Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
  • 2023 Elections
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
  • 2023 Elections
No Result
View All Result
Nairametrics
No Result
View All Result
Home Business News

It’s time to break Nescafe’s two-decade grip on Nigeria’s coffee market

Fakoyejo OlalekanbyFakoyejo Olalekan
4 years ago
in Business News, Company News, Metrics, Spotlight
Kaldi Africa, Nescafe, Nestle products, Cafe Neo, Coffee products in Nigeria
Share on FacebookShare on TwitterShare on Linkedin

From homes to offices, the consumption of coffee has increased among Nigerians, blending into their lifestyles, particularly in urban centres. There are just two coffee brands leading this drive within the country —Nescafe and others.

The others have been evidently non-existent for the last 30 years, thereby limiting the options of coffee consumers to just one choice, which inevitably made Nescafe the ‘preferred‘ brand in the coffee market.

[READ ALSO: Nigerian brands on alert as Facebook revises news feed algorithm]

Produced by Nestle Nigeria, Nescafe has grown to become a market force, controlling product price and availability. The company has been a dominant player in the coffee market, dictating its pace and structure. From tin package to economy sachet packs, Nescafe has innovatively positioned itself as a product for all levels of income earners.  

As a way of penetrating deeper, the company has gone a step further from being just an end-product manufacturer, to serving consumers caffeine-on-the-go with its mobile coffee carts. However, the stronger Nescafe’s grip is on Nigeria’s coffee market, the more danger its dominance poses for the market. 

Image result for Coffee War
Coffee war is the use of marketing to capture market share; or in simple english, create disorder to the status quo.

There’s a need for a coffee war 

For over two decades, Nescafe has enjoyed the advantage of being the market’s first mover, and it has continued to monopolise the coffee business to an extent that the market could shake to its foundation if Nescafe sneezes. 

[READ ALSO: US-China Trade War: Implications for Nigeria as its Asian romance lingers]

By 2020, consumption of coffee is projected to climb beyond the 1000 tons mark, and the majority of coffee products will be provided by Nescafe which has 75% market share. This means that Nescafe will account for most sales then, if not all sales. 

Such control is unhealthy for the growth of the market, and it’s time to loosen the grip of the Nestle subsidiary on distribution and sales through a ‘coffee war’. Customers end up being winners in such wars, considering the advantages that come when brands battle for market share, and the financial implications of having a monopoly. 

Image result for Nescafe brands
Some Nescafe flavour brands

What Nigeria is losing to monopoly

The growing consumption rate is creating an opportunity for small and medium-sized roasters to capture a larger market share and increase the revenue of the coffee market to the country’s GDP. 

A competitive coffee market will boost local production, as roasters will source for coffee beans within Nigeria. The lack of rivals has reduced the production output of coffee farmers, coupled with the fact that Nigeria isn’t considered a force to be reckoned with among coffee exporters.

[READ ALSO: How Cable TV could die in Nigeria]

This has compelled coffee farmers to abandon the venture for more lucrative seeds. But with the competition, coffee farmers will record a boost in demand, thereby, causing an increase in the number of farm jobs to meet demands. Then, they can share the spotlight with Kenyan farmers who were said to have earned $41 million within four months in 2018 for coffee seeds sales. 

The country is losing job opportunities in the coffee market which in Ethiopia employs 15 million citizens. With coffee being the second most exported commodity in the world behind oil, Nigeria can increase employment opportunities through this market. 

Also, with Nescafe playing God in the coffee market, revenue generated from farm to end-product will not be as significant as when the market is competitive. Note that in countries like Uganda and Ethiopia, coffee production alone earns both nations £634 million and £846 million respectively.

Image result for Cafe Neo
Cafe Neo located in the Island was founded by brothers; Ngozi Dozie and Chijioke Dozie.

How Nescafe’s dominance can be broken 

Coffee intake is currently on the rise in Nigeria. With urbanisation hitting 51%, it’s a good time for new entrants to make their way into the market, or for existing players like Cafe Neo and Kaldi Africa to consolidate in order to strengthen their capabilities and better compete against Nescafe. Operating as lone wolves against Nescafe in the market will only tame their growth further, until they have nothing to offer their customers.

[READ ALSO: Hypo wipes out rivals in a market determined by price and media campaign]

Currently, small coffee shops are operating in Nigeria, predominantly in Victoria Island,  Lagos, but surviving the coffee market requires extensive financial resources to market their offerings, and consolidation of resources will provide this needed capital.

Image result for Kaldi Africa
Kaldi Africa is a a joint Nigerian and Kenyan enterprise founded by Dr. Nasra Ali when she relocated to Nigeria (Photo Credit: The Food Lover)

If the French could consume about 366,000 tons of coffee and its entire population is nowhere close to Nigeria’s urban population, then there are still large numbers of under–served coffee-heads and millennials who Nescafe have been unable to service, and it’s only a matter of time before demand becomes a burden. 

While Nescafe enjoys a first mover advantage which has helped it capture a large customer base, their customer-loyalty is yet to be tested by a formidable competitor, but consolidation among smaller coffee chains and partnerships with Quick Service Restaurants, as being applied in the United States to break Starbucks monopoly, could begin the end of Nescafe’s dominance.

Related

Tags: Cafe NeoCoffee market in NigeriaCoffee products in NigeriaCoffee warKaldi AfricaNescafe brandsNestle productsStarbucks

Comments 2

  1. Aderemi Davies says:
    November 5, 2019 at 9:16 am

    This is a very analytical write up, a clarion call for local producers to start looking in to the growing coffee market. However while the new cafes can enjoy prominence with the coffee outlet venture, manufacturing and distributing of retail coffee products locally may be much more difficult especially with the prowess Nescafe currently exhibits. Are we sure they won’t stifle out the competition as most big industry players always does? Just like what competitors are facing with Multichoice.

    Reply
  2. Ayogu Odenigbo Izunna says:
    June 14, 2020 at 10:25 am

    I have always been a huge fan of coffee. Recently, the urge to go into coffee production has dominated my thoughts.
    Then, stumbling upon this article, my mind has been made up.
    It’s never easy to fight monopoly from big brands. But it’s easy to give it a try. Thanks for this.

    Reply

Leave a Reply Cancel reply

fidelity banner
Press one
Mega Millions
SME
hfm
HFM
Patricia





NM newsletters

Business News | Stock Market | Money Market | Cryptos | Financial Literacy | SME |

Recent News

  • Accenture lays off 19,000 jobs worldwide in a bid to streamline operations
  • Nigerian telco industry struggles to attract foreign capital for 4G and 5G infrastructure deployment
  • Insurance: Nigerians made claims of N318.2 billion in Q4 2022

Follow us on social media:

Recent News

Accenture lays off 19,000 jobs worldwide in a bid to streamline operations

Accenture lays off 19,000 jobs worldwide in a bid to streamline operations

March 24, 2023
Nigerian telco industry struggles to attract foreign capital for 4G and 5G infrastructure deployment

Nigerian telco industry struggles to attract foreign capital for 4G and 5G infrastructure deployment

March 24, 2023
  • Home
  • Exclusives
  • Markets
  • Industries
  • Economy
  • Business News
  • Financial Literacy
  • Lifestyle
  • Opinions
  • 2023 Elections

© 2023 Nairametrics

No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Industries
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Tech News
  • Economy
    • Nairalytics
    • Macro-Economic News
    • Research Analysis
    • Budget
    • Public Debt
  • Business News
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
  • 2023 Elections

© 2023 Nairametrics

error: Alert: Content selection is disabled!!