navigating the new normal in nigeria - nielsen · 2019-05-29 · nigeria’s economic growth and...

1 Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.

Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.

WHAT’S AHEAD IN 2017

NAVIGATING THE NEW

NORMAL IN NIGERIA


The potential of Nigeria is undisputed. With one of the

largest Sub Saharan Africa economies, an even larger

population, political, economic and social advancement,

growing investment in infrastructure and most importantly a

rising consuming class, Nigeria is poised to offer businesses

opportunities for growth unparalleled in Emerging Markets

around the world.

More recent global and local turmoil has adversely affected

Nigeria’s economic growth and consumer spending potential,

leaving businesses asking the all important questions of how

to operate in the cyclical downturn, what to focus on, what do

consumers want and need, and how to work with retailers to

sustain the diminishing demand.

The Nielsen report ‘Navigating the New Normal in Nigeria’

provides key insights into how businesses can prepare their

business for what’s next in Nigeria.

Sincerely,

Abhik

WINNING IN

A TIME OF

DISRUPTION

ABHIK GUPTA MANAGING DIRECTOR

EAST | WEST AFRICA

AND MAGHREB


Nigeria’s economic downturn has been widely followed in 2016 as Africa’s biggest,

rising economic powerhouse has been plagued by macro economic forces which have

derailed the upward trajectory. The economy slipped from highly favourable growth

rates less than 2 years earlier, into an economic recession in Quarter 2’2016, and the

lowest rate of growth since 2005. Low commodity prices, in particular oil prices, have

dragged revenues down and weakened the Naira considerably, in addition to other

factors such as falling oil production, import restrictions and persistent foreign currency

shortages.

Many of Sub Saharan Africa’s economies have also been affected by global financial

market conditions, in particular those with less diversified economies and a heavy

reliance on commodities. In the latest Nielsen Africa Prospects indicators, which

assesses relative country potential across a range of factors, Nigeria dropped to eighth

place on the macro ranking, and seventh place on the overall ranking, reflecting the

intensity of the economic crisis facing Nigeria, relative to other Africa counterparts.

Nigerian market conditions will remain constrained into 2017, with the IMF forecasting

the economy to rebound and grow at 1.2%. The strength of the recovery, however, will

depend on the recovery of oil prices, improvements in liquidity conditions in the

economy and the implementation of structural reforms.

What is clear is that businesses in Nigeria will continue to face challenging conditions,

predictions for growth will be lower than those experienced in the previous ten to

twenty years and, in order to endure the turbulent times, will require resilience,

relentless adjustment and adaptation to meet consumers’ altered needs in this time of

uncertainty and change.

A TURBULENT YEAR WITH HEADWINDS TO PERSIST

MACRO ECONOMIC

OUTLOOK


109.5 114.6

98.3

63.3 56.6 62.1

48.1 37.8 37.8

48.5 47.7 45.3

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16(Nov)

C R U D E O I L U S $ P E R B A R R E L

1 128

1 381

1 155 1 030

723 625

1 214

502

887 906

1 386 1 269

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'17

F O R E I G N D I R E C T I N V E S T M E N T

5 609 5 463 5 171

5 445 5 289 4 865

5 340 5 116 5 006

4 455

3 627

4 296 4 169

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

C R U D E O I L P R O D U C T I O N

OIL PRICE AND

PRODUCTION SLUMP BUT THE WORST IS POSSIBLY OVER


6.2 6.5 6.2 5.9

4.0

2.4 2.8

2.1

-0.4

-2.1 -2.2 -1.7

-0.5

1.2

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17(f)

G D P G R O W T H

8.0 8.4

11.4

16.2

17.7 18.0

15.4 16.3

9.2 9.3

11.3 15.3

16.6 17.4

18.4 17.6


I N F L A T I O N

CORE FOOD

165 163 164 183

199 199 199 199 199

282 313 304 317

298


N G N | U S $ E X C H A N G E R A T E

LOW GROWTH, HIGH

INFLATION GROWTH SET TO REBOUND, INFLATION WILL TAKE

LONGER TO NORMALISE


RESILIANT POSITIVITY STARTED TO WAVER, BUT

LIKELY TO STRENGTHEN

Nigerian consumers have remained extremely optimistic in their outlook (scores above

100 indicate a positive outlook), despite the broader environmental pressures trickling

through into their everyday lives. While the majority of consumers are hopeful for an

improvement in their circumstances, they have had to adapt their spending patterns.

