Nigeria’s biscuits makers are expanding operations and acquisitions while ramping up innovations in the value chain to increase their share in the N70 billion local market, which is still evenly shared with foreign brands.
One of the innovations is the use of cocoa beans and butter, which are then processed and included in biscuits and packaged snacks.
Another strategy is the production of a wider variety of biscuits, targeted at specific components of a wider market. These classifications include the low, medium and upper class types, as well the different age groups and people with certain health conditions and cultural preferences. Some manufacturers are also involved in market segmentation, which has enabled them to cut wastage and compete more effectively with imports.
The use of cocoa beans in biscuit making is particularly a critical step in the agro-allied value chain, as it is pushing Nigeria’s capacity in cocoa production and processing through the usage of cocoa powder and chocolates.
There have also been acquisitions in the industry. Deli Foods was acquired by Tiger Brands, a South African firm that until recently, had a stake in Dangote Flour. Similarly, OK Foods was acquired by Olam International, while A & P Foods is now owned by United Biscuits.
Already, some big players in the biscuits and confectionery industry are considering a holistic approach to cocoa value chain development, through investment in cocoa farming and processing to make more profit through backward integration. This also opens a window for government to earn more revenue in the form of taxes and more foreign exchange, as well as creating more jobs in the value chain.
Subramanian Murugesan, managing director, Sona Agro-Allied Foods, one of the biscuit makers, said the firm would be including cocoa powder and chocolates in the production of some biscuit products, which would create more wealth and generate employment within the cocoa value chain and the entire Nigerian agro-allied production and processing industry.
“We have created over 400 jobs and we want to do more,” Murugesan said, during a factory inspection by the Bank of Industry (BoI) in Sango-Ota in Ogun State.
Ajai Musaddi, group managing direction, Sona Group, said the company complies with the Federal Government’s directive on inclusion of local raw-materials in manufacturing operations at every level of production, explaining that Sona Group does not only use local raw-materials in its production, but also employs a larger percentage of local manpower.
According to Euromonitor International, a research-based firm, Nigeria’s fast-growing biscuits market is benefiting from population growth and an increased variety of biscuits which tend to be higher priced than previously, catering to a group of consumers whose incomes are growing.
Competition is driving innovation in the industry as local firms compete with foreign brands which are sometimes cheaper and better packaged.
“In the biscuit market, I believe in creating the right type of impression about your product first,” said Obi Ezeude, CEO, Beloxxi Group.
“We have completed the second phase expansion and are planning to introduce the second brand early next year,” Ezeude, who employs over 1,300 workers and uses a smart machine in manufacturing, said.
Yale Foods is the leader in the Nigerian biscuits market with a value share of 38 percent in 2013 and 2014. OK Foods and A&P are rated second and third, with market shares of 20 percent and 13 percent respectively.
“The Nigerian market has strong potential. It is Africa’s most populous country and the biscuit market is projected to grow at double digit rates,” said Jeff van der Eems, CEO, United Biscuits, while acquiring stake in A&P Foods in 2014.
Market watchers say one critical stage would be the resolution of the efficiency of the power sector privatisation and reduction of impediments in the doing business environment, which often raises production costs. They say with the ongoing Common External Tariff regime, the industry should be encouraged to expand to tap into the 350 million population market in the West African sub-region.
Rasheed Olaoluwa, CEO, Bank of Industry, said there is the need to reduce the level of smuggling in biscuits and other confectionery into the country as this has negative impact on the local economy, especially on the foods and beverages sub-sector.
“Biscuits and all other snack products are banned in order to build needed capacities for local manufacturers and stimulate the economy. But just like the frozen livestock, some unpatriotic Nigerians and importers still smuggle them into the country,’ Olaoluwa said at the factory inspection.
ODINAKA ANUDU & RAZAQ AYINLA
