In an extensive discussion at the Nairametrics Industry Economic Outlook event on Saturday, Ogaga Ologe, the Finance Director at Cadbury Nigeria Plc, addressed the ongoing realities shaping the Fast-Moving Consumer Goods (FMCG) sector as a result of the challenges in the economy.
Ologe identified price elasticity, changing consumer behaviour, supply chain strategies and pioneering innovation as factors that are shaping the FMCG sector in Nigeria.
Price elasticity and consumer behaviour strategies
Ologe emphasized price elasticity as a crucial concept in understanding consumer behaviour, particularly in the fast-moving consumer goods (FMCG) sector.
He indicated that it measures the responsiveness of consumers to changes in prices and provides insights into the level of demand for a product when its price fluctuates.
Given the current economic realities in Nigeria, he underscored its implications for consumer purchasing decisions in the FMCG industry.
He indicated that a thorough understanding of price elasticity enables companies to make informed decisions regarding pricing adjustments and product positioning in the market.
He said:
- “Price elasticity and consumer behaviour show you the level of consumers who will stop taking your products
- “It’s important to get accurate price elasticity
- “Spending patterns have been altered now hence it’s important to have discussions with the people in the Planning department
- “FMCGs need to understand how inflation affects spending patterns”.
Fortunately, some products in the FMCG sector exhibit inelastic demand, meaning consumers are less sensitive to price changes.
Staple goods such as bread, fuel, and alcoholic beverages fall into this category, as consumers perceive them as necessities and are likely to purchase them regardless of price fluctuations.
For FMCG companies producing such goods, accurately estimating price elasticity is crucial for optimizing pricing strategies and maximizing revenue.
Conversely, some FMCG products demonstrate elastic demand, where consumers are highly responsive to changes in prices.
In such cases, consumers may opt for lower-quality substitutes or shift to alternative brands if prices increase. For FMCG companies offering products with elastic demand, understanding price elasticity helps in devising competitive pricing strategies and maintaining market share in the face of price competition.
Speaking, he said:
- “Some products are technically inelastic such as bread, fuel, alcoholic drinks, etc which leaves the consumer with little or no option but to buy them.
- “However, there are others that are not inelastic which is why some consumers move premium products to lower quality ones”.
According to him, inflationary pressures influence consumer purchasing decisions, leading to changes in buying behaviours and preferences.
Therefore, FMCG companies need to collaborate closely with their Planning departments to analyze the impact of inflation on consumer spending patterns and adjust pricing strategies accordingly.