The most recent consumer confidence score provides an early indication that

sentiment for 2017 is likely to improve as macro environment factors stabilise.

D E T E R I O R A T I N G C O N F I D E N C E I N D I C A T O R S

CONSUMER

OUTLOOK

120 121 123

127 129

132

127 127

120 122

113 116

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16

C O N S U M E R C O N F I D E N C E I N D E X

% E

XC

ELL

EN

T /

GO

OD

TR

EN

D V

S Y

EA

R A

GO

- -14

points

-2

points

-11

points

59%

80%

39%

JOB PROSPECTS

PERSONAL FINANCES

IMMEDIATE SPENDING

INTENTIONS


CAUTIOUS, RISK AVERSE AND CUTBACKS

When times are tough, the ultimate expression of confidence is in what consumers do

to cope within their altered constraints. Less than half (44%) of Nigerians claim to

have spare cash, slightly up from 40% in Quarter 4’2015. Of those with spare cash,

the majority adopt more cautionary approaches opting to save or service debt rather

than spend, cutting back on discretionary buying, as they struggle to cover essential

daily living expenses.

While sentiment in 2017 is expected to remain positive, and with some improvement,

immediate spending intentions will continue to be subdued. Consumers will spend

cautiously as incomes remain strained and variable on a day to day basis. As higher

levels of inflation will continue to prevail throughout 2017, consumers will find

efficiency in multiple ways: non essential items will be further pressurized and

additional trade offs will be required, even within essential food products, as certain

staple items become more critical than others.

Consumers will continue to adopt different, category-specific tactics from shopping

less frequently to reducing quantities (smaller packs or larger bulk packs if incomes

permit), switching to cheaper brands or looking for better deals. Manufacturers and

retailers will need to understand the various approaches to match the consumers’

needs with viable offerings.

CONSUMER

REACTIONS

80%

62%

56%

45%

41%

Put into saving

Invest in stocks/shares

Have no spare cash

Pay off debt/loans

Retirement fund

S A V I N G

69%

60%

54%

49%

39%

Home improvements/décor

OOH Entertainment

New Clothes

New Tech products

Holidays/ Vacations

S P E N D I N G


DETERIORATING GROWTH AND SPEND OUTLOOK SET

TO IMPROVE

Similarly retailers have expressed waning sentiment about the country growth outlook.

The proportion of retailers with a positive view (excellent/good) regarding country

growth has diminished from 55% a year ago to 35% currently. Retailers are operating

in a significantly more challenging environment where they are struggling to sustain

consumer demand and manage optimal stock levels. The worst, however, appears to

be over as retailer sentiment, following consumer sentiment, shows signs of recovery

into Quarter 1’2017.

THE RETAILERS’

REALITY

55% 49% 43% 43% 37% 34% 30% 25% 22% 17% 19%

14% 14% 15% 15% 16% 20% 30%

42% 44% 56% 52%

Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

R E T A I L E R V I E W O N C O N S U M E R S P E N D I N S T O R E

Increased Stayed the same Decreased

72% 70% 67% 69% 58% 61% 55% 42% 37% 30% 35%

27% 28% 30% 30% 30% 37% 43% 57% 62% 69% 65%

Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

R E T A I L E R V I E W O N G R O W T H

EXCELLENT/GOOD NOT SO GOOD/BAD

Retailer sentiment regarding growth is also founded in the declining consumer spend

in store. Currently, the majority (52%) of retailers expressed weakening in-store spend

compared to one third in Quarter 1’2016 and only 15% of retailers who held this view

two years ago. Retailer opinion in the current quarter confirms a slightly more

favourable outlook heading into 2017, which will bring much needed relief to retailers.


Nigeria’s retail market was estimated at US$123 billion in 2013, with the second

fastest annualised growth of 13.3% in the region. Over the past few years the

momentum has been reversed, however, 2017 holds promise for restoring the pace of

growth to positive strides once again. Consumer Packaged Goods (CPG) including

food, beverages, confectionery, personal, health and home care products, which

account for nearly 40% of the overall Nigerian wallet, have been in decline since

Quarter 1’2015, but show early signs of recovery, mostly due to inflation, as overall

volumes continue to slow.

