigeria’s huge population, which is why many international companies are interesting in entering into the sector,” said Jamie Hill, director of Food West Africa.
Hill, who organises food fairs and exhibitions across the world, said the appetite he had seen in the industry in Nigeria from foreign companies was overwhelming.
An August 2016 KPMG report, which examines the wheat-based consumer goods in Nigeria, said that the outlook across the food and beverage segments (including personal care) appeared stable and positive, despite Nigeria’s challenging economic environment.
Soft drink sales in Nigeria in 2016 was highest in sub-Saharan Africa, with market value hitting $38.68 million in 2016, making Nigeria fourth in the world behind the United States ($114.75 million), China ($88.18million) and Mexico ($45.30 million), according to Martina Claus, head of market development at German Engineering Federation.
Nigeria’s fruit juice industry had three percent off-trade volume growth in 2016, according to Euromonitor International, while food sales cumulative annual growth rate (CAGR) is forecast to grow by 10.4 percent from 2015 to 2020, according to BMI Research.
The Nigerian biscuit industry is now worth $617 million, having grown at a compound annual growth rate (CAGR) of 16 percent in the past five years, with an annual production of 152,490 tonnes.
Similarly, the bread industry is now valued at $621 million, growing at a CAGR of 14 percent in the past five years.
More than $2.6 billion has been pumped into the sugar industry in the last five years by Dangote Sugar, Flour Mills’ Golden Sugar, HoneyGold, and Crystal Sugar, among others.
Dangote is investing $1 billion in rice and over $2 billion in sugarcane-to sugar value chain.
FrieslandCampina WAMCO has completed the fourth milk plant to raise local sourcing of raw milk from Fulani farmers in Oyo State.
“We now have the capacity to collect over 40,000 litres of raw milk daily from 1,720 farmers. But these investments must be supported by policies and socio-economic infrastructures to realise a robust dairy farming sector that can serve over 180 million Nigerians,” Ben Langat, managing director of FrieslandCampina WAMCO.
Apart from Flour Mills’ $300 million investments in its subsidiary Golden Sugar Estate Limited, the group is expanding its Agri Palm Limited has plantations at Ugbogui and Iguiye near Benin City in Edo State and several other plantations across the country.
PZ Wilmar, a subsidiary of PZ Cussons, is investing $300 million in palm plantations in Cross River State.
After buying OK Foods in 2012 for $167 million, Olam International in early 2016 acquired BUA’s wheat milling plants for $275 million.
Presco, Nigeria’s oil palm processor, has pumped $1 billion into the Nigerian economy in the last 10 years while Honeywell Flour Mills Plc is putting N64 billion into an integrated processing facility in Ogun State.
The food and beverage industry is driven by Nigeria’s demographic advantage (180 million population), made up of almost 30 percent middle-class and over 60 percent young people under 40 years.
ODINAKA ANUDU