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Hypo wipes out rivals in a market determined by price and media campaign 

The bleach category in the hygiene and households cleaning products segment has always been a monopolised market in Nigeria, with every new entrant backed by deep-pocketed investors always making the market their fortress.

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Bleach market, Hypo, Harpic products, OMO products, Jik

The bleach category in the hygiene and households cleaning products segment has always been a competitive market in Nigeria. Every brand is backed by deep-pocketed investors who willingly stake it all just to make the market their fortress.

While the household bleach market is not saturated, it is capital-intensive. This is because new players are known for adopting aggressive TV and outdoor advertising just to capture sizeable market share.

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The market has since experienced the introduction of quite a handful of brands —from Jik to Harpic, and now Hypo which reigns supreme. The brand is present in almost every Nigerian household.

Since Multipro Enterprise Limited launched the Hypo brand into the Nigerian bleach market, it has recorded tremendous success. This success now positions the company in direct competition with Jik and Harpic.

How Hypo became market leader: It all started with the guy in a black limousine, whose shining attire was blinding to his admirers. That Hypo commercial wasn’t just memorable because of its catchy phrase “Hypo go wipe o”. Instead, the consistent airing of the ad left it embedded in the people’s sub-consciousness.

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The company invested heavily in TV ads and other commercial avenues. The aggressive advertisements at a time competitors were mostly quiet, helped the brand to endear itself to many Nigerians.

Asides its advertising campaign, the brand also launched economy packs to lure lower income earners and the middle-class— a large population size that was ignored by other bleaching brands. This deepened Hypo’s penetration in the market.

Competitors failure: Prior to Hypo’s entry into the market, Jik was the toast of the bleach category. There was the popular phrase “Jik it” which was more or less becoming a national anthem. However, price increase due to economic situation gradually saw demand decline; Jik was no longer affordable to the Nigerian lower-class.

Just like JikHarpic’s market entry was more as a premium class in a country dominated by low-income earners. Both Jik and Harpic also focused mostly on the Southern and  Western parts of Nigeria while ignoring the Northern population.

Jik and Harpic’s positioning in the bleach market denied them a population size which Hypo took advantage of. The Tolaram subsidiary was positioned for all societal classes in Nigeria, tending to their cleaning needs regardless of the region.

Eight years later, Hypo’s success has overshadowed major brands like Jik and Harpic due to its continuous innovations. Among Nigerian households, Hypo is now synonymous with bleach as Google is synonymous with search.

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The Sodium Hypochlorite bleach now comes in two sizes: 65ml Sachet for N30 and 450ml bottle for N400.

Survey favours Hypo: According to a Nairametrics poll conducted on the social media platform, Twitter, Nigerians prefer Hypo when purchasing household bleach products.

Hypo recorded the most votes in the poll, accounting for 58%, with 35% of voters preferring Jik to other household bleaching products. The demand for Harpic products earned 3%, while OMO bleach accounted for 4%.

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Hypo might be losing its grip: One of the reasons Hypo took and maintained market leadership in the household bleach market was because of the testimonials of customers who are willing to sacrifice brand name for something new. Now, that same testimony is gradually biting the company. This is because some customers are beginning to assume that Hypo dilutes its bleach product to meet market demand and cut down on cost of operation.

This means that quality is gradually being sacrificed in a bid to remain competitive in the market without increasing production cost and losing profit. The increasing demand for Hypo might be having a negative impact on the company.

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Reaction of Customers: Nairametrics spoke with some customers to understand what factors influence their decisions when purchasing bleach in the market. They all gave diverse reasons which streamline the need of customers and help direct the focus of manufacturers during production.

According to one Damilare Famuyiwa, Hypo is the best option for him when doing his laundry and cleaning his toilet. Famuyiwa said he began to use the bleach product after hearing of it from friends and later stumbling on Hypo’s ads.

