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.
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.
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.
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.
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.
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.
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.
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.
NIFIAN elects JAIZ Bank MD, Hassan Usman as first President
…Inaugurates pioneer EXCO members.
The Non-Interest Financial Institutions Association of Nigeria (NIFIAN), yesterday in Abuja elected the Managing Director of Jaiz Bank Plc. Hassan Usman as its pioneer President.
Usman was inaugurated alongside other six EXCO members to steer the affairs of the umbrella body of all corporate organisations offering non-interest financial and related services in the country for a first term of 2 years.
Those elected includes Hajara Adeola, Managing Director/CEO, Lotus Capital Limited as Vice-President; Norfadelizan Abdulrahman, Managing Director/CEO of TAJBank Limited as Treasurer; and Fatai Ola Bakare, an astute in-house legal counsel and Islamic Finance expert of SunTrust Bank Nigeria Limited as the Secretary-General.
Other EXCO members inaugurated yesterday include Thaibat Adeniran, Managing Director/CEO, Cornerstone Takaful Nigeria Limited; Aminu Tukur, Managing Director/CEO, Noor Takaful Limited and Dr. Basheer Oshodi, CEO, TrustBank Arthur Limited.
In his opening address, Babayo Saidu, Chairman of NIFIAN’s Board of Trustees said the Association was registered on 28th August 2020, and duly incorporated at the Corporate Affairs Commission under Part C of the Companies and Allied Matters Act.
Parts of the objectives of NIFIAN is to promote common interest of member-organisations towards developing the non-interest financial services industry in Nigeria, creating an enabling regulatory environment through advocacy as well as deepening financial inclusion through market engagements and financial literacy. In addition, the Association aims to improve market resilience by fostering collaboration across the industry, promoting policies and programmes on Financial Inclusion, and sensitization of the populace for the economic development of the country through non-interest financial services offering.
The Executive Council is expected to steer the affairs of the Association towards the realisation of its objectives for the advancement of financial inclusion through non-interest finance in Nigeria.
In his inaugural address, Hassan Usman said the journey started more than a decade ago with Nigeria Islamic Finance Working Group, a multi-institutional platform under the auspice of EFInA (Enhancing Financial Innovation and Access.)
Usman said: “As today marks a new chapter in our pursuit, I would like to reiterate the fact that we are not there yet. This course is a journey and not a destination. While the overarching objective remains constant, the detailed operational and strategic initiatives of the Association shall continue to evolve to meet the requirements of the day.
“To this end, I pledge that over the course of my tenure, I will work with my colleagues in the Council to push some prominent initiative including promotion of sound Islamic banking and financial system and practise in Nigeria; growth and development of requisite market infrastructures such as an efficient non-interest inter-bank system.
“Pursuit of harmony in Shariah pronouncements (fatwas); represent the interest of members locally and internationally; provide advice and assistance to members pertinent to the development of their institution and deepen public awareness. I look forward to working with members to make Nigeria the Islamic Finance Hub of Africa.”
In addition, the President singled-out EFInA for the role played as the founder of what becomes NIFIAN today through its concerted support for the propagation of financial inclusion initiates through the non-interest finance industry. With the inauguration of persons of track records into the Executive Council of the Association, NIFIAN is therefore set to take on the charge towards developing the Nigerian financial markets.
Unilever to spin off Tea business such as Lipton, Brooke Bond in major restructuring
Unilever wants to split its Tea business as a separate entity.
Leading personal care and consumer goods company, Unilever announced plans to spin off its tea business into a separate legal entity.
The company announced this via a press release published on the website of the Nigerian Stock Exchange. The announcement is coming at least 6 months after its parent company, Unilever Global announced plans of a spin-off of its Tea business.
According to a press release seen by Nairametrics, by the company’s management through Abidemi Ademola, the Company Secretary, the strategic review which includes leading brands such as Lipton, Brooke Bond and PG Tip will go through the normal approval process, adding that the process is expected to be concluded by the end of 2021.
The planned separation will take full effect on all the balance of Unilever’s tea brands and geographies and all tea estates outside India and Indonesia, as the company will be retaining the tea businesses in India and Indonesia.
What they are saying
Prior to the recent disclosure, Unilever made the planned separation of the company’s tea business known on the 5th of August 2020.
The Global Chief Executive Officer of the leading consumer goods brand, Alan Jope, explained that it is – “important to strengthen the strategic future of the company by announcing proposals to unify its dual-headed legal structure.”
He noted that the strategic review of the company’s global tea business would help the company to make new commitments that are expected to drive efforts to help protect the climate and regenerate nature.
What you should know
- The tea and savoury segment (food products) of Unilever Nigeria Plc made a total of N34.71 billion in 2020.
- This, however, is higher than the revenue of N31.91 billion the company made in 2019 through the sales of tea and savoury.
- In total, the tea business which will be separated, generated revenues of €2 billion globally in 2019 for the company.
Nairametrics | Company Earnings
- 2020 FY: Zenith Bank post N230.6 billion profit after tax
Zenith Bank Plc released its […]
- Mutual Benefits Assurance Plc boosts post tax profits by 25.9%
Mutual Benefits Assurance Plc released […]
- 2020 FY Results: Prestige Assurance Plc reports a 50.44% increase in profit.
Prestige Assurance Plc released its […]
- John Holt falls deeper into losses
John Holt Plc released its […]
- Sales volumes crash for Northern Nigeria Flour Mills Plc
Northern Nigeria Flour Mills Plc […]