In recent times there has been a paradigm shift from the use of cloth diapers to disposable diapers among nursing mothers in the country.
This is as a result of hygiene concerns and the convenience it brings for the modern woman, especially working mothers. With this occurrence, the diaper segment in Nigeria’s FMCG industry has become a major profit-making business.
Currently, the Nigerian diaper market has over 15 brands, with each jostling for market share across the country. While some have emerged top-of-mind brands with a national spread, some are confined to regional play. The stiff competition has also forced some to shut down parts of their operations and re-strategize.
For our product review this week, we take a look at how different diaper brands are adapting and competing for the leadership position, once enjoyed by the pioneer brand, in a race for market share and profitability.
A market where Pampers once reigned supreme
Pampers is the first diaper brand ever produced and marketed in the country. The product made its entry into the Nigerian market in 2000, and over the years, the brand has gone through various transformations and brand extensions.
For over a decade, the brand controlled the most market share in the country. But, the entry of new brands, led by Molfix, into the Nigerian market has brought new dynamics into the race for market share.
In response to the threat posed by the new entrants, and in a bid to increase patronage, Pampers manufacturer, Procter & Gamble (P&G), added Pampers Baby Dry and Pampers Premium to the product portfolio. The company also commissioned a $300 million industrial plant in Agbara, Ogun State.
In an unexpected turn of events, Nigerians woke up to the news that P&G had decided to shut down its plant in Agbara. While many attributed the closure to the inability of the company to cope with the growing competition in the market, management of the company said that it was part of its restructuring exercise in its Nigerian operations. An assurance was given that it would continue to operate in the country, albeit from its Ibadan plant only.
However, a senior staff of the company confirmed to Nairametrics that from next year, Pampers will be imported into the country, while the Ibadan plant, which is majorly for detergent production, remains unaffected by the new restructuring.
Many also accused the company of not doing enough in investing in the local production of its raw materials as the company still depends largely on importation for them. This has exposed the company to fluctuations in the foreign exchange market.
These macroeconomic challenges and lapses in its product segments have created a gap which has been readily filled by the new entrants.
Molfix in the market mix
Molfix, a diaper brand produced by Hayat Kimya Nigeria Ltd, is designed to give “babies full protection and keeps their skins dry and healthy around the clock”.
Hayat Kimya, which started producing Molfix baby diapers in Turkey since 1987, presently has production plants in Algeria, Iran, and Egypt.
In an effort to boost its market penetration, manufacturers of the Molfix brand adopted a lower pricing regime which makes it affordable for the struggling middle-class group. It also has a strong distribution channel throughout all retail chains in both rural and urban areas, which makes it easily accessible.
To be able to challenge the Pampers brand, Molfix invested $100 million in constructing an ultra-modern diaper/tissue factory in Agbara Industrial Layout, Ogun State.
In terms of price strategy, Molfix is doing well in offering lower prices for quality products, while investing in backward integration to cut costs. With the company generating its own power, the cost of production is lower and there is more control over pricing.
Huggies in the market mix
Another big player in the market is the Huggies brand from the stables of Kimberly-Clark, an American multinational personal care company. The brand sells intrinsic value, driving a unique proposition that goes beyond form and functionality.
For makers of Huggies, functionality is the basics, while the “feeling” is the product. Huggies sells “self-esteem” to moms as a product and because of this, those who use Huggies have so much loyalty and affinity for the brand and they are always proud to show off the diapers at every opportunity.
The brand does not seem interested in controlling the market share, as its target is a segment of the market where it applies a strategic profiling aimed at middle-upper class, business-professional moms.
The Huggies brand is focused on gaining the wallet share, rather than market share. The concept is “having 100 percent of few pockets rather than having one percent of many households”.
…and the rest
The performance of other smaller brands in the country is hampered by the strong competition from the leading brands such as Molfix, Pampers, and Huggies, and weak distribution channels. Also, brands such as Dr. Browns, and Sunfree experience frequent stock-outs, as their availability is solely dependent on the vagaries of importation policies.
Promotions and price wars
Manufacturers of diapers in the country have taken a robust approach in an attempt to maintain market share and boost sales in a harsh economic climate like Nigeria, with each making efforts to secure higher patronage. It is not uncommon for them to offer promotional discounts to distributors to help boost sales.
In the first half of the year, Hayat Kimya, makers of Molfix, offered distributors a 10% discount across all products and an extra 3% when they exceeded a certain sales level. P&G initially ran a ‘buy 15 get two free’ promotion, which was later lowered to ‘buy 20 bundles get one free’. This resulted in further brand discounts offered mid-year: 4.5% discount by P&G and 9% by Hayat.
Brand owners are also entering into special partnership agreements with hospitals, selling diapers to them at lower prices.
What consumers are saying
Mrs. Esther Udoh, a nursing mother who spoke with Nairametrics, noted that the diaper market is already saturated but the known brands are still holding on to their shares of the market. She noted that Pampers cannot be ignored as its name stands as a colossus in the market, and will do so for more years to come. To her, the brand would have been a clear winner if not for the entries of Molfix and Huggies.
