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Competition deepens in Nigeria’s fruit, energy drinks market

by e-Naira Online News
June 17, 2022
in Capital Market
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Competition has intensified in the Nigerian fruit and energy drinks market as more Nigerians are shifting to cheaper consumer goods due to harsh economic realities.

According to a BusinessDay survey of some retail stores across Lagos State, the fruit drinks competing include Ribena, Capri Sonne, Magik, Nestle Milo drink, and Bobo, while the energy drinks are Lucozade, Fearless and Predator.

For example, both 200ml of Bobo and Capri Sonne drinks are sold at N120-N150 and N100-N150 respectively compared to a 250ml Ribena drink sold at N400-N450.

A 450ml Lucozade drink is sold at N250-N300, compared to 500ml Fearless sold at N190-N200 and a 400ml Predator for N195-N200.

“These two drinks (Ribena and Lucozade) do not dominate the non-alcoholic drinks market and have not been able to match other competitors in terms of volume, pricing, variety,” said Ayorinde Akinloye, an investment and research analyst at United Capital Plc, “This is due to the emergence of new energy drinks that are cheaper and people are opting for them.”

Read also: Soft drinks tax: Good for revenue, bad for the poor – Rewane

In 2016, GlaxoSmithKline Nigeria, a consumer goods company, sold Lucozade and Ribena brands to Suntory Beverage & Food Limited, a Japanese beverage firm. But in April 2022, the firm announced the sale of the brands to Mauritius-based Africa FMCG Distribution Ltd.

The transaction, which is worth about $14 million, is expected to be completed in the second quarter of this year.

“When Suntory acquired the brands, their strategy expectation was that they could drive the business turnover and change the fortunes of products by making them more available and profitable but they have not been able to achieve that strategy, forcing them to leave,” said Abiola Gbemisola, an analyst at FBNQuest.

Nigeria’s creaking economy has slid into recession twice in the last six years caused by the decline in global oil prices in 2016 and the COVID-19 pandemic in 2020. This has triggered high inflation, weakened the purchasing power of consumers, shrank disposable incomes, and left many without jobs.

According to the National Bureau of Statistics, the inflation rate for May stood at 17.7 percent, the highest in 11 months while the unemployment rate stood at 33.3 percent in the fourth quarter of 2020.

According to a recent consumer goods report by Cordros Securities, while the economy exited the pandemic-induced recession in Q4 2020, the living conditions for the average Nigerian consumer is yet to improve considerably due to sluggish economic growth, weak labour market, conditions, higher commodity prices and sub-inflationary wage adjustments.

“The blend of these factors dented consumer purchasing power and increased price sensitivity. In addition, industry players continued to face higher costs of operation arising from increased input costs given the depreciation of the naira, FX liquidity constraints, and structural rigidities,” the report said.

According to the World Bank, the number of poor people in Nigeria stood at 89 million in 2020 and is projected to hit 95.1 million in 2022 with as many as four in 10 Nigerians living below the national poverty line.

Hanke’s Misery Index for 2021 ranked Nigeria as the world’s 11th most miserable country.

With many consumers now poorer, premium brands are seeing lower demand for their products amid higher production costs.

This has prompted some companies to either exit the market or review their product packaging, quantity or quality.

“If the management feels that the current conditions in the market are not favourable and they decide to stay in the market in the next two to three years, there really isn’t a strong indication that will warrant those growth prospects to really materialise,” Ologunro said.

More standardised segments like the fizzy drink segment are saturated and dominated by entrenched players who have not only perfected their packaging and distribution channels but can easily meet some of the best practices in the industry, according to The Thread Group, a global boutique consultancy and agency.

“It will be hard for a new entrant to sell above the industry benchmark price and expect the same results as competitors, To have a competitor who has invested less in production, regulatory compliance, packaging, distribution, and marketing yet has a good geographical spread can impact the long term profitability of your business,” it said in a piece on the Nigerian soft drinks market.

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Tags: competitionDeepensdrinksenergyFruitMarketNigerias
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