The three quoted cement producers collectively reported a total marketing expense of N1.68 billion in the first six months representing H1 period of 2021.
The industry has experienced immense competition over the last few years following the entrance of BUA cement in 2020, whom Dangote Cement has come to see as a worthy contender, and so, the two largest cement producers have been engaged in a tug of war over market dominance.
Recall that the relationship between the two major producers became frosty in June 2020 when BUA Cement got a restraining order against Dangote Cement after the police invaded its three sites in Okpella, Edo state. This is the same town where Dangote Cement has just commissioned a billion-dollar facility, with another to reach full potential in H2 2021.
This fight for dominance could be the catalyst that necessitated the high advertising and promotion expenses, predominantly in 2019 and 2020.
The two largest cement producers have gone ahead to increase the prices of their cement this year, citing increase in production costs and freight costs as the reason for this. Dangote Cement currently trades at N3,900 per bag while a bag of BUA Cement trades at N3,750 per bag, the same price as a bag of Lafarge Africa cement.
Dangote Cement Plc
Dangote Cement Plc reported the highest expense on marketing and promotion with N1.35 billion during the period. The company has increasingly invested in its marketing, having spent N5.30 billion on advertisement and promotion in 2020, its highest in 5 years. This can partly be as a result of the covid-ridden business environment that made it imperative for businesses to invest more in putting their products out there and running promotions.
In July 2020, Dangote Cement ran a promotion named Goodies Season 2, aimed at making 1000 customers millionaires over a period of 16 weeks. Another advertisement in October 2020, referenced the strength and long-lasting period of the cement compared to its competitors.
Over the course of 5 years, the company has consistently invested in advertisement and promotion but have however, declined its marketing expenses by 29% from H1 2017 to H1 2021.
Dangote Cement Plc increased its revenue by 44.81% from N476.85 billion in H1 2020 to N690.55 billion in H1 2021, while profit after tax appreciated by 51.92% to stand at N191.63 billion.
BUA Cement Plc
BUA Cement Plc spent a sum of N216.54 million in the six months period of 2021, a reduction of 55.40% from N485.57 million recorded in 2020. The expense item is listed as Marketing and overheads in its financial statement and it is not explicitly expressed as marketing expenses
Recall that the company was quoted on The Exchange in January 2020 hence, there is no information on marketing and overhead expenses prior to 2020. However, there are records of the company running campaigns and promotions as far back as 2016 as top customers were awarded by the management.
The company’s product can be found predominantly in the northern part of Nigeria, hence it’s understandable that most of the marketing will be directed at the southern part of the country.
In July 2020, the company ran a promo for its cement produced from the Okpella plant in Edo State as a bulk purchase of 50 bags and above were sold for a promo price of N1,500 per bag. BUA Cement Plc recorded a growth of 22.73% in revenue during the period while net profit grew by 24.64% from N34.82 billion in the prior-year quarter to N43.40 billion in the current period.
Lafarge Africa Plc
Lafarge Africa Plc, however, has actively reduced its expenses on advertising over the period of 5 years ranging from 2017 to 2021. The company’s advertising expenses has declined by 68.71% from N361.03 million in H1 2017 to N112.96 million in H1 2021.
The company recorded the highest expense on advertisement of N737.05 million in 2019. In 2019, A Buy Lafarge and Win promotion which encouraged customers to purchase the product for a chance to Win a certain amount was launched. Also, in 2020 a National Essay Competition for Children was also launched to challenge talented children writers for a cash price of N1.5 million.
Lafarge Africa reported an increase in revenue of 20.31% from the corresponding period of H1 2020, while post-tax profit appreciated by 21.39% from N23.33 billion recorded in H1 2020 to N28.32 billion in H1 2021.
What the experts are saying
Business Analyst at Social Media Creatives, Temiloluwa Shobowale, gave his opinion as to why Dangote Cement spent the highest on Advertisement and Promotion in H1 2021.
According to Mr. Shobowale, “To be and remain a market leader, you have to out-do your followers and what they are spending. Promotions and advertisement are important, because to be in the minds of your customers, they need to always be reminded why you should be their first choice”.
“We can see that company’s investment in adverts reflects on the company’s revenue, which is the rationale for adverts in the first place,” he added.
According to Ola Rufus, an analyst with a top advertisement agency, “Most of these companies invest majorly in promotions that directly reward their customers and are not huge on television adverts.”
“Companies engage in government relief programs as a form of reach out which is also recorded as marketing expenses, for example, BUA cement donated to CACOVID for the purchase of the Covid vaccine this year,” she added.
Another market analyst with a top investment firm in Nigeria, Frederick Ebintoye says that “Comparing the advertisement cost against revenue will give a clear understanding of the importance of investing heavily in marketing for each individual company and although spending more on marketing does not guarantee more sales, it generally has a strong influence in sales.”
Based on these views, we should expect to see Dangote Cement especially increase their marketing spending to assert dominance in the industry, with BUA Cement following closely behind as they plan to spread their business tentacles further into the Southern part of the country and Lafarge making efforts to at least maintain its market share.