Prince and princess is my best. It's flat, not as thick as molfix. Based on your pool, molfix is first, pampers is second, Huggies is worst
— Emem Amanam (@EmemAmanam) July 24, 2018
@Molfix is leading regardless of the outcome of this vote. Why? Same quality as the others. Lower costs than the others. Why pay more for the same quality?
— Lassie (@NaijaGoldaMeir) July 24, 2018
I don't know the reason but I know my wife prefer molfix to other diapers.
— Jaywonderoflife (@juwantojuwonlo) July 24, 2018
In a product review done on our social media platforms, respondents mentioned factors that were considered when choosing diaper brands. Many stated that the reaction of a baby’s skin to these products was the most important factor when it came to choosing a brand; some cause nasty rashes and make babies uncomfortable.
Product affordability was another factor to be considered when deciding on a diaper brand.
In a poll conducted by Nairametrics, Pampers brand got 38% of the votes, Molfix got 36%, while Huggies got 26%.
No doubt, the new entrants are aiming for the leadership role in the market and are doing everything possible to challenge the dominance of Pampers.
For this week’s battle, Pampers is the winner. However, for a leader to protect its position against challengers, it requires innovation, price cuts, expansion of its distribution channel, and intense promotional efforts. The manufacturers of Pampers have to double down on their efforts or lose patronage to competition.
COVID -19 saving Nigerians millions in wedding and burial costs
As long as the pandemic persists, the ‘new normal’ is for ceremonies to remain subdued.
It was a sunny Saturday in May and like it had been for the better part of 8 weeks, the new normal was in force in Nosa’s household. The lockdown induced COVID-19 meant that all the hustle and bustle of giving attention to side hustles on weekends had all evaporated. Now he spent more time with his kids watching TV and playing video games. Whilst he has had to endure multiple weekends of lost revenue, staying indoors meant that his personal finance was still intact. But things would change dramatically this weekend.
Nosa got a call that he had just lost his aged mother to a brief illness. He had been battling with a terminal illness for years, but things seemed to be under control so her death came as a surprise. Even as he grappled with the thought of losing his mother, Nosa knew that he had to start making preparations for the expenses that are bound to come with burials in an African setting.
Thanks to the pandemic, and rules that came with it, Nosa ended up spending much less than he would have for his mother’s burial with most of the funds going towards mortuary expenses, transport and the direct cost of the actual burial itself.
READ ALSO: Post COVID-19: The Challenges Ahead
“This COVID-19 is bad but it has saved me millions of naira that I would have spent in this burial,” he remarked.
“I wanted to give my mom a befitting burial but these are hard times and I may have borrowed money just to fund this. But with COVID-19 and social distancing in place I did not have to do any of this,” Nosa informs our reporter.
Nosa’s gains translate to massive losses for a whole chain of service providers in the event management industry. Similar occurrences over the last few months have resulted in the loss of revenue for such businesses.
Events in Nigeria often cost anywhere between half a million naira to over N100 million depending on the financial muscle of those spending. Burials, weddings, naming ceremonies and birthday parties, make a burgeoning industry that spans several sectors of the economy.
From mortuaries to casket makers, event planners, event Halls rentals, professional mourners, caterers, confectionaries, party rentals, photographers, video editors, tailors, newspapers , etc, its an entire value chain of businesses that provide one service or the other for this industry.
Each of these events cost millions of naira to organize hosting as many people as the budget can support. According to a CNN article quoting a report from TNS Global, Nigerians spend as much as $9,460 for a wedding ceremony. The report also indicates the party industry could be worth as high as $17 million based on statistics in 2017.
The math can be easily deducted. Assuming 50,000 ceremonies every weekend at an average cost of N1 million that is a N50 billion per weekend or N2.7 trillion ($6.75 billion) per annum. GDP data from the National Bureau of Statistics indicates sectors that support the ceremonies market in Nigeria, telecoms, transportation, Arts and Entertainment is worth a combined N18.4 trillion.
Chuks, a Partner at a top consulting firm in Nigeria admits were it not for the pandemic his wedding could have cost him about N15 million personally and another N20 million spent by family, friends, colleagues and well-wishers. He is in his forties and his wedding had been much anticipated. He went ahead with his wedding last weekend with less than a dozen people in attendance and over 140 others logging on via Zoom. He claims while he ended up not spending millions on food, drinks, wedding halls and other logistic costs, he still achieved his goal of getting married.
Necessity they say is the mother of invention and has millions stay locked in their homes, they have resorted to apps such as Zoom, Instagram Live, Microsoft Teams to hold virtual events. These days Zoom themed parties now have their own rules and conventions. Friends from all parts of the world log in with each person taking turns to say nice things about the celebrants. Games are conducted to spice up the event and stories told by the celebrant. Music is also played by the Zoom host with participants dancing and having fun.
“It is like watching a live movie and also being part of it as the audience and participant” a wedding planner informed Nairametrics. Whilst one cannot underrate the connection physical socializing brings, virtual meetings are gradually becoming a lifestyle and the longer social distancing continues its cultural significance will only continue to increase.
