Hot Drinks in Nigeria

COVID-19 impact on hot drinks

Many Nigerian businesses were negatively impacted by the lockdown in the first half of the year to control the spread of COVID-19, leading to job losses, some permanent closures, disruption to supply chains and weaker consumer spending. The local currency suffered depreciation and manufacturers who depend on imports were put under intense pressure due to the high cost of production.

COVID-19 country impact

The spread of the COVID-19 in early 2020 led to a government-imposed lockdown in three states in March, which initially lasted for two weeks, with the lockdown eventually extended nationwide. Governors were in charge of setting and enforcing the lockdown at the state level.

Company response

In 2020, Nestlé Nigeria and Cadbury Nigeria have maintained their strong leading positions, together accounting for nearly two thirds of off-trade value sales in hot drinks. Both have also seen increases in their shares, as they are subsidiaries of multinational companies with local manufacturing facilities, both with a long-standing presence in Nigeria.

Retailing shift

Most off-trade volume sales of hot drinks are through traditional grocery retailers, with independent small grocers alone accounting for more than three quarters of sales. However, the share of this channel has declined slightly in 2020, with theses sales mostly taken by modern grocery retailers such as forecourt retailers, hypermarkets and supermarkets.

Foodservice vs retail split

In addition to the COVID-19 pandemic forcing on-trade outlets to shut their operations during the lockdown from March 2020, operators in these channels have had to contend with the challenge of poor demand since restrictions have been eased, due to continued social distancing and weakened consumer spending. On-trade sales have therefore declined strongly in 2020, and businesses such as coffee and tea shops have had to adapt to a new way of doing business.

What next for hot drinks?

After a poor year in 2020, hot drinks in Nigeria is expected to return to stronger total volume growth in 2021, and see an accelerating rate of growth over the course of the forecast period, stimulated by marketing and advertising from the leading players. However, on-trade growth is expected to remain lower than off-trade, maintaining the shift from the former channel to the latter.