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Nigeria Food and Drink Report Q1 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
Nigeria |
Published |
22 December 2009 |
Number of Pages |
39 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Arguably Africa’s most enigmatic market, Nigeria deals in extremes. On the one hand, a rapidly rising population of 160mn, underdeveloped food and drink industries and promising long-term economic outlook make it a fast-moving-consumer-goods market of some promise; on the other, a dire regulatory environment contributes to the sizable risk firms assume by operating in the country. These risks withstanding, a number of leading multinational food and drink companies reported strong headline results this quarter as discussed in the recently published Nigeria Food & Drink Report for Q110. Unilever’s Nigerian unit led the way reporting a more than twofold increase in net income to NGN5.48bn (US$36.15mn) for the first nine months of FY09 (year ending December 31 2009). Turnover increased 16.6% year-on-year (y-o-y) to NGN32.59bn. All through 2009, the report has put forward a view that most of Nigeria’s major food and drink companies were likely to emerge fairly unharmed from a downturn that has proven less troubling than initially feared. We recently revised up our 2009 Nigerian Real GDP growth forecast to 4.0% as the economy continued to strengthen after hitting a trough in Q109. Relative to the size of the market, companies are growing their turnovers from relatively low bases. Nestlé’s Nigerian business also continued to perform strongly in 2009. In November, it reported a 24% yo- y increase in pre-tax income to NGN10bn over the nine months to September 30 2009, while in August, it reported a 25% y-o-y increase in net profit, to NGN4.14bn.
Among the multinational band, Unilever and Nestlé remain particularly well placed to take advantage of the forecast that headline food consumption in Nigeria will increase 54.1% to NGN8,255bn (US$54.1bn). Cadbury’s Nigerian business would probably be similarly well placed had it not been embroiled in an accounting scandal. Shortly after Cadbury-Schweppes acquired a majority stake in 2006, Cadbury Nigeria was found to have overstated its financial performance, which led to a costly lawsuit and a goodwill writedown on its balance sheet. In June 2009, the confectioner announced plans to sell 2.57bn ordinary shares at NGN8.65 per share as it looked to pay off accumulated bank debt of about NGN15.2bn. While we acknowledge that the firm still has much work to do to repair its finances and gradually return to profit, it is able to call on a number of established brands and has been present in Nigeria since 1965, which should stand it in good stead as demand for confectionery strengthens sharply over the long term.
On the beer front, Nigeria continued to offer reprieve to international beer majors still being stung by the downturn in their core markets. Diageo’s prized West African unit Guinness Nigeria reported an 11% yo- y increase in net income to NGN18.99bn and a 29% turnover strengthening to NGN89.15bn in the year to June 30 2008. Nigeria’s second biggest beer company behind Heineken-owned Nigerian Breweries, Guinness will be encouraged by a forecast 37.2% increase in headline beer sales to NGN650.13bn to 2014.
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