“I wasn’t a bleach user before Hypo. I never really thought I needed bleach for my clothes, but when my friends won’t stop talking about it, and the constant advertisement, I decided to try it for my clothes. Since I saw the result, I’ve been using it.”

Another ardent user of Hypo, Busayo Fakoyejo, said she stopped using other bleach brands when she heard of Hypo. The testimonials and price of Hypo persuaded Fakoyejo to try it. Ever since, she has continued to use the product to bleach her clothes, but she still prefers Harpic to wash her toilet.

“Before Hypo started to trend in Nigeria, I had stopped using bleach for my clothes. But along the line, when everybody continued talking about Hypo, I used it, and it was good, though I still prefer Harpic when cleaning my toilet. I’m already used to Harpic for toilet.”

Meanwhile, another user, Tola Oyewole, said that apart from the terrible smell of Hypo, the bleach product is better than Jik, stating that the cheap price is enough reason for her to continue using Hypo.

“I’ve even forgotten about Jik. Jik is old school. I use Hypo now because it’s cheaper and works well.  What got me initially is their “Hypo go wipe o.” It was weird and funny somehow. But I prefer it even though it smells terribly.”

But Juliet Solomon told Nairametrics that she just prefers Harpic to other household bleach products.

Strength, Weakness, Opportunities, and Threats of bleach market

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Strength: Nigeria’s population size is a market base that promises growth for any business venture. The country currently boasts of a 104 million urban population across the country, and with less competitors to worry about in the bleach market, there’s enough customer base to go round. Also, bleach has become popular in Nigeria because of the environment. So there’s a growing need for bleach products.

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Weakness: To be a product shelved by every mom and pop stores, there is a need for massive investment. First, the bleach market demands that new products slash prices to lure competitors’ loyal customers. Also, there’s a need for media campaign if your product is to penetrate households. This is capital intensive and production needs to be at large scale because demand could be overwhelming.

Opportunity: Consumers are willing to switch loyalty for cheaper household bleach products without considering brand name as experienced by Jik and Harpic. Also, the bleach loyalty is tied to the product that makes the most noise, so entering the market with a cheaper product and aggressive media campaign could just earn your product the leadership position.

Threat: The business environment in Nigeria is a threat to all ventures or companies. The necessary basic amenities that are the responsibility of the government to provide, are taken on by entrepreneurs, which means extra costs of production. Also, labour wage limits the spending ability of the lower and middle classes in Nigeria.

Conclusion: The growth of products in the household bleach market in Nigeria is determined by three forces: product price, media campaign and customers’ willingness to switch loyalty. These factors can make or mar a bleach company, which makes the market unpredictable because your dominance doesn’t guaranty continuity for a present market leader; your profit is constantly threatened by new entrants with deeper pockets.

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Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Why Shoprite is “exiting” Nigeria

Shoprite’s intention to divest from its Nigerian operations appears to be anchored on these factors.

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Shoprite, Growth outlook

Africa’s largest retail chain, Shoprite, announced on Monday that it is considering divesting from its Nigerian retail entity, Retail Supermarkets Nigeria, the owners of Shoprite Supermarket Nigeria.

Shoprite Nigeria operates about 26 outlets across the country and employs about 2000 employees who are 99% Nigerians. A divestment means it will sell its holdings to another investor who will continue to run the business.

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According to the company, it has taken a decision to leave “following approaches from various potential investors” looking to invest in the Nigerian entity.  The group also said the decision is in line with its “re-evaluation of the Group’s operating model in Nigeria” one of the 15 countries where it currently operates.

Shoprite also confirmed it has initiated a formal process to sell its entire stake in the Nigerian entity or a majority stake.

READ ALSO: Nigeria’s retail outlets risk CBN sanction, debit N50 PoS fee from customers 

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Why the exit?

Shoprite’s explanation of its intention to divest from its Nigerian operations appears to be anchored on its investment expectation and operating environment. However, there could be more to it.

