The diverse nature of the Nigerian market makes its potential for profit very high and attractive. However, the perennial economic instability of the African largest economy, in many ways, affects the purchasing power of the largest chunk of the population.
In November 2022, the National Bureau of Statistics (NBS), in its first poverty index survey published since 2010, stated that 133 million Nigerians were living in multidimensional poverty. Considering the extent to which the naira has lost its value currently, it is estimated that less than 20 million Nigerians have a decent income, which is shouldering the burden of more than 200 million people through taxes.
Also, the latest Nigeria’s annual inflation rate rose to 29.90 per cent in January 2024, from 28.92 per cent in December 2023, according to NBS. The report stated that food inflation ballooned to 35.41 per cent as the naira exchanged at N1,534.39 to a dollar at the official market segment within the same period.
Given the foregoing depressing report and statistics for Nigerians, the end result is a huge depletion of their purchasing power and ultimately, less money in their accounts.
To remain in business, and maintain a relatively healthy bottom line while cushioning the effect of hyperinflation on consumers, players in the consumer goods sector of the economy have to increase market penetration for their products by making them available in smaller, more affordable packs. This tool for penetrating the market at the bottom of the economic pyramid has been adopted by even the market leaders such as FrieslandCampina WAMCO, Unilever Nigeria, and Procter & Gamble among many others across all sectors of the economy, including the government.
Sachet marketing has been around in Nigeria for decades and is prevalent in other emerging markets like The Philippines and India.
Known to have started in the country in the 1990s with the production of smaller sachets of drinking water (pure water) and Cowbell powdered milk from the stable of Promasidor Nigeria, the revolutionary innovation penetrated the larger low-or-no-income segment of the population. According to a recent NAFDAC report, about 167 million sachets of water are consumed in Nigeria daily.
Between 2015 and 2019, Nigeria slipped into recession twice as the naira plummeted against the dollar, losing 70 percent of its value. But, the prevailing circumstances that have put Nigeria's economy in a chokehold before and after the 2023 general elections, creating an atmosphere of dystopia, calls for urgent and strategic solutions.
In February 2019, Eat’n’Go, the Nigerian franchisee of popular pizza maker Domino’s, introduced a miniature version of the pizza boxes to the market for 550 naira ($1.50) at the time. Smaller in size and far cheaper than the medium-sized pizza which cost N3,900 ($9) at the time, the new version was designed to be affordable for everyone.
What's more, in 2017, StarTimes, a Chinese satellite TV provider with a strong presence in Nigeria, added daily and weekly subscriptions – with fewer channels – at N60 (15 cents) and N300 (72 cents) respectively, to its existing monthly option.
As purchasing power persistently declines in Nigeria as a result of rising inflation, more companies in various sectors of the economy have turned to sachetisation, even service providers that previously served only the upper and middle classes.
However, recently, the National Agency for Food and Drug Administration and Control (NAFDAC) began to seal alcoholic beverage-producing factories in Nigeria across various states and cities, for defying its ban on the production of alcoholic beverages in small pack volumes of 200ml and sachets. The regulatory agency also claimed that the sealed factories did not comply with good manufacturing practices and have been operating without NAFDAC certification.
According to NAFDAC, the Agency in January 2022 stopped the registration of alcoholic beverages in sachet and small volume PET and glass bottles below 200ml, giving room to a gradual phase-out period to allow producers to comply with the new regulation.
Meanwhile, the ban and its attendant enforcement have been met with stiff resistance as the distillers under the aegis of the National Union of Food Beverage and Tobacco Employees (NUFBTE) took to the streets of Lagos recently, vigorously opposing it. The protesters alleged that the ban, if fully implemented, would send over 500,000 breadwinners out of jobs and into the oversaturated Nigerian labour market.
Also voicing its objection to the ban, the Manufacturers Association of Nigeria (MAN), stated that the reasons NAFDAC alluded for the ban were not backed by empirical evidence.
In a statement, Segun Ajayi-Kadir, Director General of MAN, explained that the ban aligns with an agreement reached by a tripartite committee established in 2018 by the Federal Ministry of Health to halt the production of alcohol in sachets and PET bottles of less than 200ml, effective Jan. 31, 2024.
However, he noted that when NAFDAC initially proposed the ban, critical stakeholders, including key members of the Distillers and Blenders Association of Nigeria (DIBAN), expressed reservations in a letter dated Nov. 6, 2018.
Calling for effective regulation, the MAN boss highlighted the importance of government efforts and assistance, while advocating for increased activities and support in the form of access control and stricter regulations. He insisted that a total ban in sachet marketing would be counterproductive in that sector.
He instead proffered measures that could include the establishment of licensed liquor stores or outlets by local government councils nationwide.
While community engagement and awareness among producers, vendors and consumers about alcohol in sachets and its health and legal implications are paramount, NAFDAC must find a way to not throw away the baby with the bath water.
In conclusion, NAFDAC should be reminded that even the Nigerian government seemed to understand the sachet marketing strategy, too, when it launched a micro-pension scheme in 2019. So far, the scheme has expanded the country’s contributory pension plan to allow individuals in the informal and semi-formal sectors to create accounts without a plan sponsor, typically their employer, and save small amounts over a long period.