Nigeria’s biscuit industry faces a decline in sales due to inflation and reduced consumer purchasing power, significantly impacting local manufacturers. Key market players are struggling, leading to factory shutdowns and a drop in consumption primarily attributable to the prioritization of essential goods over snack items like biscuits. The burgeoning trends of biscuit imports further complicate the local manufacturing landscape.
Nigeria’s biscuit industry is facing a significant decline in sales, heavily influenced by inflation and reduced consumer spending. According to a 2017 KPMG report, the industry was valued at N121 billion with an annual output of 152,490 tons. However, demand may have fallen from an estimated 15-20 percent to under five percent as consumers prioritize essential needs over biscuits, leading to factory shutdowns.
Akin Akintayo, chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), noted that major market segments, especially low-income earners, are significantly reducing biscuit consumption. Due to reduced sales, several manufacturers have had to cease operations. Akintayo attributes this trend to inflation outpacing stagnant incomes, forcing households to limit expenditures to essential items.
The KPMG report also estimated Nigeria’s biscuit and bread market combined at N243 billion in 2017, noting that bread accounted for 80 percent of this sector. The biscuit industry had various key players, including Yale Foods and OK Foods, but changes are evident with the expansion of Beloxxi and the reported shutdown of Deli Foods. The bread market remains predominantly controlled by artisanal producers.
Given Nigeria’s minimum wage of N70,000 (approximately $50 monthly), rising inflation has pressured consumers to reassess their spending habits. This economic strain is reflected in MAN’s recent report, highlighting a 12.9 percent increase in unsold inventory within the manufacturing sector. Francis Meshioye, president of MAN, indicated that diminishing household income has resulted in lower purchasing power.
Despite being one of Africa’s largest biscuit markets, local producers are feeling the pinch as they compete against cheaper imported biscuits from countries like India and China. In contrast, the growth of biscuit imports has been notable, with Volza reporting a 205 percent increase in shipments from March 2023 to February 2024. This substantial import rate further exacerbates the difficulties faced by local manufacturers.
Fola Osibo noted ongoing challenges for biscuit makers, including stringent policies and high raw material costs, which have forced some manufacturers to close down. Muda Yusuf from the Centre for the Promotion of Private Enterprise pointed to macroeconomic hurdles like forex difficulties and high-interest rates as contributors to the industry’s poor production performance. In light of these challenges, companies such as Mayor Biscuits Company Limited have shifted their business model, ceasing biscuit production altogether to focus on other ventures.
In summary, Nigeria’s biscuit industry is experiencing considerable challenges due to declining consumer demand, inflation, and increased competition from imports. Local manufacturers are struggling to maintain operations amidst rising costs and changing consumption patterns, leading to factory closures and significant drops in sales. Addressing these economic concerns will be crucial for reviving the industry and supporting local producers.
Original Source: businessday.ng