Firstly, Nigeria is a highly competitive space, where retail is the survival of the fittest. Following Shoprite’s foray into Nigeria in 2002, the retail chain disrupted Nigeria’s retail space giving ordinary Nigerians a taste of what it feels to shop with family and friends. But the fairy tale was not going to last forever. Previous retail outlets like Park n Shop rebranded and injected significant funds in their operations and business expansion. Park n Shop rebranded to Spar and has 14 outlets across the country. It only makes sense for them to divest having held on to the Nigerian operations for almost two decades.

Shoprite also competes with homegrown retail outlets especially in Nigeria’s commercial city, Lagos State. Retail outlets like Ebeano, Citydia, and Adiba are now household names that are expanding rapidly across the state. There are also several neighbourhood supermarkets in the nooks and cranny of Nigeria’s commercial capital piling pressure on Shoprite’s market share. Shoprite does not disclose revenues from its Nigerian operations.

Shopping is also going online as evidenced by the growth in online shopping since COVID-19 hit Nigeria. Jumia, one of Nigeria’s largest online retail outlets, revealed lower earnings in the first quarter of 2020. However, the company is optimistic of higher revenue growth in Q2, on the back of the COVID-19 lockdowns. Jumia had earlier noted that “we are seeing unprecedented demand to join the Jumia platform, especially for named brands. We believe those dynamics will help accelerate the shift toward online.”

READ MORE: The deal that helped Lafarge stock gain 18% in less than a week

Local competitors like Spar and Ebeano already offer online shopping experiences and deliver goods to your doorstep. Shoprite’s business model relies heavily on physical store visits.

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As internet services become faster and cheaper, more Nigerians will rely on e-commerce to meet their shopping needs. Jumia has often struggled in this space and remains unprofitable. However, gravitation towards online shopping is inevitable and only those who have the capital and know-how will come out winners.

Jumia’s competitor in this space, Konga, was also recently acquired by Zinnox. Konga was then merged with another Nigerian retail giant Yudula. Interestingly, Konga’s model includes a combination of online and brick and mortar. The company has since been acquiring warehouses across the country as delivery points for its retail expansion drive.

Nigeria’s harsh operating environment is also another major challenge Shoprite faces. The Muhammadu Buhari-led administration, through the CBN, has focused on supporting locally made goods by banning forex availability for the importation of local substitutes. This has negatively impacted the number of products Shoprite can sell and how many new shelves it can create per floor space. It also creates supply chain challenges, especially with locally produced goods.

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Note that supermarkets sell on very thin margins. Therefore, the more products they can sell the higher the operating profits. Taxes are also higher and Nigeria’s susceptibility to exchange rate devaluation is also a major challenge. The company makes money in Naira and must convert to dollars before converting back to Rands.

READ MORE: Exploring branchless, other digital forms of banking in a crisis

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In 2017, when Nigeria last faced a currency crisis, Shoprite explained that it has about Rand 2.3 billion in cash locked up in Angola and Nigeria due to currency restrictions (inability to repatriate their money on time). Information reaching Nairametrics from traders suggest most foreign-owned investments in Nigeria are also facing “restrictions” due to limited liquidity in the NAFEX window.

Shoprite’s less talked challenge is its Legal Issues. In 2011, Nigerian company A.I.C Limited (the Claimant), which is owned by Chief Henry Akande, issued a summons against Shoprite South Africa and its Nigerian subsidiary for an alleged breach of a joint venture agreement (the JV Agreement) allegedly concluded in 1998. The company took Shoprite to court claiming it breached on an agreement to set up the Nigerian arm of the business.

The Federal High Court then ruled in favour of AIC and awarded damages of $10 million against Shoprite in 2017. Shoprite appealed the judgment in the appeal court and lost again earlier in 2020. It is unclear if Shoprite has any plans to take the matter up to the Supreme Court. Could this be another reason why the owners are deciding to divest?