Quarterly spend through to mid 2016 showed progressive declines over previous years

in value and volume. Quarter 3 and 4’2016 spend remained fairly flat versus 2015, but

Quarter 1’2017 shows a marked recovery, up +10.7% over Quarter 1’2016. Volumes

remain under pressure due to rising inflation which has climbed from 8% in early 2016

to current levels of 35%.

SHIFTING SHOPPING DYNAMICS

REFLECTED IN

SPENDING

While spend rebounds as a result of sky rocketing inflation, consumers are still faced

with paying ‘more for less’ and will continue to alter their shopping patterns to meet this

reality. What is evident is that the shopping dynamics across areas, categories and

channels have changed, and manufacturers and retailers will need to continue to

adjust their strategies to what matters most to consumers. .

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

JA

N'1

5

FE

B

MA

R

AP

R

MA

Y

JU

N

JU

L

AU

G

SE

P

OC

T

NO

V

DE

C

JA

N'1

6

FE

B

MA

R

AP

R

MA

Y

JU

N

JU

L

AU

G

SE

P

OC

T

NO

V

DE

C

JA

N'1

7

FE

B

MA

R

AP

R

Bill

ion

s

TR

ILL

ION

S

T O T A L B A S K E T T R E N D S

VALUE VOLUME

8%

35%

INFLATION


Consumers have been compelled to divert more of their spend to staple, non-

packaged (loose) food products to feed their families, and of packaged goods, edible

products account for the majority of spend (75%). As prices have risen more money is

required to cover the essential living items, taking away from the non-essential

categories such as Confectionery, Personal and Home Care products. In more recent

months, packaged goods reflect growth in spend at +7.7% versus Q4’2016, and a

slower rate of decline in volume (-9.2%). Beverages have remained resilient in the

face of rising prices as new, cheaper alternatives have become available.

BASKET RE-MIX

STAPLES CAPTURE

MORE SPEND

Rural areas account for 13% of the national sales and reflected greater loss in

spending in earlier periods. While annual growth in Rural areas is still flat, into the

short term both Rural and Urban areas show signs of recovery with positive growth .

SPEND CONTRIBUTION VALUE GROWTH VOLUME GROWTH

QTR 1’2017 YEAR QTR YEAR QTR

+3.1% +8.9% -25.7% -9.3%

-4.8% +6.8% -34.2% -11.4%

+6.0% +6.7% +13.7% +6.4%

+8.6% +10.5% -12.7% -5.6%

+2.3% -6.8% -12.0% -12.4%

+17.9% +14.7% -5.8% -0.1%

-0.4% +7.9% -18.1% -5.9%

41.3%

2.8%

31.7%

8.8%

3.6%

3.0%

8.9%

Food

Confectionery

Beverages

Personal Care

Health Care

Baby Care

Home Care

Annual growth for the 12 months to April 2017, Quarter growth versus previous quarter (Q4’2016)


MORE RISK AVERSE CHOICES

MORE PARTICULAR

ABOUT PRODUCTS

67% 70% 58% 55% 48% 50% 43% 42% 36% 31% 33%

4% 6% 7% 6% 9% 9% 16% 21% 24% 32% 28%

Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

C O N S U M E R W I L L I N G N E S S T O T R Y N E W P R O D U C T S

Increased Stayed the same Decreased

Consumers also become less likely to try new products, reverting to choices rooted in

familiarity and recommendation. In this climate, manufacturers will struggle to

convince retailers to range or promote new products which are unfamiliar to their

customers, as they focus on the products that are the top sellers and critical to

consumers.

The decreasing ability to spend is followed by more risk averse shopping behaviour.

Consumers revert to tried and trusted brands in tough times, but are also forced to

consider more affordable brands, usually of lower quality or brands which are

available, due to variable stock supply.

56%

34%

47%

62%

37%

52%

14%

62%

43%

60%

26%

Trusted brand Tried before Affordable Available

H O W C O N S U M E R S C H O O S E P R O D U C T S

Q1'2015 Q1'2016 Q1'2017


Shoppers have adapted what they’re putting into their baskets to accommodate their

wallets, and have also adjusted where and how often they are shopping. There is a

trend towards more frequent shopping due to the decline in disposable income. As

incomes vary on a daily basis, consumers are shopping on an immediate-needs basis,

often visiting stores more than once per day due to their fluctuating earnings.

Channel importance has shifted as shoppers shop around in search of more cost

effective products, pricing and available products. Consumers have reverted to Open

Markets and smaller format stores, away from Supermarkets/Grocers, where there is

greater flexibility in the quantity and packaging which can be obtained.

