Kelloggs announced last week it's plans for a $450 million joint venture with Toleram Group, Distributors of Indomie Noodles in Nigeria. It wants to develop breakfast foods and snacks for the West African market with a focus on Africa. Kelloggs said that rather than increase it's cereal offering, it would push lower end products to consumers in open air markets in Nigeria such as Lagos. This actually make sense as the Toleram Group is equipped with a strong distribution network of 450,000 touch points.
Nestle Foods on the other hand recently admitted it over estimated the size of Africa's growing middle class and started to cut jobs. However, McKinney estimates that Nigerian households with income of more than $5,000 a year will increase from 20 percent of the population to 27 percent by 2020- putting them within the target customer base of formal retail chains. "The size of the economy, it's growth rate and changing demography were the reason Nigeria was the right first move and we found a suitable partner the company said. A report by the International Finance Corporation (IFC) says close to 13 million Nigerians who live on between $1 and $2 a day are used to a traditional meal of powdered milk and bread or fried dough and eggs. A box of kelloggs Special K cereal cost $5.50 in a country where the minimum wage of government was increased to $90 monthly." Fast moving consumer products and impulse purchases sold for between 5 and 25 cents are the biggest opportunity". according to Renaissance Capital frontier consumer markets analyst Omar Ansar .
“Now, with the Nigerian economy under strain, single-use small packets
of snacks like biscuits and fruit juice boxes are the best bet as long
as the cost of packaging is not passed on to the consumer,” said Ahmed
Maswood, Vice-President of Godrej, the Indian company which sells a
range of beauty products in Nigeria.
Partnering with a strong, local distribution partner and adapting
products to suit its target market, Kellogg’s may be able to avoid the
mis-steps that Nestlé made on the continent by focusing on the elite
minority rather than the everyday majority.
That has been Unilever’s strategy in the country where it has created
several brands of varying affordability, including a low-cost margarine
that does not require refrigeration. The Anglo-Dutch group recently
offered to increase its equity stake from 50 per cent to 75 per cent in
its separately listed subsidiary Unilever Nigeria to capitalise on
expected growth in the country. The deal is pending regulatory approval. Diageo and Unilever have increased their appetite for investment in Nigeria recently despite the "economic woes".
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