Building on gains of FMCG for economic growth
In the face of continued uncertainty in global oil and commodity prices, and its adverse impact on the extractive industries in many African countries, the continent has turned to other areas to support its ongoing economic growth.
One of such industries is the fast-moving consumer goods (FMCG) sector.
FMCG, also referred to as the consumer packaged goods (CPG) – sector is one of the largest industries in the world. It covers mass-market consumables, including food and drinks, personal care, home care, and over-the-counter pharmaceuticals
The products, which are quick to package and sell such as toiletries, processed foodstuffs and alcohol, are usually a low profit margin, high volume industry.
Given their fast-paced, traceable nature, they are an excellent litmus test for assessing the state of many other variables in the markets including transport, trade and consumer sentiment.
On the continent, favourable economic factors such as, GDP growth coupled with a rise in incomes, increased participation of women in the workforce and the tapping of rural markets have led to a surge in the growth rate of the FMCG sector in the past decade.
Experts have pointed out that today, new engines are helping to power Africa’s economies. “Consumer-facing industries have quietly grown into a significant economic force and are poised to continue growing,” said…… “For instance, Nigeria’s fast-moving consumer goods (FMCG) sector is already the third largest contributor to Nigeria’s GDP.”
According to industry experts, FMCG trends allow economists to track the rise of the emerging consumer class on the African continent, and the consumer price index (CPI) – a measure of price changes in an average basket of FMCG staples – is a largely accepted statistical gauge of inflation.
They noted that a growing middle class with greater spending power will impact more on FMCG items.
“This – together with a large market size, improved education standard, stronger mobile and Internet penetration, a young and growing population and increasing urbanisation – is expected to fuel this market,” said Raj Kulasingam, an expert in FMCG.
A KPMG report in 2015 said: “The FMCG sector in Africa has significant scope to expand. Poverty levels in especially Sub-Saharan Africa (SSA) are still quite high, with food and other necessities dominating consumer budgets.
For this reason, the food sub-sector of FMCG has a very large market to cater for, while penetration rates in the other categories still have significant room to expand.”
A Euromonitor sector report indicates that 82 per cent of all FMCG revenue growth in 2015 was accounted for by emerging markets.
A report by the National Bureau of Statistics reveals that the sector contributes 14.82 per cent to the gross domestic product of the nation.
Industry watchers believed that in Nigeria, several firms have set up manufacturing plants within the shores of the country in order to allow ease of operation and reduce import expense.
“What this means for the country is more job creation, lesser retail cost of products and a room for participation in the global economy,” revealed Kenechukwu Obiagwu, a perception expert.
A recent report on M&A in the FMCG sector suggests that the following are the key trends for this sector: Globalisation: Brand owners are looking to globalise, particularly focussing on the potential of emerging markets, including Sub-Saharan Africa’s fast-growing economies.
Portfolio of products: Companies are increasingly expanding their portfolio of products with a growing emphasis on “premium/aspirational” and healthy products alongside existing mass and traditional brands to drive profit margins.
E-commerce and social media: This is changing the market considerably. Companies are looking to lower cost and establish direct-to-consumer online sales channels for better returns in comparison to more traditional sales through wholesalers and distributors.
A classic example is Procter and Gamble popularly referred to as P&G. The company started operations in Nigeria in 1992 and has grown to become one of the leading FMCGs in the country.
Over the past 25 years of operation in Nigeria, P&G has invested in local manufacturing and in a series of CSR projects, especially in respect to girls and women.
In 2014, the company invested 300 million Dollars in a state of the art manufacturing plant in Agbara, Ogun State, which is said to be the largest U.S. non-oil investment in Nigeria.
Its Managing Director, Mr. George Nassar in his remarks at the Company’s 25th anniversary in Nigeria, applauded the good work done in the last 25 years and reaffirmed the company’s commitment to contributing to the Nigerian economy.
‘We have achieved this through our commitment to invest in Nigeria and to provide superior products that satisfy the needs of our consumers.
We have dedicated ourselves to 25 years of product innovation and manufacturing efficiencies to provide our consumers with the highest quality of household products.
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