Confectionery market gathers steam on growing FDIs, population
Nigeria’s confectionery market (biscuits, candies, chewing gum, and chocolates) is gathering steam on Foreign Direct Investments (FDIs), fuelled by a population growth rate of about 3.2 percent. Africa’s 180 million people strong market accounts for 2.35 percent of the entire earth’s population. This has prompted big movers in the global confectionery industry to scramble for and grab a fair share of this burgeoning profitable market, attracting over $5.3bn in FDIs since June, 2016.
Africa’s largest economy’s confectionery market masks investment opportunities comparable to the Kimberly Diamond Mine. Some think of biscuits or chocolates as fringe parts of their lives, snacks occasionally stuck into their mouths to keep idle teeth busy or satisfy itching taste buds. However, what appears trivial or peripheral needs may present smart entrepreneurs with the opportunity to make huge kills. The reason is simple; a critical mass of people with similar ‘trivial’ needs creates a big market.
According to an Aguto & Co Ltd report, the Nigerian Confectionery Industry generated estimated revenue of ₦115 billion in 2014. The biscuit segment is the largest, accounting for about 61 percent of the Industry’s turnover. The performance of the Industry has been supported by a densely inhabited country with about 45 percent of the population composed of children within the age group of 0 to 14. The total biscuit demand in Nigeria is estimated at about 600,000 metric tonnes annually.
The report added that there is an active import market which competes aggressively with local production and accounts for about 40 percent of sales. In the last few years, there has been an inflow of investments from multinational confectionery companies seeking to retain and grow business in Nigeria that had hitherto been sustained by imports.
For instance in June, 2016 the Nigerian Biscuit market received $5.2 billion as Central & Eastern Europe, Middle East & Africa’s largest food company, Yildiz Holding, merged its core biscuit, chocolate, and confectionery businesses, to form a new global company, called Pladis.
The new corporate entity, which is worth $5.2billion, aggregates internationally recognised brands, such as McVitie’s, a leading biscuit brand in Nigeria with a heritage in the United Kingdom and Europe; Godiva, a leading premium chocolate brand worldwide; and Ulker, the leading biscuits and confectionery brand in Turkey and Middle East to form the $5.2 billion business, positioning Pladis as a global leader in this category, a statement made available to the press revealed.
With this buy-in, A&P Foods Limited, the producers of McVities Biscuits in Nigeria, became a member of Pladis. Established in 2002, A&P Foods is a major player in the biscuit and confectionery categories in Nigeria, and also produces the Haansbro brand, a known brand in Nigeria’s biscuits and confectionery market.
Yildiz Holding Chairman, Murat Ulker, said: “Establishing Pladis is the first step in realising the long-term strategy of Yildiz Holding. We are bringing together some of the world’s best loved brands and combining their 350 years of experience to form a new family company. We will be a global leader in biscuits and confectionery, and bring ‘bites of happiness’ to every corner of the world.”
Similarly, in August 2016, the media reported that one of Nigeria’s leading biscuit makers, Beloxxi Industries Limited had received an investment of about $80 million from a group of private equity investors led by rock star Bob Geldof. Geldof’s fund, 8 Miles was said to have acquired a minority stake and is looking to expand its investments in Africa. This is a pretty good source of news for an economy that has been gloomy.
For a lot of Nigerians looking at these investments and wondering why biscuit? Well this piece of information may change your mind about the positives of the biscuit market in Nigeria.
Biscuits are mostly made of wheat flour, which is considered healthy and can be sourced locally.The raw materials and ingredients used for manufacturing biscuits include, palm oil or vegetable fat, and sugar.
However, local manufacturers also have to import the food ingredients and additives used for making biscuits. These are not considered major ingredients making this a largely locally sourced market for raw materials. Biscuits are a whole some food and also very rich in common nutrients and can be preserved for a long time.
The biscuit market is largely manufacturing as most biscuits (about 50 percent) are made in Nigeria.
Out of the several brands of biscuits in Nigeria, the Yale brands is said to own about 38 percent market share. Yale brands
Local manufacturers of biscuits are said to own about less than 60 percent of the market share with the rest going to biscuit importers.
According to Deli foods there exits about sixteen biscuit manufacturers (not sure of date of this claim) operating in Nigeria. They also claim that biscuit consumption in Nigeria is estimated between 450,000 to 500,000m.t.annually.
Biscuit manufacturing is said to have soared from an annual growth rate to 1-2 percent to 20 percent “due to the ban on Importation of biscuits.” Biscuits manufacturers employ thousands of Nigerians. For example, Beloxxi employs about 2,300 people and operates through a network of some 400 distributors.
Nigeria’s biscuit sector is said to be growing at an annual rate of 10 to 15 percent. The growth rate is mostly driven by Nigeria’s rising population growth. The population growth is also further complimented by an increasingly urbanised market.
The price point for biscuit, which goes for as low as N50 per pack puts it at a range that is payable by majority of Nigerians who live on less than $1 (N315) per day. The local varieties are grouped into three categories of biscuit and are as follows: Soft Dough biscuits – Digestive, Glucose etcetera; Hard Dough semi sweet cabin, marie, coaster etcetera; Cream Crackers naturally fermented or chemically aerated, salty or sweet.
STEPHEN ONYEKWELU