Building Retail Market That Works for Nigerians

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Raheem Akingbolu writes on how local investors are moving towards filling the gap in the formal retail market sector of the economy, which used to be dominated by foreign brands.

These are interesting times for Nigeria’s formal retail sector. While the national economy is being buffeted by the global recession, slump in oil price, inflation and the COVID-19 pandemic, it appears that the formal retail space is bucking the trend. Even while global retail giants, many of whom were applauded as the force behind the sector’s rebirth in the 2000s, are exiting the country, a renaissance of sorts is taking place, mostly led by indigenous brands.

From Lagos to Abuja, Port-Harcourt to Ibadan and other major cities of the country, local players like FoodCo, Justrite, Ebeano, Jendol , H-Medix and NEXT appear to be raising the bar by adapting same global best practice to explore the Nigeria’s market. Though, none of them have gotten the national spread like Shoprite, the steady manner they are moving is enough to convince analysts that they would soon cover most of the major cities. For instance, one of the most visible players driving the new wave in the South West is FoodCo Nigeria Limited, while NEXT and H-Medix are leading the pack in Abuja.

For FoodCo, it’s a story of a wholly Nigerian brand that started humbly in Ibadan but has now assumed a position of its own. The 39-year-old diversified consumer goods company and operators of the largest supermarket chain brand in south-West Nigeria, outside Lagos is today one of the most vibrant brand in the sector. The company’s origins as a small fruits and vegetables corner shop in Bodija, Ibadan, financed from the proceeds of wedding gifts given to the founder, Sola Sun-Basorun, bears testament to the company’s vision and ambition. Its growth has mainly pivoted from a legacy of offering top quality products at affordable prices.

Accordingly, when the company recently announced the launch of its latest outlet in Abeokuta, the ancient capital city of Ogun State, it was an excited crowd of shoppers and well-wishers that greeted the news. The new outlet, FoodCo’s 14th and 1st in the state, bears the typical brand signature: a one-stop shop where people can shop at the supermarket, eat at the restaurant and play at the entertainment centre.

The brand’s focused pursuit of its expansion agenda, despite the instability in the ecosystem, has seen it double its footprints within the last five years. In the last two years, a period defined by the pandemic-era lockdowns and social distancing stipulations, the supermarket brand has opened five outlets spread across Ibadan, Lekki and, more recently, Abeokuta.
Managing Director of the company, Ade Sun-Basorun, told THISDAY in an interview that they are a wholly indigenous brand and have built enduring relationships in their almost four years of existence. Consequently, he pointed out that they cannot just pack up and leave, dashing the trust of a large and loyal customer base that have come to depend on the brand for their everyday essentials and hangouts.

In Ibadan, FoodCo is a household name, having served at least three generations of the city’s middle-class from grandparents, to parents and now their children.
When Sun-Basorun resumed as then Executive Director in 2017, it was clear that he had his sights set beyond Ibadan.
Today, as CEO, he and a young team of like-minded executives are taking the company through the most ambitious phase of its existence yet.

“Our aspiration is to continue to serve more and more customers across the South West. The first thing for us is the philosophy and belief that we have the responsibility to deliver quality service and affordability to our customers. That mindset drives us to prioritize the delivery of value, in many cases over profitability, and it also drives us to make a number of strategic decisions as to how we structure the business,” he said during the Abeokuta launch.

The company is also leveraging innovation and technology to deepen formal retail penetration in Nigeria. Currently, FoodCo is only one of two multi-channel retailers in the country. Last year, the company launched its online supermarket which Sun-Basorun touts as Nigeria’s first. “The concept of a virtual supermarket is not one that has really caught on in the country. Customers usually have a limited experience when shopping online for groceries and other household essentials because the range of products and the scope of services are usually limited compared to when one walks into the shop floor. What we have done is to create a seamless experience that is comparable to the in-shop experience in terms of scope, range and quality of products available as well as the price point,” he says. The online supermarket is complemented by a WhatsApp ordering and delivery service.

Another notable area the company has made significant changes is in the modeling of its outlets. Early brand stores employed a co-location model comprising a supermarket, restaurant and entertainment centre in one location. Lately, the brand has added a convenience store model tagged Quick Shop, which allows customers to shop quality groceries, toiletries and household essentials within their neighbourhoods. “It makes sense to adopt the convenience store style model where customers can easily access formal retail services on-demand in their neighbourhoods. However, our investments in the co-location model will still continue. We want to be as strategic as possible in order to give our customers viable options to enable to them get the best value out of their retail experience,” he explained.

Notwithstanding the changing dynamics, Nigeria’s formal retail sector is sub-scale at five percent penetration. For a population of about 200 million people, the biggest retailers boast an average of fourteen stores each. In Kenya and South Africa with a fraction of the population, the top retailers have about seventy and two thousand hypermarkets respectively.

Still, Sun-Basorun is optimistic about the future of organised retail in Nigeria. According to him, the population, particularly the burgeoning middle class, as well as vast untapped opportunities are reasons to believe that the future is bright. “When you compare the scale of the retail sector in Nigeria versus what obtains in some other countries, quite granted it is under-optimized.

That said, there are tons of opportunities that operators can latch on to. As you can see with the enthusiasm of customers on the shop floor today, there is a growing and sophisticated consumer class that are desirous of the value and convenience that only formal retail can bring. That is where the opportunity is and we feel a responsibility to do our part as an industry stakeholder to continue to serve consumers and give them the sort of experience that they crave,” he explained.

The company is also actively building towards that future with significant investments in capacity building and infrastructure for the sector. In 2018, it established FoodCo Fellowship, a management training program aimed at nurturing leadership cadre talent for the Nigerian retail sector. Sun-Basorunsaid at the time: “a major challenge in the industry is the clear dearth of specialist talent. For the industry to scale, stakeholders must make deliberate and industry-wide interventions towards building a workforce that see a future in retail and are motivated enough to drive the growth potentials of the sector.” The Fellowship currently attracts MBAs and post-graduate students from top business schools in the country.

FoodCo is also partnering with local manufacturers, SMEs and entrepreneurs to provide them with access to market and technical training support in order to boost their production and enhance the quality of their products. This, it believes, is a more sustainable way to boost local supply and promote stability in the Nigerian market.

As indigenous operators continue to gain ascendancy, the expectation is that they will demonstrate a higher burden of responsibility to develop the many opportunities within the local market and build a sustainable retail economy that’s here for Nigerians.