Nigeria’s biscuit industry is facing a dramatic decline in sales due to shrinking consumer wallets, inflation, and factory shutdowns. Demand, once estimated at 15-20 percent, has fallen to below five percent. The industry is grappling with increased imports, operational challenges, and a competitive landscape that threatens the survival of many local manufacturers. Stakeholders must address economic factors to ensure the industry’s future viability.
Nigeria’s biscuit industry is facing severe challenges, with declining sales attributed to shrinking consumer spending and inflationary pressures. As consumers prioritize essential needs like food, clothing, and shelter, biscuit demand has plummeted from an estimated 15-20 percent to less than five percent. Akin Akintayo, chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), expressed concern over the rapid decline in biscuit consumption, especially among average and low-income earners who form the primary market. The economic strain has also forced some manufacturers to cease operations due to persistent sales declines.
The biscuit and bread market in Nigeria, estimated to be worth N243 billion in 2017, reflects fragmentation, dominated by artisanal producers. The KPMG report indicated that bread accounted for 80 percent of this figure, growing at a CAGR of 14 percent over five years. In contrast, market dynamics have shifted with major players like Beloxxi expanding, while others like Deli Foods have reported shutdowns. The absence of adequate purchasing power among consumers continues to affect operating margins and prohibitively high prices lead to increased imports of foreign biscuits, as domestic production struggles.
Accelerated inflation, coupled with a minimum wage of N70,000 (below $50) per month, has significantly impacted consumer spending behavior, as outlined in the latest MAN report. The manufacturing sector experienced a rise in unsold inventory, indicating weakened demand and decreased real household income. With high price elasticity in the biscuit market, local manufacturers are grappling with competition from imported products, particularly from India, China, and the UK. Import data from Volza illustrates a staggering growth rate in shipments of biscuits to Nigeria, compounding local challenges.
Local biscuit producers, despite their substantial market presence, are contending with numerous adversities, including fluctuating raw material costs and policies that hinder competitiveness. Fola Osibo, former chairman of the Biscuit and Bakery Group of MAN, has highlighted the operational challenges facing manufacturers as unsustainable conditions threaten many businesses. Muda Yusuf, director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), indicated that macroeconomic issues persistently undermine production performance, causing many companies to declare financial losses and even close down operations.
Overall, the Nigerian biscuit industry is navigating a tumultuous landscape filled with socio-economic challenges. Increased inflation rates, poor consumer purchasing power, and heightened competition from imported products are threatening the viability of local manufacturers. To sustain their operations and future, industry stakeholders must address these pressing issues while adapting to the evolving market conditions.
In summary, the Nigerian biscuit industry is experiencing a significant decline in demand due to inflation and shrinking consumer wallets. Many local manufacturers are shutting down due to increased competition from imported products and rising operational costs. Despite its potential to thrive, the industry faces formidable challenges that stakeholders must tackle to ensure its sustainability and growth. Addressing macroeconomic issues and enhancing competitive strategies will be essential for the future of biscuit production in Nigeria.
Original Source: businessday.ng
