Another Wave of the Sachet Economy, FMCGs Response to Beleaguered Consumers

Proshare

Thursday, November 19,  2020 / 12:13 PM / by CSL Research / Header Image Credit: Sidomex


Early July, we noted in our daily report that consumer companies operating in the non-food FMCG businesses would have to innovate and create more affordable brands as the average Nigerian consumer is expected to become poorer given the bleak macro outlook (See CSL Nigeria Daily, 3 July 2020 Nigerian consumers set for double whammy hit to purchasing power). This appears to be playing out exactly as predicted as a retail check by our analysts showed the presence of many more new products packaged in sachet. Amongst these were dish washing liquids, antiseptics and even premium liquor such as Baileys.

 

Related Link: Nigerian Consumers set for Double Whammy Hit to Purchasing Power - Jul 03, 2020

The economic recession witnessed in 2015-17 had a major impact on Nigerian households, eroding their purchasing power and driving joblessness across the country. Household income levels dipped significantly as employers either laid off workers or cut salaries. The consumer situation was further exacerbated by the inability of many state governments to fufil salary obligations. Nigerian consumer firms responded to the pressures of 2015-17 by implementing staggering price increases on their products which led to a shift in product classification as many mainstream and economy brands fast became premium. It also gave birth to an alternate market of vast discount and unbranded alternatives.

 

We note that prior to 2020, our channel checks and discussions with FMCG value chain operators revealed consumer goods firms had resorted to stuffing the channels to sustain revenue growth following stuttering consumer demand. Clearly, the onset of the global pandemic in 2020 has worsened the situation. The global pandemic has led to many businesses cutting workforce or implementing steep salary cuts. In addition, the economy recorded negative GDP growth rate in Q2 2020 and is expected to plunge into a recession by Q3 2020.

 

Furthermore, unemployment level has worsened printing at an all-time high of 27.1% in Q2 2020. This situation has made it very difficult for FMCGs to implement price increases. Nevertheless, many of them have gone ahead to raise prices (at rates much smaller than in 2016/17). However, in bid to keep many of their products affordable, some of them have resorted to "sachetisation" of their products in what we consider another wave of the sachet economy.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Related News

  1. Nigerian Consumers set for Double Whammy Hit to Purchasing Power
  2. Manufacturing PMI Stands at 50.2% in November 2020 from 49.4% in October 2020
  3. October Inflation: A Blip or Trend?
  4. Inflation: Higher Energy Costs Could Compound Spiralling Food Prices
  5. Nigeria's Inflation Maintains Upward Trend Amidst Structural Rigidities
  6. Higher Energy and Food Prices Pushed Headline CPI to 14.23% YoY
  7. Headline Inflation Increases By 14.23% YoY In October 2020, 0.52% Higher Than September 2020 Rate
  8. Coronanomics (1) - Understanding the Realities of an Impending Recession
  9. Coronanomics (27) - Impact of Government Policy and Restrictions on Households
  10. Economic Slowdown - Quick Response But No Quick Fix - LBS Executive Breakfast Session - July 2020
  11. PMI Reading No 87: Back in Positive Territory
  12. Andrew Nevin to Speak Tomorrow on WebTV Economy and Politics Show
  13. Manufacturing PMI Still Weak
  14. Coronanomics (23) - Sectorial Analysis of Nigeria's Trade Sector
  15. Coronanomics (21) - Sectorial Analysis of Nigeria's Manufacturing Sector
  16. Coronanomics (20) - Sectorial Analysis of Nigeria's Finance and Insurance Sector
  17. Highlights from Conference Call with Minister of Finance, CBN Governor and Budget Office

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP