Bottled water leads soft drinks sales in Nigeria
The inability to access safe drinking water and the poor provision of electricity in Nigeria, especially given the hot weather conditions in the country, continued to contribute to the strong performance of bottled water, which accounts for the bulk of soft drinks sales in volume terms. At least 50% of the population purchase packaged water – particularly pouch and sachet varieties – on a daily basis. Partly due to favourable government policies for domestic producers, other categories of soft drinks saw positive performances in volume and value terms in 2013. For example, increased health consciousness among Nigerians, who are becoming more concerned about their sugar intake, alongside a growing interest in novel drink flavours, has led to an increasing consumer preference for juice. In addition, carbonates sales recovered after a poor performance the previous year, largely as a result of the development of fruit-flavoured carbonates, led by the La Casera Apple brand from The La Casera Co Ltd.
All soft drinks categories bounce back in 2013, following weak 2012 performance
Led by bottled water, all categories of soft drinks returned to previous levels of growth, following the weak performance in 2012, which was caused by the fuel price hike as well as security disturbances in parts of the country. This improved performance was largely due to positive population growth, with younger consumers in particular demanding novel products, as well as rising disposable incomes, an increase in formalised employment (which supports demand for convenient soft drinks that are suitable for on-the-go consumption), and urbanisation. Strong growth is also supported by creative marketing by manufacturers whose introduction of new pack types, such as PET bottles, has helped to spur demand.
La Casera leads the challenge to Coca-Cola’s dominance
Innovation in the Nigerian soft drinks industry has been led by local companies, who seem to be teaching the established players, such as Coca-Cola, how to adapt to local Nigerian conditions. Chi Nigeria Ltd, which strongly leads the juice category, outperforming the likes of Coca-Cola Nigeria Ltd, is one such leader in terms of innovation. However, other companies such as The La Casera Co Ltd (formerly La Casera) and Cway Food & Beverages Co Nig Ltd, are also presenting a stronger challenge. The La Casera Co Ltd’s La Casera brand has rapidly established a name for itself in carbonates; the brand is solely available in PET bottle packaging, while the newly-launched apple flavour has proved popular. Nevertheless, Coca-Cola Nigeria Ltd maintains a leading position in two categories – carbonates and bottled water – thanks to its well-established name in Nigeria, strong distribution network and very large marketing expenditure.
Off-trade outlets dominate volume sales but fast food channels are growing
Off-trade outlets, independent small grocers and other grocery retailers in particular (traditional open markets and the traffic/ street vendors), dominate volume sales in Nigeria. Many consumers buy soft drinks for consumption at home or on the go. They are also commonly consumed by guests at parties and other events. The supermarkets and hypermarkets channels, in particular, are seeing an increasing presence, with strong competition between Shoprite and Spar, which have both been opening new outlets. Such outlets contribute to growth in soft drinks as they establish bulk buying arrangements with manufacturers and thus sell drinks at discounted prices. Additionally, the boom in the fast food industry has resulted in the dynamic growth of on-trade volume sales; however, these remain a fraction of off-trade sales.
Strong forecast period growth expected
It is anticipated that over the forecast period, total volume sales will grow well, but at a slower rate than they did over the review period. As the economy becomes stronger, population growth increases and disposable incomes improve, thus all categories of soft drinks are expected to see positive sales growth over the forecast period. However, because of saturation and the growing awareness among consumers of the potential dangers of excessive sugar intake, growth will be at a slower rate in most categories, with competition from drinkable dairy products posing a challenge. As health become a growing concern among consumers, the best opportunities for growth in soft drinks will be presented by the most innovative products that are able to combine new types of fruit flavours with the perception of a healthier positioning. A notable exception to this is the carbonates category, which is set to see a stronger total volume growth rate over the forecast period than it posted in the review period. A key reason for this is the strong positive development of the non-cola carbonates category, reflecting consumers’ apparent perception of this product type as more refreshing in comparison to cola carbonates.
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