The economic turmoil in the country is having an adverse effect on the fortunes of many Fast-Moving Consumer Goods companies (FMCGs).
Nielsen Consumer Confidence Index, which is a key measure of the economic health of the country, has seen a significant drop in consumer confidence index in Nigeria due largely to weak macro-economic factors, rising inflation, weakened consumer income, all of which has affected the way consumers feel about the future.
The index showed that there is a decline in the consumption of FMCG goods, “as people will have to start reprioritizing on goods they spend their money.”
The index showed that consumers are spending more of their money on education, housing, with less disposable income to spend on branded goods except for beverages and telecom services.
Nielsen started keeping track of Nigeria’s Consumer Confidence Index in the first quarter of 2014. The Managing Director of Nielsen Nigeria, Lampe Omoyele, said that the index was high in 2014 but they started noticing a drop in the third quarter of 2015.
“When we noticed the decline in consumer confidence, we became concerned because Nigerians are generally optimistic people,” he said.
He noted that FMCGs were the worst hit sector. Most of the FMCG companies have reported losses. However, beverage brands (alcoholic and non-alcoholic) and telecom brands have all recorded some growth despite the economic headwinds.
The growth in the alcoholic beverage sector is as a result of people’s natural tendency to consume alcohol during down moments, in the same vein the telecoms companies have recorded growth because of the general attitude of Nigerians to talk and connect with family and friends regardless of the economic condition, he said.
However, the growth in the soft drinks segment was primarily driven by Coca-Cola’s Share-a-Coke campaign, which was hugely successful and inspiring marketing drive. Likewise, growth in the alcoholic segment has been largely driven by Nigerian Breweries Plc. Guinness Nigeria Plc, a Diageo company was in decline despite the acclaimed success of its top brand, Orijin.
Omoyele noted that the key factor for Nigerian Breweries growth was their acquisition of Consolidated Breweries, which had a host of value brands. “So the growth was driven by the value brands,” he said.
“The other point with Nigerian Breweries is that they have consistently engaged with consumers,” he said.
He added that it was imperative for FMCG businesses to begin to hold market share, to retain their consumers and do not reduce quantity they are consuming.
The Nielsen Consumer Market Index Benchmark has been pegged at 100, and as at fourth quarter of 2015, it was hovering around 104, down from close to 200 in the first quarter of 2014. This is a course for concern for economic reasons because any figure below 100 will suggest depression.