Good Morning Nigeria 08 February 2016: Squeeze on consumers’ spending
​Squeeze on consumers’ spending
The lingering macro challenges have taken their toll on consumer discretionary spending and resulted in a deceleration in the topline growth of most listed manufacturers. The food, beverage and tobacco sector has been the chief contributor to Nigeria’s manufacturing GDP over the past eight quarters. Given that the average Nigerian spends over 65% of earnings on food and beverages, this segment tracks consumer spending patterns and is certainly one to watch. As for the breweries, the macro headwinds have led to a hard hit. Consumers are now leaning towards cheaper brands.
- In response to consumers’ downtrading to value brands, Nigerian brewers are gradually focusing on their value-for money category. Guinness Nigeria is beginning to gain market share through Satzerbrau (its main value brand).
- Foreign exchange restrictions have led to additional strains on industry players. Given the prevailing issues with sourcing fx, we expect a rise in local content as companies begin to substitute locally sourced materials for imported inputs.
- The December inflation report showed a pick-up in headline inflation to 9.6% y/y from 9.4%. The NBS commentary singled out higher price rises in alcoholic drinks. Food and non-alcoholic beverage prices rose by 12% y/y.
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