Fruit juice is in high demand in the beverage industry. It has an annual demand of over 550 million litres with supply pegged at about 25% of the demand ; thereby causing an imbalance in demand and supply, with the result being an inflated price compared to the soft drink industry. With the government prohibiting the importation of fruit juice, local fruit juice makers are now finding alternatives, and sourcing raw materials such as grape, lime, lemon, paw-paw, guava, pineapple and mangoes locally, with production also taking place in Nigeria.
The fruit juice market is a viable investment opportunity, and with supply way below the demand, investors can take advantage of the excess demand and make abnormal profit.
Nigerian alcoholic beverage market (beer, wine and spirits) is valued at $2 billion and has maintained an annual growth rate of 6 percent since 2007. The leader in the market for alcoholic beverage is beer with a market share of 55%; followed by spirits at 30%, and wine at 15%. Wine is the lowest of the lot because prior to the 90’s, consumption of wine was almost non- existent. It is impressive that the wine is quickly gaining a share of the market, with its competitors (beer and spirits) having a long history in Nigeria and being widely consumed even before the 90’s. The Nigerian consumers holds a strong market for both locally made wine and foreign branded wine; with the wine industry estimated to reach $370 million by 2016.
According to INSR reports, the Nigerian spirits market is valued at about $2.8 billion and growing. The spirits market in Nigeria consists of brandy, vodka and may others, and it has had a stable growth rate of 6% since 2007. A large portion of the 2.8 billion dollars goes to cheaper local brands, with imported brands accounting for about $600 million of the spirit market.
The main driver is the increasing taste of middle class consumers, whose premium drink has been beer and champagne and the upper class. It is said that about 13 million cases of whiskey are sold in the Nigerian market every year and this has been growing at an annual rate of 5 to 10% with a steady retention and trial rate.
Diageo is the market share leader in the spirits industry, with popular brands such as Johnnie Walker, Smirnoff Vodka and Baileys. Moet Hennessey, owned by French luxury brand, Louis Vuitton, controls the premium Cognac market with its Hennessey Cognac labels.
In 2013 alone, Hennessey launched several of its newest Premium Cognac brands, SOP Nyx, the Glenmorangie Malt Scotch Whiskey and its limited collector’s edition bottle, Hennessey KYRIOS. Hennessey’s Marketing Manager, Lere Awokoya said that the Hennessey Whiskey brand has experienced a 12 percent growth in the Nigerian market year-on-year since 2011.
New entrants like Ashkok Capoor’s United Spirits Limited (USL), manufacturers of McDowell Scottish Whiskey said that they have already sold nearly half a million in one year.
The diary market had estimated revenue of $347 billion as at 2013. It has emerged the second largest in the food and beverage industry with a Compound annual growth rate of 8%. According to a report by Augusto & Co, a market research company, the milk segment constitutes 61 percent of the dairy industry turnover. The industry consists of six market segments – milk, yoghurt, cheese, ice cream, butter and infant formula. The industry is led by a few dominant players – FrieslandCampina, with a 30 percent market share, followed by Promisador Nigeria Limited, Nestle Nigeria Plc and PZ Nutricima. Other players are Fan Milk, Chi Limited, UAC, Viju Industries and Shagalinku, among others. The market leaders have extensive national distributorship and strong foreign partnership and product demand.
The companies in this sector import approximately 75 percent of the milk they use in production because local supply cannot meet demand. Estimated demand in 2013 stood at 1.7 million tonnes, of which local supply was just 591,470 tonnes, leaving 1.2 million tonnes to be imported.
Milk imported by the dairy industry are repackaged and sold or reconstituted into liquid and other forms such as yoghurt and ice cream. Because the industry is heavily import dependent, they face volatility in the global milk prices and are also exposed to exchange rate movements, which has been wreaking havoc on import dependent businesses in the country.
However, the industry’s growth prospects should remain strong due to strong demand for the products. Key drivers in this segment is the large population of Nigeria, which is dominated by youths and children (0 – 24 years), and make up about 63 percent by some estimates. Other drivers are rapid urbanization, growth of retail stores, westernization, the hot climate and availability of products in smaller packaging.