The implication for manufacturers is ensuring that their products are available in the

pack size, format and price denominations which consumers can afford, and in the

channels and locations where consumers are now shopping.

MORE FREQUENT, MORE FLEXIBILITY

MORE SHOPPING

AROUND

In addition, Wholesalers are fulfilling a more important function, with direct influence on

retailer’s product handling and direct-to-consumer trading. They have continued to

grow despite the tougher market conditions, but report changes in their customers’

purchasing behaviour: increased preference for foreign products of higher quality,

slower movement of locally produced and inferior quality products, higher turnover of

‘value for money’ products and greater demand for quality, cheaper alternatives.

46%

9% 12%

7%

19%

46%

9% 12%

7%

20%

44%

7% 12%

8%

22%

Supermarkets/Grocers Semi Retailers Kiosks Table Tops

Q1'2015 Q1'2016 Q1'2017

Open Markets


Retailers face many additional challenges which impact their business. Compounded

by the macro economic conditions, rising energy costs and deteriorating ease of doing

business (sourcing stock, managing pricing, credit from suppliers etc.) there is a lack

of capital to run their businesses, which has led to rising levels of out-of-stock and

fewer categories and products stocked by retailers, and available to consumers. In

addition to lower and declining sales, retailers are losing valuable sales due to

inadequate and variable stock supply.

ASSORTMENT AND STOCK SUFFERS

FEWER OPTIONS,

LESS AVAILABILITY

85%

69%

79%

48%

80%

88%

60%

72%

37%

74%

89%

38%

59%

63%

83%

71%

75%

44%

76%

75%

66%

65%

36%

69%

FOOD

CONFECTION

PERSONAL CARE

MEDICINE

HOME CARE

FOOD

CONFECTION

PERSONAL CARE

MEDICINE

HOME CARE

FOOD

CONFECTION

PERSONAL CARE

HOME CARE

FOOD

CONFECTION

PERSONAL CARE

MEDICINE

HOME CARE

FOOD

CONFECTION

PERSONAL CARE

MEDICINE

HOME CARE

GR

OC

ER

/S

UP

ER

MK

TS

EM

I R

ET

AIL

ER

SO

PE

NM

AR

KE

TS

KIO

SK

ST

AB

LE

TO

PS

% O F S T O R E S T O C K I N G

Q1'15 Q1'17


Across all channels and categories there is a drop in the number of

stores (penetration) stocking packaged consumer goods. The

Open Market channel has maintained the most consistent range of

product categories, with fewer losses in distribution as compared to

other channels.

Confectionery, Personal Care and Home Care categories have been the most

adversely affected with fewer channels stocking these products, as the demand for

discretionary products has declined.

When a product is unavailable, shoppers are more store (location) loyal than they are

brand loyal, opting to buy substitute brands rather than visit another store or retail

location to find their brand of choice.

For manufacturers it becomes even more critical to ensure products are available in

the right channels and stores to avoid the risk of losing a sale. Manufacturers will need

to identify the wholesaler and retailer catchment areas which service the greatest

proportion of consumers, in order to optimise supply. This could mean more regular

supply of smaller quantities to support retailers with strained income levels, or

alternative pack size variations to suit retailer and consumer budgets.

68% buy a substitute brand

More brand disloyal

31% visit another store

More store loyal

WILLING TO SUBSTITUTE BRANDS

LOYALTY TO

LOCATIONS


Source: Nielsen Emerging Market Insights II

58%

PRICE

46%

CAN FIND WHAT I NEED

40%

AVAILABILITY IN 1 PLACE

26%

ALWAYS IN STOCK

25%

FAMILIARITY

21%

RIGHT PACK SIZES

19%

FLAVOURS & VARIANTS

17%

CLEAN & TIDY

14%

PROMOTIONS

13%

LOCATION

13%

TRUST THE OWNER

11%

NEW PRODUCTS

7%

RECOMMENDATION

3%

LOYALTY SCHEME

OPEN MARKET

PURCHASE DRIVERS HOW THEY ARE WINNING

Open Markets account for a greater proportion of sales at 22% versus 19% two years

ago. They are the second most prominent channel for packaged goods after Grocers/

Supermarkets, as consumers have reverted to more informal trading environments

that are more flexible in tailoring their offerings to meet consumers’ fluctuating income

and demand.

