By Emma Okonji
Given the general belief that the business of fast moving consumer goods (FMCG) does not hold huge margins that will see traders become mega-millionaires, especially when compared to other attractive sectors such as technology, telecoms, banking, a Lagos-based brand expert, Mr. Joseph Okoghenun, has identifies factors that would grow the market.
He cited the factors to include: improved education standard; stronger mobile and internet penetration; a young and growing population and increasing urbanisation.
According to him, the FMCG market in Nigeria remained part of the growing commercial innovations of the last 20 years, explaining that the growth had not been exponential as a result of the market challenges such as the mundane and unstructured business process in the past.
He is, however, of the view that the growing middle class, possessing greater spending power, will spend more on FMCG items to further grow the market.
He further explained that the distribution landscape has changed over time from the largely mundane and unstructured business to a fairly structured modern business and processes, with more educated individuals driving an influx into the sub-sector and their coming has digitalised the processes.
“Generally, FMCG products have lower profit margins. The sub-sector is driven by scale and volume to drive profitability, which in turn depends on the purchasing power of the right segment of the population. But the prevailing mindset was the ubiquitous presence of kiosks peddling FMCG products at virtually every street corner. The products are often referred to as ‘provisions’, further lending a sense of a pedestrian business,” Okoghenun said.
He listed some of the challenges of FMCG business to include: high competition that has further driven margins low; unstructured and mundane business as perceived by the younger generation; growing interests to maximise profit by manufacturers, much more than growing the brand; issues with credit control; high logistics costs and high rate of returns for rejects and damage; lack of continuity and succession planning leading to early exit or demise for the venture; and belief of younger generation who see FMCG space as hectic, unattractive and not futuristic, among others.
But looking at the impact of technology skills and technology tools on FMCG business, Okoghenun said current trends in the country, showed that a new set of companies had redefined FMCG mega-distribution by digitalising the process using current technology and up-scale professionals who are experts in their field.
The current trend is to subdivide the mega-distribution into modern trade, neighborhood and open market distribution.
According to him, structured invoicing, inventory and vehicle tracking have been employed by some of these modern FMCG key distributors to monitor tracking and delivery. Educated drivers and warehouse managers have also been deployed to improve the supply chain process.
“A very good example of this is the landmark strides being recorded by a foremost FMCG distribution company headquartered in Lagos. TDiLife has achieved a remarkable measure of growth over the last 18 months by redefining the scope and nature of FMCG distribution in Nigeria and ultimately Africa, by deploying technology and creating an efficient supply chain and adding value to the entire business processes of the sub-sector,” Okoghenun said.
He added that social media strategies and techniques have become a core part of the marketing mix to reach out to a wider and younger consumer market who can now shop online for their daily needs.
“To this effect, e-commerce companies are now creating pages for these daily needs and driving them online. Insights from the e-commerce space further reveals that one of such online stores with its dedicated page – iGroceries –has recorded huge patronage on Konga and Jumia over the past few months since it was set up,” Okoghenun added.