The latest report by NielsenIQ has revealed that the Nigerian Fast-Moving Consumer Goods (FMCG) market has seen a 17.4% decline in the volume of transactions this year as Nigerians continue to battle with the high cost of goods.
The report, which measured the market’s performance and consumer behaviour as of March 2024, indicated that the volume of transactions in the market plunged further from the 4% decline recorded in 2023.
NielsenIQ in the report noted that the market now faces a daunting challenge with the declining purchasing power of the consumers as they grapple with rising inflation.
As of June 2024, Nigeria’s inflation stood at 34.2%, forcing Nigerians to continue to pay more for less.
Growth amid challenges
However, NielsenIQ observed that despite the challenging market conditions, the FMCG market’s value has grown, increasing by 21.6% in 2023 and further accelerating to 24.8% in 2024.
“This indicates that while consumers are buying less, they are spending more on essential goods, driving up the overall value of the market,” said Associate Director of West Africa at NielsenIQ Joyce Nwachukwu said.
The report further revealed that the cost-of-living crisis is devastatingly impacting Nigerian consumers, with 81% of respondents surveyed reporting that they are worse off this year than last.
The main drivers of this crisis are rising costs, particularly fuel and food, and the economic slowdown.
Leveraging innovation
According to the report, an analysis of data from the home care, personal care, confectionery & snacks, non-alcoholic beverages, and food industries, found that manufacturers with growing innovation sales were an average of 1.8 times more likely to see overall sales growth despite the current economic challenges.
Home care and personal care manufacturers saw the most significant impact, with innovation boosting sales by 4.2 times and 2.9 times, respectively.
Contrary to the widely held assumption that innovation success rates hover between 5% and 15%, the study found that innovation vitality is significantly higher across various FMCG categories.
The research, which analyzed over 60,000 innovations spanning four or more years showed 52% of innovations led to sales growth in the second year compared to the first.
This finding challenges the conventional wisdom surrounding innovation in the FMCG industry and underscores its critical role in driving business success.
Commenting on the findings, Head of Innovation Insights (BASES), East & West Africa at NielsenlQ Bayonle Oseni, said:
“By prioritizing innovation and investing in research and development, businesses can unlock significant growth opportunities. Understanding the varying levels of innovation vitality across different categories will enable companies to allocate resources effectively and maximize their chances of success.”
Also speaking, Managing Director of NielsenIQ (East and West Africa), Faith Wanderi, said businesses need to understand consumer behaviour and the shifts that have occurred to make informed decisions on whether to change price strategy, brand extension or focus on distribution targeted at consumers.
She noted that consumers will continue switching brands as they are not loyal to any brands currently, but manufacturers can search out ways or moments to connect to them through various innovative ways like offering bigger or smaller sizes of their products among other options.
What you should know
Nigeria faces the most severe cost of living crisis in a generation as inflation reached 34.19%- the highest in 28 years with food inflation crossing over 40% as of June 2024. The spike in inflation was triggered by the removal of the petrol subsidy in May 2023 and the devaluation of the naira by over 100% since June 2023 by the Central Bank of Nigeria.
- To address the crisis, the federal government has rolled out social intervention programs such as cash transfers, low-interest loans for businesses especially manufacturers, and grants to MSMEs and others.
- The federal government has also approved a more than 100% increase to the minimum wage but many Nigerians continue to lament the ineffectiveness of this intervention which spurred “Hunger Protest” last week across the country.
