Consumer sector remains resilient despite challenges

The consumer sector in Nigeria has proved to be one of the most resilient over periods of economic turbulence, with most industry investors staying the distance during tough times.

The Covid-19 pandemic has been no exception. Despite the hit to the economy as a result of global lockdowns, investment is still flowing into the sector. Last year, for example, Coca-Cola announced a five-year $1.7bn investment as it celebrated 70 years in the country.

Earlier this year, US personal care company Kimberly Clark recently opened an $80m plant in Ikorodu in Lagos. Unilever, which saw losses in 2019 and 2020, experienced a jump in sales of 35% in 2021 over the previous year.

The pandemic came on top of a perfect storm that hit consumers hard, with the sector buffeted by spiralling inflation, scarcity of foreign exchange as well as shortages of basic foods due to border closures with Nigeria’s neighbours and insecurity in agricultural areas.

Covid-19 exacerbated those

There is still huge opportunity in the formal retail sector in Nigeria, given that it represents less than 10% of the overall retail market

hardships but there were also rays of light. The Sundry Foods Group, headquartered in Port Harcourt, has 21 Market Square supermarkets across the country and owns the Kilimanjaro chain of fast-food restaurants. Its CEO, Ebele Enunwa, says the pandemic, while having many negative impacts on peoples’ lives, had also been good for business.

“We sell basic and essential commodities and so regardless of what is happening in the economy, demand for our products remains strong. And we were considered an ‘essential’ business since we were a key source for food and other essential commodities and so we were not directly affected by the numerous lockdowns instituted by governments in Nigeria.

“We were therefore allowed to trade for the entire period, and we experienced significant increase in demand as a result too.”

In contrast with many other countries, the lockdowns in Nigeria were not applied uniformally, as different states had the authority to implement them as they deemed necessary. But the national ban on international travel was good for shopping malls as well-heeled Nigerians, unable to travel abroad, were forced to do so at home.

As a result, the Western-style malls enjoyed increased patronage over much of the past year and more, says Derrick Roper, CEO of Novare Equity Partners, which develops malls in Africa.

“Because of Covid-19 we have seen people travelling less and shopping more in the malls. Some of the shops saw turnover double and we have seen occupancy in the malls increase in 2021 – it is the highest it’s ever been. And rentals arrears are also down,” he says.

Ade Sun-Basorun, CEO of another local food retail chain, FoodCo, says that in addition to food, resilient brands during the pandemic included electronics, health and beauty products and furniture.

He says there is still huge opportunity in the formal retail sector in Nigeria, given that it represents less than 10% of the overall retail market in the country and is much lower than in countries such as Kenya and South Africa.

“This reflects an unmet need that creates opportunity even within the current cycle,” he says. “We see semi-formal retail going more formal, particularly as the youth is now driving a shift to a more modern retail experience.”

The withdrawal from the market of South

Africa’s Shoprite has not created a vacuum, given that the 25 stores were disposed of in a franchise agreement with local company, Ketron Investment Ltd. Sundry’s Marketsquare has moved into a centre in Ikeja as the anchor tenant where Shoprite used to be, for example.

Says Enunwa, “Formal retail is largely underdeveloped and so there is lots of headroom for growth which we are exploiting.

“Our strategy is to put as many stores as close as we can to the consumer and to offer them the products that they want at the lowest prices possible. Our focus is largely on the customer, not on the competition.”