While price is an important discriminator, open markets also offer a greater selection of

products in a single location, and are flexible in adjusting offerings to suit strained

budgets.

http://www.digitaljournal.com/image/136046

http://www.digitaljournal.com/image/136046


KEY TAKEAWAYS FOR WHAT’S AHEAD IN 2017

THE ADJUSTED

REALITY

1

CONSUMERS Cautiously confident consumers cut back on spending as income was squeezed, with

any spare cash saved for future uncertainties, rather than immediate spending.

Sentiment is likely to improve in 2017, providing much needed relief to manufacturers

and retailers as consumers are able to add items back into their repertoire.

2

PRODUCTS More discerning consumers rebalanced their basket, trading back on products less

essential, and within essentials. As conditions improve consumers will aspire to better

quality products, but require more flexibility in price and quantity to meet immediate

daily needs. Product portfolios should be reassessed to suit consumers altered needs

to rebuild brand loyalty.

3

SHOPPING Shopping has shifted to proximity-based, smaller, informal channels, with more

frequent trips, as consumers search for the best deals to match their wallets.

Manufacturers need to match product (format and price) to place, with optimal levels of

supply to avoid missing vital sales.

4

RETAIL Retailers are highly influential in stocking and ranging decisions. Manufacturers need

to optmise distribution, stock supply and retail execution through greater collaboration

with retailers to sustain diminishing demand.


• Nielsen Global Survey of Consumer Confidence and Spending Intentions is

conducted quarterly, and polls more than 30,000 consumers in 63 countries

throughout Asia-Pacific, Europe, Latin America, North America and Middle East

Africa. The Sub Saharan African countries are compiled using a separate mobile

technology among respondents in Nigeria, Kenya and Ghana.

• Nielsen Africa Prospects Indicator Report, is produced bi-annually across Sub

Saharan Africa countries. Multiple sets of comparative data is integrated across

Macro Economic, Business, Consumer and Retail dimensions and weighted to

produce prospects indicators for 8 countries, with extended metrics available for a

further 20 countries.

• Nielsen Wholesale Survey, conducted in Nigeria

• Nielsen Retail Measurement Services in Nigeria is based on a defined universe

of retail outlets, updated to reflect the current universe evolution and channels as at

April 2017. Retail trends are based on a defined basket of categories including

Consumer Packaged Food, Beverages, Confectionery, Medicine, Personal Care,

Home Care and Baby Care. Value is reported in Naira and volumes are reported in

packages.

• Nielsen Emerging Marketing Insights, is a 2-part, syndicated series, which

surveyed consumers on lifestyle, attitudes, shopping and buying behaviour, media

usage, brand drivers and advertising influence.

• Central Bank of Nigeria - Crude Oil US$ per barrel

• Trading Economics - Crude Oil Production, Foreign Direct Investment, GDP

Growth, Inflation

• XE.com – Naira/US Dollar exchange rate

SOURCES


AILSA WINGFIELD

Executive Director

Thought Leadership

Nielsen Emerging Markets

Ailsa Wingfield leads Nielsen’s thought

leadership and foresight initiatives in Nielsen’s

Emerging Markets.

She has over 25 year’s experience, working

extensively with clients across developing

markets, to uncover opportunities for future

growth.

ABOUT THE

AUTHORS

GEOFREY ODUWO

Client Solutions Manager

Data Science

Nielsen West Africa

Geofrey Oduwo serves as Nielsen’s Data

Science Lead for West Africa responsible for

client engagement and solutions, providing

subject matter expertise and technical

consultation on statistical issues.

He holds Msc (Social Statistics) and Bachelor of

Science (Mathematical Statistics) degrees.


ABOUT NIELSEN

Nielsen Holdings plc (NYSE: NLSN) is a global performance management

company that provides a comprehensive understanding of what consumers

watch and buy. Nielsen’s Watch segment provides media and advertising

clients with Nielsen Total Audience measurement services for all devices on

which content — video, audio and text — is consumed. The Buy segment

offers consumer packaged goods manufacturers and retailers the industry’s

only global view of retail performance measurement. By integrating information

from its Watch and Buy segments and other data sources, Nielsen also

provides its clients with analytics that help improve performance. Nielsen, an

S&P 500 company, has operations in over 100 countries, covering more than

90% of the world’s population. For more information, visit www.nielsen.com.

navigating the new normal in nigeria - nielsen · 2019-05-29 · nigeria’s economic growth and...

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