Whatever the reason is, officially, it perhaps makes sense for the company to exit its Nigerian operations in the light of the points mentioned above. Its Nigerian entity is worth 1.1 billion Rands (N24 billion) per its financial statements and could be worth more when the sale is eventually consummated.

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Okomu Oil: Home is where the heart is

Okomu Oil has its tires on the track and is not slowing down.

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Okomu Oil records N4 billion profit in H1 2020

Despite the teeming opportunities in the Nigerian agriculture industry, very few companies in the agro-space have been able to put in place the right processes and systems to create huge corporations out of farm produce. But there is one that is doing just okay. With a market capitalization of N71.5 billion, Okomu Oil Plc sits at the top of the industry.

While many companies, big and small, are losing their grip to the volatile global economic landscape of 2020 birthed largely by the COVID-19 pandemic, Okomu Oil has its tires on the track and is not slowing down. More so, it is not only proving COVID-19 wrong. Just a little over a year ago, Nairametrics had downgraded the company to a “Sell” owing to its faltering revenues. Today, with huge increases in revenue in 2 out of 2 completed quarters, Okomu Oil plc is laughing last.

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READ ALSO: Okomu Oil half year profit drops by 57%

Winning by the Numbers

The company’s Q1 financials had revealed a 65.2% growth in revenue as the company recorded a turnover of ₦6.9 billion in comparison to the ₦4.2 billion it made in Q1 2019. It had also recorded a profit after tax of over ₦2 billion in comparison to the ₦1 billion recorded in Q1 2019 resulting to a 101.4% jump in profits. In the second quarter of the year, its unaudited results reveal that the company has also increased its revenue. Turnover jumped by 50.6% from N4.3 billion in Q2 2019 to N6.5 billion in Q2 2020. This jump was not totally reflected in its profits after tax, however, owing to a significant increase in income tax from nothing in Q2 2019 to N462 million in Q2 2020. PAT was still able to increase by 30% to 1.9 billion in 2020. While there could be a myriad of reasons for the tax burden, the company’s foreign operations are starting to rain on its parade.

Why it has to watch its foreign operations

Okomu Oil’s wins can be directly attributable to its domestic activities, bolstered by devaluation impact and a larger market share as a result of border closures. A closer look at both its Q1 and Q2 financials reveal that a majority of its earnings have been from improved domestic operations. In Q1, the company witnessed a decline of ₦89.8 million in Q1 2020 from its 2019 figures, representing a drop of 12.5% in the comparative quarter. In Q2, its export revenue took an even greater plunge. Export sales experienced a 35.3% drop from N730.6 million in Q2 2019 to N473 million in Q2 2020. Domestic sales had increased by 67.9%.

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READ MORE: GTBank declares closed period as directors meet July 22nd to consider H1 result

While this is reflective of the current economic activities, there are rising fears that it will keep relapsing. Failure to contain its activities will, sooner than later, have it in the same position as some of the equally large companies that had to eventually spin off ailing foreign activities. Reduced turnover is not the only diaspora-induced challenge being faced by the company. Its Q2 financials also reveal exchange losses of over N17 million for the quarter. Compared to the exchange losses incurred in Q2 2019 which stood at 1.2 million, it recorded a 1284% increase in foreign exchange losses.

In today’s world, it is becoming increasingly tough for businesses to ward off the allure of foreign opportunities in trade as well as in the area of raising finance. While these, no doubt, have immense benefits to businesses, there’s a long list of reasons why staying home and penetrating local markets has been underrated. Being able to source inputs locally, produce locally, and even finance locally is becoming even more of a luxury to Nigerian companies especially given the challenges around the relatively weak currency to stronger currencies.

Okomu Oil plc is creating a sustainable market in Nigeria and its efforts are paying off. Until order is restored, an increasing focus on its domestic market will do the company more good. That said, the company is a great stock to have in your investment portfolio to serve as a hedge against companies that have been negatively impacted by the pandemic. Its current share price is N74.95. While its price to book ratio is high at 2.2857 hinting that it could be overvalued, its EPS is stable at 7.33.

