Packaged foods in growth spurt fuelled by demography, urbanisation, retail stores
Despite economic slump in Nigeria, the packaged foods industry is still on the rise due to a resilient demography made up of over 60 percent under-40 population, urbanisation, growth of retail stores and change in consumer tastes.
“Growth of the already large Nigerian population, particularly babies, children and young people, drove categories such as baby food, confectionery, noodles, biscuits and dairy products,” says a Euromonitor International report on the 2016 packaged foods segment in Nigeria.
“A booming urban population – with cities such as Abuja and Lagos expanding remarkably through satellite town growth – fuels demand for convenient food and drink products such as drinking yoghurt, pastries and sweet and savoury snacks such as fruit snacks,” says the report.
With a population of Nigeria’s 182.2 million people and a growth rate of 2.6 percent, Nigeria’s demography provides a big market for packaged foods.
A 2016 KPMG report shows that the size of the Nigerian bread industry has reached $621 million, representing 80 percent of the baked goods sector.
The bread industry has grown at a compound annual growth rate (CAGR) of 14 percent in the past five years, with a yearly production of 554,270 tonnes. Similarly, the Nigerian biscuit segment has grown to $617 million size at a CAGR of 16 percent in the past five years and an annual production of 152,490 tonnes, according to KPMG.
In 2016 alone, chewing gum’s sales value rose by 11 percent, making it the highest growth rate within confectionery in Nigeria, according to Euromonitor International.
Nigeria’s fruit juice industry had 3 percent off-trade volume growth in 2016.
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.
“Food manufacturers and packagers are now displaying their products through retails stores such as Shoprite, Spa and online shops like Jumia, Konga, Payporte, Kara and others,” said Ifeanyi Okeleke, executive director of Kenfrancis Farms, an integrated farm and packaging company.
“What it does for a brand is that it gives it leverage. If you go to Shoprite, for example, you see 70 percent of the products bought by shoppers are packaged food items,” Okeleke said.
Naomi Peterson, managing director, Nampet Ventures Nigeria Limited, producer of disposable plastic materials based in Port Harcourt, Rivers State, had told BusinessDay that the demand for plastic containers was being driven by the need to package food in very attractive containers.
“The fact that these containers are disposable is also helping the continuous demand,” Peterson had said.
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.
Apart from population and retail stores, urbanisation is also a major factor. In 2012, the United Nations Organisation (UN) put Nigeria’s urbanisation rate at 51 percent, suggesting that over 80 million people lived in the cities. The UN says this number is growing at an annual rate of 3.5 percent.
Rural-Urban migration is rising by the day and work pressure in cities is forcing middle-class and rich families to rely on packaged foods.
Families now buy processed meat and sea food, frozen desserts, processed fruit and vegetables, ready meals, rice and condiments from retail stores.
The proliferation of ‘fast food joints’ has also spurred the growth of the packaged foods segment, say analysts.
ODINAKA ANUDU