2014-01-24 00:38:07 - Recently published research from Business Monitor International, "Nigeria Food & Drink Report Q1 2014", is now available at Fast Market Research
We continue to maintain our positive long-term outlook on the Nigerian economy, and food and drink sector over our forecast period, despite some of the obstacles in the near term. In addition to ongoing instability in the country's northern regions, and high rates of inflation (which increased 7.90% year-onyear in November 2013, according to the National Bureau of Statistics), we note that downside risks have increased over recent months. Specifically, ructions within the ruling party and the uncertainty surrounding the identity of the central bank governor are both issues which could destabilise the economy, is having a negative impact on consumer confidence. However, there is no doubt of the tremendous untapped potential of this emerging market, yet a lack of
agricultural technology and transport infrastructure are holding back domestic production.
Full Report Details at
- www.fastmr.com/prod/763982_nigeria_food_drink_report_q1_2014.asp ..
Similarly to much of the continent, Nigeria is experiencing a growing middle class, accompanied by economic growth (real GDP is forecast to increase 7.2% in 2014). The increasing spending power of this middle class is being targeted by multinationals who are continuing in invest in the country's food and drink sector. Domestic winners from Nigeria's growing food consumption are more likely to be retailers such as Artee Group's Park'n'Shop rather than food producers as domestic producers are not yet in a position to supply additional demand. The Nigerian economy is set to be one of the continent's strongest performers in 2014. Underpinning this growth will be the non-oil sector, including food and drinks industries, set to experience buoyant rates of expansion thanks to relatively healthy macroeconomic environment.
While economic growth in 2014 will continue to be constrained by the headwinds that characterised much of 2012 and 2013, including security concerns and the lingering effects of widespread flooding, the longterm outlook remains very bright. We are forecasting average annual real GDP growth of 7.1% over the next 10 years, and expect the Nigerian government to prioritise investment in vital infrastructure over our forecast period and beyond, which will greatly benefit the food and drinks sector, as well as the grocery retail sector.
Headline Industry Forecasts
* Per capita food consumption (local currency) 2014 = +8.18%; forecast compound annual growth rate (CAGR) to 2017 = +8.24%
* Alcoholic drinks volume sales 2014 = +8.40%; forecast CAGR to 2017 = +8.20%
* Mass grocery retail sales (local currency) 2014 = +33.50%; forecast CAGR to 2017 = +36.11%
Key Industry Trends And Developments
Woolworths To Close Three Stores In Nigeria: In November 2013 it was announced South Africa-based retailer Woolworths plans to shut three of its outlets in Nigeria, citing high rental costs and duties, and supply chain difficulties, Bloomberg reports. Woolworths CEO Ian Moir said the decision had to be made as the investments failed to generate viable returns despite several attempts to improve performance. Woolworths said it will still continue to expand its presence in the region in the future.
Cadbury Fighting Back: Over the past few years, Cadbury Nigeria has been battling an accounting scandal that unravelled in 2006 and revealed that the company had overstated its accounts by about NGN13bn (US $80mn). Owned by Mondelez International, the Kraft Foods spinoff and owner of Cadbury, it has a longstanding presence in Nigeria that dates back to the 1960's and a Nigerian stock market listing in 1976. While the scandal was clearly an enormous setback both for the company and indeed corporate governance in Nigeria, Cadbury had built up tremendous brand equity in the years it had been in Nigeria and this has helped it a great deal as it has battled back valiantly.
Cadbury has announced plans to invest US$400mn largely aimed at capacity upgrades that will be spread over two phases with the first phase of investment expected to be worth a quarter of the total outlay. Given that demand for confectionery is expected to rise considerably as Nigerian middle class spending power grows over the next few years, the investment announcement is an important forward step in the ongoing rehabilitation of Cadbury Nigeria.
Security A Concern For Nestle: In May 2013, Nestle Nigeria reported that the Boko Haram crisis in the north east of the country has resulted in a slowdown in the company's sales and distribution growth in FY12. Nestle Nigeria reported that profit after tax reached US$134.2mn in the 12-month period ended December 31 2012, which represents a rise of 28.1% against US$104.7mn in FY11. Revenue increased 19.1% to US$740.9mn against US$621.5mn in FY11. Nestle Nigeria's cost of sales rose by 16% to US $422.2mn, from US$364.4mn in 2011, with basic earnings per share reaching US$0.16 in 2012, from US $0.13 in the previous year. Instability in northern states such as Borno and Yobe has resulted in Nestle having to temporarily remove some of its sales staff.
Key Risks To Outlook
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