Nigerian biscuit makers report decreased sales due to shrinking consumer wallets and inflation. The KPMG report from 2017 estimated biscuit industry value at N121 billion, but demand has dropped to less than five percent as consumers prioritize essentials. Many manufacturers are ceasing operations amid rising imports and operational challenges.
In Nigeria, biscuit manufacturers are reporting a notable decline in sales, largely attributed to diminished consumer spending capacity, inflation, and factory closures. A KPMG report from 2017 estimated the biscuit industry to be worth N121 billion, with an annual output of 152,490 tons and a compound annual growth rate (CAGR) of 16 percent. However, the current demand for biscuits has plummeted from an estimated 15-20 percent in 2017 to less than five percent due to financial constraints faced by consumers, who are prioritizing essentials such as food, clothing, and shelter.
Akin Akintayo, chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), emphasized that the reduced purchasing habits of average and low-income earners are significantly impacting the biscuit market. Consequently, numerous biscuit manufacturers have reported operational shutdowns owing to declining sales, with inflation further exacerbating the situation. Households with stagnant incomes are now focusing exclusively on essential goods, leading to an evident drop in biscuit consumption.
The KPMG report further assessed the Nigerian biscuit and bread market, valuing it at N243 billion in 2017, with bread making up N122.1 billion or 80 percent of the sector. The bread segment shows a robust CAGR of 14 percent with an annual production capacity of 554,270 tons. The biscuit sector, once dominated by major firms like Yale Foods and OK Foods, is witnessing changes as local manufacturers struggle against increased imports which have risen significantly in recent periods.
The impact of rising inflation on consumer purchasing power has been profound. With a minimum wage of N70,000 (approximately $50) per month, many Nigerians have adopted stricter spending habits. The Manufacturers Association of Nigeria revealed that unsold inventory within the manufacturing sector surged by 12.9 percent in the first half of 2024, reflecting dwindling demand. Increased inventory levels directly stem from declining consumers’ real household incomes, which complicate manufacturing operations and profitability in the biscuit industry.
Recent import data from Volza indicates that Nigeria significantly increased its biscuit imports, with thousands of shipments arriving from countries such as India and China. Over one year, biscuit shipments increased by 205 percent, as local production faced pressure from cheaper foreign competitors. Despite the large Nigerian market for biscuits, local manufacturers are finding it increasingly difficult to sustain their operations under these challenging conditions.
Former MAN chairman Fola Osibo stated that the biscuit sector is encountering severe challenges that threaten its viability. Issues such as escalating raw material costs, unfair foreign competition, and restrictive policies have led to several manufacturers ceasing operations altogether. Muda Yusuf of the Centre for the Promotion of Private Enterprise highlighted low production performance in the industry, driven by macroeconomic obstacles, including Forex issues and high-interest rates. In 2023, Mayor Biscuits Company Limited decided to shutter its biscuit production to pivot towards a more viable business line.
The Nigerian biscuit industry is currently facing a significant downturn, largely due to the impacts of inflation and decreased consumer spending. The shift in consumer priorities towards essential goods has led to a drop in biscuit demand, now at less than five percent. With rising imports and operational challenges, many local manufacturers are struggling to survive in this volatile market, resulting in factory closures and job losses. The industry’s future hinges on addressing the economic challenges that inhibit consumer purchasing power and negatively impact domestic production.
Original Source: businessday.ng
