In this interview with MARKETING EDGE, the Group Marketing Director, Jotna Nigeria Limited, a member of the Jotna Group and The LaCasera Company, Emmanuel Chukwuemeka Agu speaks on Nigeria’s beverage market, emphasizing on the Carbonated Soft Drinks segment and its dynamics.
How would you assess the entire soft drinks market in Nigeria’s FMCG segment?
The market is evolving. It is very dynamic with lots of changes happening here and there. It’s actually becoming very unpredictable because you don’t know what your competitors have up their sleeves. Currently, I think it’s one of the fiercest battle fields that you see in the FMCG space, with the big multinationals fighting with the insurgent brands that are making headways. A lot of flavours, brands, new introductions, new innovations and the rest are all happening in the same space, quite unlike what you would have seen in the last ten years. There are lots of flavours in the Carbonated Soft Drinks (CSD) market today; it’s more like the survival of the fittest.
The Nigeria beverage landscape consists of the CSDs, Lager, Malt, Stout, RTDs, Spirits, Energy drinks and bitters.
CSD still has a lion sharewithin the beverage industry and controls about one-third (32.1%) of the entire value of the FMCG, and there are quite a lot of options from different splinter manufacturers. The CSD, within the Non-alcoholic beverage segment, makes up approximately 47% as at full year 2019.
In summary, the CSD category continues to show growth prospects; the PET packaging mainly in Lagos and South West are expected to lead this growth particularly in the GSM (Groceries and Supermarkets).
Manufacturers continue to rely on price discounts (at the expense of profit margins) as the major volume growth mechanism.
How would you describe consumers’ response to FMCG market segment generally?
What you would see from the reports of the companies’ results is that basically the FMCG category in Nigeria is bleeding, and the result may not be unassociated with the economy’s performance. Those posting profits are indexing below gains from the last 3 to 4 years. So, the entire market, in terms of FMCG, is bleeding. Could we attribute that to the economy? May be yes; or could it be attributed to the ways of doing business in Nigeria, which can be linked to high operational costs?
Look at our low power generation and distribution network, poor road infrastructure, exchange rate fluctuations, high input costs, rising inflation and logistical challenges, all the indices that make manufacturing business successful in other parts of the world are lacking or not sufficiently harnessed in Nigeria. Consequently, we’re exposed to fiscal policies that have seen high levels of taxation from 5% VAT to 7.5%, currency (Naira) adjustment from N360=$1 to N380 =$1 and then in the beer sector the increase in excise tax that has impacted negatively on their profit margin. Again,talks on the proposed excise tax on CSD are ongoing, which might likely impact the industry negatively if the government does not sheath their sword. So, operating a manufacturing company in Nigeria is quite challenging.
LaCasera is no doubt an iconic brand in Nigeria’s market, a house hold name. Can you take us through the growth trajectory of the brand since its arrival?
Launched in 2001, LaCasera redefined the CSD marketing space in Nigeria by being the first carbonated soft drink to be in PET bottle. If you read a book called ‘Execution’ by Larry Bosidi, it explains that big multinationals will never innovate in the areas where they have comparative advantage over others and will not innovate against themselves. So, what LaCasera did was to innovate against big multinationals in Nigeria; against their comparative advantage. The comparative advantage of majority of big multinational CSD manufacturers in Nigeria was the returnable glass bottles, and if you look at the Porter’s 5 forces, that model that shows you how easy or difficult it is to get into a new business, you will see that RGB (returnable glass bottle), like we technically call it, was a major barrier in starting a CSD business in Nigeria, because it entailed significant capital outlay. For example, think about the production cost of glass bottles, the logistics, stocking, product distribution, as well as the hygiene (washing) and the cumbersome nature of dealing with rubber crates and bottles.
So, you will be outdone if you did not have the capacity and budget to invest in RGB, for you to get into the carbonated soft drinks business in Nigeria. That’s why you see that so many brands that came earlier into this market were eased off as glass capacity was amongst the major barrier to entry into the carbonated soft drinks business.
LaCasera took the advantage of being the first CSD in PET and drove massive growth for itself in the past 19 years. Since then, the brand has been in an upward trajectory.
How are your brands currently positioned in the market and how well are they performing among their peers?
Our brands are currently positioned as mass market brands in the Nigerian carbonated soft drink market. We are the king of the streets. We were born in the street, made in the street and made for the street. Apart from a few brands in the CSD market that you could actually tag as premium brands, the entire carbonated soft drinks market in Nigeria is basically mass market driven. Any brand that is trying to position itself as premium might just be doing so based on price and communication, but such price premium-ness has fast eroded with the advent of recession in Nigeria and multiples of different CSD flavours in the market. The Affordability game is now the new order where volume and considerable pricing (N100 magic price point) makes the world of difference. So far our brands have been doing great within the mass market territory where it is positioned.
What do you consider as a competitive advantage, what stands your products out amongst the host of other brands in this market?
