The Nigerian biscuit industry is experiencing a sharp decline in sales due to inflation and reduced consumer spending capacity. In 2017, the industry was valued at N121 billion, but demand has plummeted from 15-20 percent to below five percent lately. Local manufacturers face challenges, including competition from imported products, resulting in closures and operational difficulties. Amidst high inflation, economic conditions have compelled Nigerian consumers to focus on essential goods, further impacting biscuit sales.
Nigeria’s biscuit industry is facing a significant decline in sales, primarily due to inflationary pressures and reduced consumer spending. A report from KPMG in 2017 estimated the industry at N121 billion, but current estimates suggest consumer demand has fallen dramatically, from an initial 15-20 percent to under five percent, as households prioritize essentials over luxury items like biscuits. Akin Akintayo, chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), stated that the demand for biscuits is declining rapidly, particularly among average and low-income earners who previously constituted the major market segment.
The biscuit and bread market was valued at N243 billion in 2017, with the bread segment accounting for the majority at N122.1 billion. This market remains largely fragmented, with artisanal producers capturing a significant share. The leading companies in biscuit production included Yale Foods, OK Foods, and A&P Foods, but the competitive landscape has shifted considerably, leading to some manufacturers shutting down due to adverse market conditions.
Operating under a challenging economic climate, the impact of rising inflation has forced many Nigerians to focus their spending strictly on necessities. According to Francis Meshioye, president of MAN, there has been a notable increase in unsold inventory, reflecting weakened consumer purchasing power. The biscuit sector continues to grapple with thin operating margins, driven by a highly price-sensitive market and the influx of cheaper imported substitutes that threaten local producers.
Recent import data presents a contrasting scenario where Nigeria imported 8,984 shipments of biscuits primarily from countries like India, China, and the UK between March 2023 and February 2024. This marks an impressive growth of 205 percent in imports, suggesting a growing reliance on foreign products amidst local difficulties. Consequently, local producers are increasingly squeezed by competition with imported goods, further complicating their operational challenges amidst fluctuating raw material costs and unfavorable market policies.
Industry experts have emphasized the ongoing struggles faced by local biscuit manufacturers, characterized by low production capacities and financial losses attributed to macroeconomic difficulties, including high-interest rates and foreign exchange challenges. The situation has led to notable closures, including that of Mayor Biscuits Company Limited’s manufacturing operations in 2023, as firms pivot to other business avenues due to sustained challenges in the biscuit segment.
The Nigerian biscuit industry is undergoing a considerable downturn fueled by economic pressures such as inflation and shrinking disposable incomes. While the market was once thriving, current figures indicate a drastic decline in consumer demand, particularly among the lower-income demographic. Coupled with an increase in imported biscuit shipments, local manufacturers face intense competition and operational challenges, leading to factory shutdowns and market consolidation. Industry leaders stress the need for comprehensive strategies to address these macroeconomic issues to support local production and sustainability in the biscuit sector.
Original Source: businessday.ng