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Why you should avoid investing long term in Nigeria’s stock market

The stock market is only as resilient as the economy.

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Thirteen years ago today, I was getting set to oversee a meeting with a group of partners in a newly formed investment club. About a dozen of us, young and just at the cusp of family hood thought it was important to come together and put money aside for the future.

We had several options such as real estate or treasury bills, but we settled for the Nigerian Stock market. The decision wasn’t difficult to make especially when you look at the performance. Stocks were up 37.8% in 2006 and will close the first half of 2007 55% up.

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Demand was high as everyone wanted a piece of what was then the fad. Private placements, right issues, IPOs were fast and coming and it was as if any offer placed in the table was sure to sell. The early signs that this was a bubble was when spare part traders abandoned their trade to get in on the gold rush.

READ MORE: Facebook, Microsoft, Amazon shares drop, top U.S official orders lockdown

The All Share index showed its first signs that the bears were around the corner when it fell by 5.15% in August 2007. As investors who were made to understand that investing in stocks for the long term was wise, we ignored the temptation to sell believing that stocks will rise again.

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It’s 13 years now and the Nigerian All Share Index is down 52% between June 2007 and June 2020. In hindsight, we should have sold everything we had and simply bought dollars and kept it under our pillows. The stocks, we had hoped will deliver compounding returns over the years have delivered nothing but losses.

The Nigerian Stock Exchange is not a long-term market. We learned this 13 years ago but believed that experience was just a massive correction and that things will change. It did not and is unlikely to change so long as we remain a highly import-dependent economy. The stock market is only as resilient as the economy. If you have an economy like Nigeria that is good at growing its population and not its economics, investments in capital and money markets is a risky activity.

READ MORE: Where to Invest N5 Million right now

The more we remain reliant on crude oil and high imports, the worse it gets and you lose more money. Thus, it is my firm belief that investing in Nigerian stocks for the long term is folly. There are much better investments out there that will deliver you better returns and reduce capital erosion, two of the major symptoms of the Nigerian Stock market. But why is this market not a long term investment?

The reasons…

Firstly, stocks rely heavily on foreign portfolio investors to drive demand up. Since former CBN Governor, Sanusi Lamido Sanusi allowed foreign investors to repatriate any portfolio investment into the country without restrictions, stocks have become heavily reliant on hot money to keep valuations high. Thus, when foreign investors exit, stocks suffer. They create a bubble when they enter our markets and leave bears to dominate when they exit, until they are ready to get back in again.

READ MORE: A New Wave: Where to Invest in H2 2020

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Secondly, Nigeria’s susceptibility to frequent currency devaluations keeps market valuations in perpetual risk of capital erosion. For example, if your portfolio was worth N165, 000 in 2013 it was the equivalent of $1,000. Today, that portfolio is worth just $412 assuming N400/1. So, even if you are lucky to have a portfolio that has performed well over the years, it will struggle to outperform dollar investments on the medium term.

Also, Nigerian companies are hardly accountable with the way their businesses are run. Insider trading persists without control and suspicions are immediately swept away. There are no consequences for reckless corporate behaviour. Most of the corporate fraud and unscrupulous activities perpetrated in the great stock market crash of 2008/2009 did not lead to a single jail term for anyone.

READ MORE: Eid-El-Kabir: Food prices surge, as ram traders decry low patronage

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Billions lost in stocks over the years have not been recovered. Whilst some companies have continued to grow their revenues and profits most remain unprofitable and lack the basics of corporate governance.

Investor protection is weak in this market as there are no reliable remedies for fraud induced market losses. The stock market is also very limited in the number of products available to buy. Apart from buying and owning stocks, there are little options to short-sell. We understand this is in the pipeline but it has remained there for years.

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These are examples that explain why investing for the long term cannot work in Nigeria for now. Buy and hold forever is a myth at least in today’s Nigeria. You will get burned and likely lose the value of your investments.

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