How Nigeria’s soft drink makers test their pricing and volume power
In a tough consumer economy, pricing and volume can become powerful marketing tools in the hands of Fast Moving Consumer Goods (FMCG) companies. Having spent the past few years cutting/increasing volumes and, in most cases, subtly increasing prices to deal with weak and fluctuating economy, players in Nigeria’s soft drinks market may not be resting on their oars any time soon.
The focus on volume and pricing became clear when the nation’s economy plunged into recession a few years ago. The talk was how price increase and grammage reduction were both necessary because of external factors, including forex restriction on many imported raw materials, a growing unemployment and consumers’ loss of purchasing power.
So far, the price hikes and reduction in grammages have been somewhat subtle and the effects for consumers would largely not have been harshly felt yet.
But FMCG firms’ commitment to pass on costs to consumers doesn’t seem to have abated and might have only assumed a change in strategy from companies, which were previously more concerned with retaining existing prices and elusively reducing volume to retain customer loyalty. However, passing costs to consumers because of the economic situation in the country is unfair and unjust.
The Head of Market Development, German Engineering Federation, Martina Claus, recently revealed that Nigeria ranked fourth globally in the volume of soft drinks sales recorded about three years ago. Claus spoke at the Third International Trade Exhibition on Agrofood, Plastics, Printing and Packaging, recently in Lagos.
She said that statistics on soft drinks sales were sourced from the Euromonitor International, a global market intelligence publisher. The market developer said the statistics showed that 38.68 million litres of soft drinks were sold in Nigeria in 2016.
This puts Nigeria behind only the United States (114.75), China (88.18) and Mexico (45.30) in the top markets’ ranking.
This also explains why the battle for market share in the segment, despite the country’s economic challenges, is intense. At the last count, there are more than 18 soft drinks brands in the market going after buyers’ consideration. For around 30 years, and before the passageway of different brands, Coca Cola, Fanta, Sprite made by Coca Cola Nigeria Limited, CCNL; Pepsi, SevenUp and Mirinda delivered by SevenUp Bottling Company, SBC Plc, and La Casera, made by La Casera Company Limited, overwhelmed the market.
Since the most recent five years, new players in the soft drinks sector have raised a basic test to the current market pioneers, apparently trying to upturn their authority. As of late, new soft drink brands such as Big Cola, created by Ajeast Nigeria Limited, a backup of AJE Group, a Peruvian soda maker and Bigi Cola, fabricated by Rite Foods Limited, entered the market to test the situation of the pioneers.
Carbonates are mainstream among all Nigerians, particularly the youth segment. Numerous Nigerians expend somewhere in the range of 2 and 8 bottles every day and stay ignorant of the well-being ramifications of their activities. Amid the survey time frame, filtered water was the most unique part regarding all out volume development, at a rate of 46%.
Any brand that controls the cost of the soft drink advert, without substantial decrease, would dependably have a more grounded hang on buyers and the capacity to initiate them to switch loyalty. Bigi Cola which is pressed in 500ml bottle, has four variations; Bigi Cola, Orange, Lemon-Lime and Apple. Bigi Cola is riding on evaluating, a similar methodology sent by Big Cola to infiltrate the soda pop market when it recently came. A container cost of PET bottle (50cl) of Bigi-Cola is N950, Pepsi-Cola moves for N1,050 and Coca Cola for N1150.
While the retail cost of a 50cl bottle of Bigi-Cola, Big Cola and Pepsi is N100, Coca-Cola moves for N120. Some famous brands, for example, Coca Cola and Pepsi are pioneers in the high-development showcase; others are predominant in the low-development advertisement. In spite of expanding rivalry, Coca Cola and Pepsi still hold firmly to their initial position in the soft drinks showcase, having effectively disregarded threats from competitors with a blend of item quality, tireless purchaser commitment and forceful promotion.
From every indication, Coca-Cola possesses the capacity to rise above all age gatherings. Moreover, Pepsi is slanting towards a similar market course by speaking to all demography and driving constant shopper commitment. Ajeast’s discoveries at various retail shops across Lagos, including Apapa, Ikeja, Oshodi, Gbagada and Agbara show that a few customers who have reinforced their dependability on Coke and Pepsi still have the appetite for different brands.
As one of the ‘4Ps’ of marketing (along with product, promotion and place), pricing is a key tool in a marketer’s arsenal, yet a double-edged sword, despite arguably being the most effective lever for driving profits. Brands often shy away from increasing prices within a competitive market so that customers don’t defect to cheaper brands and they lose volume sales and therefore market share.
Over the past couple of years, Nigerian FMCG firms have been combating lower demand and increased competition by reducing grammages and slightly increasing prices. Yet analysts believe they may overplay the impact of market forces on their brands if the consumers are squeezed too hard.
The choice by FMCG companies to raise prices now is purportedly due to circumstances, with rising commodity costs, inflation, proposed forex ban on certain consumer goods and foreign exchange rates all forcing their hand.
Meanwhile, with prevalent economic worries, Nigerian consumers are more careful with their spending. As pricing and volume strategies have diverged in recent times and the effect is fully felt in the market, marketing has become even more important to explain why consumers should part with their hard-earned cash.
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