The Nigerian dairy industry is not new to rivalry and over the years, major players in that segment have made various value propositions for their brands, through campaigns and innovations in the bid to gain a market edge.
While some brands have survived this battle of the fittest, others, especially the reigning ones in the 70s have bitten the dust. Over time, the milk segment has witnessed an increase in the influx of different brands (foreign and local) jostling for a prime place in the consumer’s heart.
This week on consumer’s watch, we look at activities of brands in the dairy milk segment, and how major and upcoming brands are competing against one another to gain market share and profitability.
Peak Milk leading the pack
One brand that has stood the test of time and succeeded in fulfilling the role of market leader in the dairy segment of the market in Nigeria is Peak milk, a product from the stables of FrieslandCampina WAMCO, an affiliate of Royal FrieslandCampina of the Netherlands. Peak has been in the Nigerian market for over 65 years and despite the introduction of various brands, it remains the brand to beat.
Initially, branded milk was seen as a luxury, exclusive for the rich. The first to challenge Peak’s dominance was Promasidor’s Cowbell milk in 1993, which introduced powdered milk in smaller sachets. This gave average Nigerians access to branded milk. Promasidor’s effort also paid off significantly for a while, as Cowbell adopted “Our Milk” as a pay-off line.
In response to the threat from new brands led by Cowbell, Peak milk made a transition into packaging their products in smaller sachets, both in powdered form and evaporated. This response, in due time, allowed Peak to make in-roads into the homes of the lower class consumers in the country.
Gone are the days when some milk brands such as Peak, Nido, and Dano were positioned as elitist brands; today the manufacturers have come to realise that they cannot just play in the elite market and survive the onslaught posed by contending brands like Nunu, Miksi, Loya, Coast and Three Crowns brands.
Another brand that reigned in the milk market was Nido, a product of Nestle Nigeria Plc, the brand did so well that it earned the respect of pupils and students in higher institutions. Sadly, the brand has not been able to compete with its peers in the market. Interestingly, the smaller brands such as Jago, owned by Sosaco Nigeria, Nunu from PZ, and Blue Boat marketed by Ranona have upped the ante in grams, taste, and packaging, all directed towards arresting the attention of consumers.
Unique value propositions of brands
Milk is known for its immense benefits, as it contains minerals such as calcium, vitamin D, phosphorous, and other blends of nutrients proven to build bones, teeth, as well as promote healthy function of muscles and blood vessels, particularly in children. In the midst of all the new beverages (energy drinks, and other artificially contrived beverages) milk is seen as a natural healthy choice.
According to Promasidor Nigeria Limited, manufacturers of Loya and Cowbell, its milk contains 50 percent more calcium than any other in the dairy market.
In the last few months, the battle for market share in the milk segment has assumed a new dimension, with major milk brands in Nigeria making multi-billion Naira investments to aggressively shore up their production capacities and also radically energise their marketing communications strategies in preparation for improved market share.
Brands have adopted different advertisement strategies, both in the print and electronic media platforms to appeal to consumers. Some brands have also signed endorsement deals with celebrities and influencers to help put their brands right in the faces of consumers.
The recent frenzy in the segment has essentially been triggered by increasing demand for safe and affordable milk and dairy products in Nigeria, occasioned by improving living standards and growing enlightenment about the nutritional benefits of milk and dairy products to humans’ physical and mental wellbeing and growth, especially for adolescents.
A market survey by Nairametrics shows that consumers have their sentiments towards these brands. One of such is the general notion that the Peak brand is superior to other brands in the market, and all variants of Peak are fattening, in other words unskimmed. They are mostly recommended for the active population, people who desire to add weight and consumers who randomly buy what comes to hand in the market.
Taking a sit behind the chiefly position of Peak, is Three Crowns, which is widely sold in the open market and shopping malls. Though the Peak rack empties faster than that of Three Crowns, this does not undermine the market power that Three Crowns holds.
Three Crowns is skimmed and considered safe, particularly for convalescence, the aged population, people looking to shed weight, and consumers who don’t have any preferences.
What consumers are saying
In a consumer poll done by Nairametrics on our social media platform, one of the respondents, Oshoniyi Moradeyo noted that most middle and low-income earners will always go for Cowbell and Loya milk. Another respondent also revealed that most households no longer use Peak milk because of the price.
A respondent on Twitter noted that she uses Dano because it is creamy, rich and dissolves easily.
Nairametrics’ observation on the performance of the brands reveals that the Nunu brand is barely visible in the market; it is believed to be struggling in the midst of low financial support and market forces. Jago on its part is also struggling to gain market share. Despite several activities which the owners have tried to institute to improve its image and visibility, more still needs to be done.
"Preferred" is not consumption. Alot of people prefer peak milk but consume Dano. That's what it is.
— divine project (@welly98welly) August 8, 2018
Despite the exploits of Peak milk and other top brands, the manufacturers must look inwards and invest more into backward integration, as most of them still depend on imports for their raw materials. This has made them susceptible to foreign exchange shocks and increase in the cost of production.
In a poll conducted by Nairametrics, Peak milk scored 69%, Dano got 19%, Cowbell scored 7%, and Loya milk had 6%.
Going by the poll this week, Peak Milk is the winner. However, the manufacturers must continue to churn out variants that will be affordable to the Nigerian consumers. Whichever way the battle goes, the ultimate winners shall be the consumers and the Nigerian economy.
**Additional Information provided by Ibukunoluwa Samuel
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.