The latest report from NielsenIQ has revealed that the Nigerian fast-moving consumer goods (FMCG) market has seen a 17.4% decline in transaction volume this year as Nigerians continue to struggle with the high cost of goods.
The report, which measured market performance and consumer behavior as of March 2024, indicated that transaction volume on the market plummeted further from the 4% drop recorded in 2023.
NielsenIQ noted in its report that the market now faces a huge challenge with consumers’ declining purchasing power as they grapple with rising inflation.
As of June 2024, Nigeria’s inflation stood at 34.2%, forcing Nigerians to continue paying more for less.
Growth amidst challenges
However, NielsenIQ noted that despite challenging market conditions, the value of the FMCG market has grown, rising 21.6% in 2023 and accelerating further to 24.8% in 2024.
“This indicates that while consumers are buying less, they are spending more on essential goods, which increases the overall value of the market.” Joyce Nwachukwu, Associate Director, West Africa at NielsenIQ, said:
The report further revealed that the cost of living crisis is devastatingly affecting Nigerian consumers, with 81% of respondents reporting that they are worse off this year than last year.
The main drivers of this crisis are rising costs, particularly for fuel and food, and the economic slowdown.
Taking advantage of innovation
According to the report, an analysis of data from the home care, personal care, confectionery and 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 current economic challenges.
Manufacturers of home care and personal care products experienced the most significant impact: innovation boosted sales 4.2 times and 2.9 times, respectively.
Contrary to the widely held assumption that innovation success rates range from 5% to 15%, the study found that innovation vitality is significantly higher in several FMCG categories.
The research, which analysed more than 60,000 innovations over four or more years, showed that 52% of innovations generated sales growth in the second year compared to the first.
This finding challenges conventional wisdom surrounding innovation in the CPG industry and underscores its critical role in driving business success.
Commenting on the findings, Bayonle Oseni, Director of Innovation Insights (BASES) for East and West Africa at NielsenQ, said:
“By prioritizing innovation and investing in research and development, companies can take advantage of significant growth opportunities. Understanding the different levels of innovation vitality across categories will enable companies to allocate resources effectively and maximize their chances of success.”
Also speaking, NielsenIQ Managing Director (East and West Africa), Faith Wanderi, said businesses need to understand consumer behaviour and the changes that have occurred in order to make informed decisions on whether to change pricing strategy, brand extension or focus on targeted distribution to consumers.
He noted that consumers will continue to switch brands as they are not currently loyal to any brand, but manufacturers can look for ways or moments to connect with them through various innovative ways, such as offering larger or smaller sizes of their products, among other options.
What you should know
Nigeria is facing the most severe cost of living crisis in a generation as inflation hit 34.19%, the highest in 28 years, and food inflation exceeded 40% as of June 2024. The rise in inflation was triggered by the removal of the gasoline subsidy in May 2023 and the devaluation of the naira by more than 100% as of June 2023 by the Central Bank of Nigeria.
- To address the crisis, the federal government has implemented social intervention programs such as cash transfers, low-interest loans for businesses, especially manufacturers, and subsidies to MSMEs and others.
- The federal government also approved a more than 100% increase in the minimum wage, but many Nigerians continue to lament the ineffectiveness of this intervention that sparked the “hunger protest” last week across the country.
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