ON THIS P&G EXIT FROM NIGERIA

This P&G issue has been a subject of discourse amongst marketing colleagues since the news broke.

There are many angles to look at the challenges.
One of it is the Nigerian economy, whose per capita income has been on a decline since 2016.

When per capita income declines, it is a sign that the average wealth of the individuals in the country is reducing.

We must also remember that Nigeria has been having a double-digit inflation since 2016, which means the purchasing power of the people is reducing.No doubt, these are macro-environmental factors that affect every organization irrespective of size or origin. By origin, I mean local or multinational.

My analysis of the P&G exit will be from the micro- enviromental point of view.

The challenge with P&G started pre-2013, and as at this time, consumers were complaining about the quality of their diapers. It was not meeting the desired standard of consumers.

As at this time, consumers were always looking for the Turkish brand [Pampers produced in Turkey] as it was of a higher quality than the ones produced in Nigeria.When a product is no longer meeting the expectations of the consumers, the consumers begin to look for alternatives.

As at 2016, P&G was holding some 76% of the diaper market while a Turkish company called Hayat Kimya was holding 4% of the market.

Hayat Kimya came into Nigeria and got the price point right.As of this period, was in her season of recession, and inflation has eroded the purchasing power. Hayat Kimya [makers of Molfix] offered consumers diapers of better quality and at a competitive price. That was how the company started to eat into the market share of Pampers.

You see, a lot of companies had problems getting the price point right, especially when Nigerians started having affordability issues due to macro-environmental factors.

This was also what Bigi Cola [a local company] did when they struck and dealt with Coke. Bigi Cola [a local company] came in 2016, Big Cola [a Peruvian company] came in 2015, RC Cola [an American company] came in 2018.

Many more bottling companies have come into Nigeria since that time, including Pop Cola in Kano.Now, for those who understand marketing, you have what you call the 4P’s of marketing.

You have the product, the price, the place, and the promotion.

P&G failed in two or three out of these four.

Their product was having a problem. That was the quality issue.The price was becoming unaffordable for Nigerians, as the price point was high.
Now, their distribution also was having problem because, in the whole of Nigeria, they had very limited distributors.

They were using the mega distributor model.What did Hayat Kimya do? I mean, Molfix, for those who may not know the company, but know the name of the brand.

Molfix came in with a lower price. They came in with a product better than Pampers. They got distributors in every city.

Regarding distribution, they beat Pampers to it.

And it was with these that they dealt with Pampers. By 2020, Pampers had crashed from 76% of the market share to 30% of the market share, while Molfix moved from 4% to 60% of the market within those four years.

Somebody is asking, why was quality an issue for P&G? The quality issue is also a function of the cost of production. If you have a margin you are targeting and you are unable to increase your price because of competitors, you have to find a way to reduce your production cost

Reviewing your quality of raw materials may be one of the ways to go about reducing production costs. Many of the multinational have expatriates that they pay in dollars. They stay in Banana Island and Ikoyi. They also pay royalty to their headquarters. All these are paid in $$$.

Now, the moment they are unable to meet this high cost of production, they begin to look towards the reduction of quality. That was one of the places P&G started having problems with consumers. For your information, Molfix has been pushed to No.3 in the diaper market.

The entrance of new players pushed Molfix to number three. These new players have factories set up in Nigeria.

This was the same principle that AB InBev used to push Guinness to No. 3 in Nigeria. ABInBev is now strong No. 2 after Heineken [Nigerian Breweries].

The above buttresses the fact that you must get your pricing right in a country where a lot of people can not afford these goods. The last market share analysis I saw, ABInBev was close to Nigerian Breweries.
Guinness was strong No. 2 before the entrance of ABInBev in the market.

AB InBev was able to use penetration strategy, and it worked because consumer purchasing power is declining.

They were the ones in charge of Trophy in the South West of Nigeria and Hero in the Eastern part of Nigeria. So these are the issues.

When companies are unable to bring down the prices of their product as a way of adapting to changes in the micro and macro environment, their market share are taken over by new entrants who are ready to adapt.

If Coke hadn’t brought down the price of their PET bottle to N100 from N150 in Q4 2019, Bigi Cola would have eaten further into their market share.

Between 2016 and 2019, Bigi Cola took almost 20% from Coke and Pepsi, but Coke suffered more.

Like I have said in my other write ups, there are two people you must give focus to when you want to succeed in any market.

The consumers and the competitors.

• You must watch the actions and inactions of your competitors.

• You must watch the behaviour of your consumers.

• You must also watch their preferences, their choices, and their ability to purchase your products.

When consumers are unable to buy your products again because of your price point, your company is going down.

On the other hand, if you are unable to maintain a price point that will make you competitive because of your huge operating cost, then you are screwed. This is one of the reasons companies must look into cost leadership strategy and work on lean production.

So the above points are reasons these companies are having these problems.

Then, you now add to it the cost of raw materials as a result of high FX rate because many of these companies import their raw materials. It is indeed a tough time for companies in Nigeria.

The experience with these companies currently is such that consumers are even rejecting their products because of the high prices.

For instance, in the last three years, the milk market [dairy market], and the vegetable oil market have been on a decline.

That shows to us that the number of people buying milk and vegetable may have reduced or the volume each family is buying has reduced.

The same thing goes for some other products which I will leave out of this thread.

What then is the solution?

Our economy needs to expand. Affordability of people needs to go up. This will give opportunities to these organizations to be able to sell their product and make more profit. More companies will see the Nigerian market potential and come in.