Aderonke Adebamibola, CEO of Unik Ushering Agency, an Event management firm, confirmed to Nairametrics that business has really slowed down in the last few months. “Even though the NCDC has now given rules to guide weddings and other events, the budget now is way less than it used to be due to the cap on numbers of guests” she explained.
Now, most events are kept within the premises of family residences, depriving hall rentals, the money they could have made from leasing out their halls. Venue decorators also have much less on their hands to do, as they no longer have to decorate big halls.
According to Adebamibola, every single business in the chain has been affected, from caterers to ushers.
“Now, we even have to convince them to use one or two ushers for their events because they believe they don’t need ushers for 20 or 30 guests. Caterers cannot even cook a half bag of rice now because of the number of guests. This means that they are also paid less for their services, even if they expend the same energy and time” she said.
The new normal in this industry means that the things that used to be prioritized are no longer priorities. Hand sanitisers, face masks and hand washing equipment are now compulsories in events, while the hand-shaking, and hugs that would have characterized such weddings.
Due to the nature of the industry, a large percentage of the staff are kept on contract basis, so the reduction has not really translated into lay-offs. However, the industry revenue has been badly hit. A contract staff with NPU Events, who preferred anonymity, noted that in the last three months, she has only been called twice for events.
Since this forms a major part of her income, it has caused a major dip in her resources. COVID-19 has brought unwanted hardship to the Nigerian economy with small businesses and workers in the informal sector suffering the most.
A recent World Bank report indicates the Nigerian economy might contract by as much as 3% in GDP growth rate this year. This informed government’s latest decision to inject about N2.3 trillion into the economy to spur economic growth. The funds will be targeted at small businesses through non-collateralized low-interest loans. Whilst all these initiatives are geared towards stimulating the economy, the spending power of Nigerians will remain pivotal and as long as the pandemic persists, ceremonies will remain subdued.
BHH Podcast: What 2020 holds for SMEs (2) – Ugodre
Business Half Hour (BHH) is a weekly podcast targeted at Startups and Entrepreneurs, who are redefining the Nigerian business scene through innovation.
Business Half Hour (BHH) is a weekly podcast targeted at Startups and Entrepreneurs, who are redefining the Nigerian business scene through innovation.
In this episode of #BHH, Ugodre gave an insight into how business climate would be for SMEs and an overall outlook on the global and national economy. Enjoy!
Ikeja Electric, GRA Ikeja residents sign contract to deliver 20 hours daily power supply
Ikeja Electric (IE) announced it has signed a Power Purchase Agreement with residents of Ikeja GRA to deliver “up to 24 hours of supply daily”. The company tweeted this on Friday revealing that it is in line with the company’s Bilateral Power Agreement.
However, the company representatives explain that it is a minimum of 20 hours of power supply for residents of the association. Ikeja GRA includes streets like Oduduwa, Isaac John, Joel Ogunaike, Fani Kayode, etc.
Ikeja Electric signs bilateral Power Agreement with Ikeja GRA.
…Residents to enjoy up to 24 hours of supply daily. pic.twitter.com/13ue5K1wqw
— Ikeja Electric (@IkejaElectric) October 11, 2019
In its previous Power Purchase deal with Magodo Residents, it stated that “with the agreement, IE will provide the residents with electricity supply beyond the existing standards, with guaranteed performance levels. In addition, there will also be access to dedicated Customer Care and Technical teams for prompt resolution of queries and/or technical issues within the estate.”
Also, the Chief Operating Officer, IE, Mrs. Folake Soetan expressed confidence in the success of the trend-setting agreement, which she noted was in line with the Federal Government’s willing seller, willing buyer policy.
What this means: The Power Purchase Agreement suggests residents of the Ikeja GRA will enjoy a steady power supply when compared to non-residents. However, they will have to pay tariffs much higher than is provided for in MYTO. Residents in Magodo who currently enjoy a similar arrangement informed Nairametrics that they pay higher tariffs but have enjoyed regular power supply and often go days without a power cut.
They also explain that even when the power cuts they get messages from Ikeja Electric explaining why the power was cut and indicating when it will return. We understand Ikeja Electric still relies on the grid to deliver this power as such power cuts will still be expected in the transmission and distribution end.
Backstory: In August, Ikeja Electric announced it signed a similar power purchase agreement with residents of Magodo, providing them a power supply of up to 20 hours daily. Residents of Magodo, have enjoyed steady power since then and are thought to be paying about N47 per kilowatt-hour of power compared to the MYTO tariff which is N23.10 for residential customers.
Sources with knowledge of the transaction indicate Ikeja Electric is likely to extend this arrangement to other estates within Lagos, in a move that disrupts the power sector dynamics. Residents in the Eko Franchise area seeking regular power supply have also demanded a similar deal and are ready to pay for a tariff that is higher than the MYTO approved tariff for general customers.
It is however not clear if the Nigerian Electricity Regulatory Commission, NERC has approved this arrangement.