I will start from PET (Polyethylene Terephthalate), even though we no longer have the sole monopoly of that innovation, because most CSDs are now in PET, it is no longer a competitive advantage. As confirmed by several taste tests conducted over the years, we are proud to say that we have the best apple flavoured CSD with LaCasera; we have the best tasting Chapman with Smoov Chapman drink; we have the best Lemon drink in Bold Bitter Lemon Extra. We have the best and the first Ginger CSD in Nigeria and our Orange, Tropical, Tonic and Soda water are arguably one of the best in their segment. Nirvana Premium Table water is the most sought after premium table water within the region where it is distributed.
From a production facility point of view, you would see our world-class production equipment with international endorsements and certifications from ISO 22000; FSSC 22000 & PAS 223. Our business operation is built on a fully integrated system of raw materials sourcing; packaging and beverage manufacturing that can compete globally and meet consumer interests sustainably. This business ecosystem is being coordinated by the JOTNA Group of which you have The LaCasera Company, Prima Corporation and Engee Pet manufacturing. Engee Pet produces the PET resinthat Prima Corporation uses to produce the preforms and caps; The La Casera Company then uses the preforms and caps to produce and package beverages in PET bottles. Prima also supplies preforms and caps to most manufacturing companies in Nigeria that deal in PET. All within the group, you can see that there is synergy and sustainability in the business model.
How has the market responded to these brands, particularly Smoov brand that came on much later into the market?
Smoov has exhibited an extraordinary performance in the marketplace. It has emerged as one of the leading CSD brands and a must stock for every home. The momentum of the Smoov brand is in the upward trajectory as we expand distribution and route to market. Check every hawker’s basket and you will see Smoov conspicuously displayed. It isthe undisputed best chapman drink in the Nigeria market today. The brand has grown in awareness, availability and visibility. It is within arm’s length as it has become the retail trade favourite Chapman drink. The sales volume has been in geometric progression and we are excited about it.
What are your projections for these brands? What plans do you have for them over the next one year?
I see them as category leaders in their different flavours, in the sense that when you come to ready-to-drink Chapman, Smoov will remain unbeatable. When you look at apple flavour, LaCasera would remain the king irrespective of the fact that we have other competitors. This is the only apple drink in Nigeria with 5% real apple juice concentrate validated by the regulatory body i.e. NAFDAC. That’s why I tell you that what we do is more like a lifestyle innovation. We don’t do innovation just for innovation sake. Market demand guides our strategies. With invaluable consumer insights, we help the consumers to answer the questions that they don’t even know how to ask. Look at our Bold Ginger; it is the first of its kind. Ginger is a spicy product known in every home as a healthy product. Bold Ginger CSD makes it even more accessible to many homes. Bold Tropical, Orange and Bitter Lemon Extra will perform excellently because of their unique taste which differentiates them from the lots we see in the market space.
How has competition responded to your innovations on these brands?
We haven’t seen any response from competition yet. I guess it is too early to judge what will be their response to our innovation, but what we see is the intensive and aggressive drive in various trade channels and other areas of marketing to ring-fence their brands from our innovation. We see massive trade loading and discounting which are all geared towards fighting for the dealer’s share of wallet. But we are not perturbed because we know we have good innovation brands that will on their own generate the right consumer pull that no dealer or retailer can afford to resist.
Let’s see the much you are doing with regards to brand building and marketing efforts around your products. What has it been like?
From the launch date till now, we have focused our efforts on driving massive awareness for the innovation brands both above the line (ATL) and below the line (BTL). We have been involved with our partner agencies in driving massive sampling across different cities in Nigeria and will not relent in our brand building efforts until we establish the new brands.
Our idea is to continue to support the new brands alongside other brands with strong marketing and sales efforts. We will follow through with our winning brand strategy and tweak where necessary but be rest assured we have lots of work to do.
Innovation is expensive, but managing existing brands is also not cheap. So it calls for concerted efforts and resources to strike the right balance.
What are the consumers to expect from the house of LaCasera for its various brands going forth in the New Year?
They should expect more because we are in a dynamic market where things change sporadically. We will be as fluid as ever in order to remain relevant and competitive. We have our plans well thought through and will respond to the needs of our consumers at the appropriate time. I am sure the market was not expecting us to come up with four different flavours at a go, but hey, it just happened. That explains how audacious we can be, so expect more from us.
What impact has the general economic situation in the country had on you as a company and then on your products and brands?
Well, we are not immune to the current economic realities in Nigeria. However, the way our business is structured in terms of backward integration always provides us with some level of resilience and sustainability against the tough economic landscape. If we are able to weather the impact of the 2016 recession, this one will also come to pass. It all comes to how effective our strategies are and how disciplined we are with our execution in the marketplace.
Where did you meet LaCasera and where do you want to take it to?
I met great brands in The LaCasera Company and would want to take them to greater heights.It is my responsibility and that of my team to nurture and build these brands into iconic brands, thereby making them category leaders in their different flavour groups. The launch of the new innovation is in line with our portfolio expansion plan. These we have done in order to reposition and restore the company as a dominant player in the CSD space.