Declining Biscuit Demand in Nigeria: Economic Pressures and Industry Challenges
Nigeria’s biscuit industry has experienced a sharp sales decline due to inflation and reduced consumer spending. The demand for biscuits has reportedly fallen to less than five percent, leading to factory shutdowns. Competition from imported biscuits has intensified, further challenging local producers.
Nigeria’s biscuit manufacturers are experiencing a significant decline in sales, attributed to inflationary pressures, shrinking consumer wallets, and factory shutdowns. A 2017 KPMG report had previously valued the biscuit industry at N121 billion, estimating an annual output of 152,490 tons with growth rates of 16 percent over five years. However, current industry estimates suggest that biscuit demand has plummeted to less than five percent as consumers prioritize essential needs like food, clothing, and shelter.
Akin Akintayo, the chairman of the Biscuit and Bakery Group of the Manufacturers Association of Nigeria (MAN), highlighted that average- and low-income earners, the primary consumer base, are purchasing fewer biscuits. The report indicated that some producers have been forced to cease operations due to this ongoing decline in sales. Inflation has exacerbated the situation, compelling households to focus their spending on necessities rather than discretionary items like biscuits.
A KPMG report from 2017 estimated the broader Nigerian biscuit and bread market combined at N243 billion, with the biscuit segment alone being N121 billion. The bread segment accounted for N122.1 billion, reflecting its dominance by artisanal and smaller regional producers. The biscuit market was previously led by companies such as Yale Foods and OK Foods, but dynamics have shifted with Beloxxi expanding and Deli Foods facing operational difficulties.
An alarming trend of deteriorating economic conditions is evident from the rise in unpaid inventory in manufacturing, which increased by 12.9 percent within the first half of 2024. The president of MAN, Francis Meshioye, associates this increase with declining consumer purchasing power due to stagnating incomes amidst rising prices. Operating margins in biscuit manufacturing remain narrow due to the price-sensitive nature of consumer demand.
Data from Volza reveals that Nigeria imported 8,984 shipments of biscuits between March 2023 and February 2024, primarily from India, China, and the UK, reflecting a dramatic increase of 205 percent in imports. In February 2024 alone, there was a 56 percent increase in shipments compared to February 2023. This competition from imported products places additional pressure on local manufacturers.
Fola Osibo, a former chairman of the Biscuit and Bakery Group, pointed out the numerous challenges local producers face, such as high raw material costs and unfair competition from foreign biscuits. Muda Yusuf, director of the Centre for the Promotion of Private Enterprise, echoed this sentiment, noting that many local biscuit manufacturers are suffering, as macroeconomic constraints hamper profitability and capacity.
The Nigerian biscuit industry is facing a critical downturn as consumer spending diminishes in the face of inflation and stagnant incomes. Local manufacturers are struggling to compete against a flood of imported biscuits, which has forced some to halt operations. As consumer priorities shift towards essential needs, the biscuit industry’s future remains precarious without effective interventions to bolster local production and stabilize the economic environment.
Original Source: businessday.ng
