Boston, MA -- (SBWIRE) -- 05/15/2013 -- Our outlook on Nigeria's food and drink sector remains bright due to the tremendous untapped potential of this emerging market, despite a slowdown in the local economy. Nigerian growth in 2013 will continue to be constrained by the headwinds that characterised much of 2012, including security concerns and the lingering effects of widespread flooding. The economy is still performing well below capacity due to the flooding, which has submerged thousands of acres of farmland and displaced millions of people; oil theft which has damaged pipelines and constrained production; and ongoing violence, particularly in the northern states where militant organisations such as Boko Haram have disrupted economic activity. Nevertheless, the economy will still grow rapidly by global standards, at a forecast 6.8% in 2013. The longterm potential of the Nigerian consumer market is so great that with the help of international industry majors such as Nestle and Unilever, who are already present and developing the market, the long-term potential is huge.

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Headline Industry Forecasts

- Per capita food consumption (local currency) 2013 = +8.51%; five-year compound annual growth rate to 2017 = +8.53%
- Beer volume sales 2013 = +7.69%; five-year compound annual growth rate to 2017 = +8.22%
- Mass grocery retail sales (local currency) 2013 = +31.20%; five-year compound annual growth to 2017 = +36.11%

Key Industry Trends & Developments

Nestle Looking To Triple Sales: In early 2013, Nestle Nigeria announced its plans to triple its annual sales to more than US$2bn within the next decade. Nestle registered a 38% year-on-year (y-o-y) increase in pretax profit for 2012 (year to December), with gross revenue from the previous year up 19% y-o-y to NGN117bn (US$743.3mn). The company plans to invest NGN100bn in order to meet this goal, and in February commissioned a NGN5.4bn distribution centre in the country's southwest in order to strengthen its manufacturing operations and increase volume sales.

Beer Sales Take A Hit: In February 2013, Nigerian Breweries, the country's biggest brewer by market value, reported that full-year profits for 2012 were stagnant, with net income for the 12 months ending December was NGN38.1bn (US$241mn), compared with NGN38bn a year earlier. Sales were up 20% to NGN252.7bn, but the cost of sales rose by 26% over the same period. The drop in profitability was attributed to an aggressive expansion plan that led to increased costs. Also in February, Diageo-owned Guinness Nigeria posted a 16% y-o-y decline in first-half profits, as inflation hit raw material costs and put a dent in consumer spending, resulting in a significant slowdown in volume sales.

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