Applying Indian FMCG Lessons in Nigeria

Sunil Kumar Singh, PGP 2009-11, Indian Institute of Management Bangalore

Introduction

Indian market, especially the rural market has presented many challenges to firms trying to make inroads
there. Besides systemic deficiencies, issues like scattered populace, cultural differences further
compounded the challenges. At a time when the potential of rural markets are the cornerstone of all major
firms, it makes sense to take stalk of how these firms have overcome some of these hurdles in the past.
While doing such evaluation, it makes sense to check universal applicability of these lessons. To explore
this theme, we turn to Nigeria for such an evaluation.
A recent Citigroup report pips Nigeria to become world’s sixth largest economy by 2050, in PPP terms. It is
expected to reach a GDP of $9.51 trillion. The main reasons cited for this bullish expectation are
improvement in policy environment, better governance and prudent management of oil revenues1.
Nigeria is poised to grow at a CAGR of 6.9% for the next 40 years, one of the highest rates of growth,
surpassing even India and China. This makes it a very lucrative investment destination. The increase in
disposable income makes it especially attractive for FMCG firms, as brand proliferation and product depth
can be increased in such an economy. Also, Nigerians are a brand loyal consumer segment which translates
to better return on corporate spending on products and marketing efforts, provided these efforts are
geared towards meeting the needs of the market. At present though, the country still has a long way to go
forward especially in terms of infrastructure development. Though FMCG firms are present in Nigeria, their
reach and product portfolio is still not adequate.
FMCG firms in India had faced similar situations in India before. Instead of letting go, they devised
innovation strategies on all fronts. Creation of sachets for greater affordability to devising new cost
effective promotion strategies; by innovating at all parts of the value chain , Indian FMCG firms overcame
these hurdles and posted a robust year-on-year growth.
In this paper, we try to apply the lessons learnt from the Indian FMCG firms to Nigeria. To set the context,
we first do a comparative study of India and Nigeria on the macroeconomic parameters. The next step is
identifying these innovations in the Indian context itself. Three distinct features are studied: How to enter
a highly competitive space, Innovative Promotion strategies and Innovative Product Strategies. Each
concept’s applicability to Nigeria is then evaluated.

Nigeria: An Introduction

Nigeria is the most populous country in Africa, with a population of more than 150 million (as of year
2010). It is also one of the largest oil producing countries of the world. Though Nigeria became a free
nation in 1960, democracy has embarked in Nigeria only since 2003 being ruled mostly by military rulers. It
maintains a status of federal republic. Government is marred by prevalent corruption and low

1
http://www.rediff.com/business/slide-show/slide-show-1-budget-2011-why-india-will-be-the-number-1-economy-in-the-
world-by-2050/20110224.htm
This paper is based on an academic term paper “Applying Indian FMCG Lessons in Nigeria” written by Rahul
Pramanick , Marianna Laensitalo, Sawan Kumar, Sumit Kumar and Sunil Kumar Singh (for the course Engaging
with Africa) under the guidance of Prof. Hema Swaminathan

Applying Indian FMCG Lessons in Nigeria Page 1

effectiveness. Transparency International ranks Nigeria as one of the most corrupt nations in the world
(142nd out of 163).

Political
• Nascent democracy, since 2003
• Federal republic – President both head of state
& government
• 36 states dived into 774 LGAs
• High level of corruption, government
effectiveness is low
Social
• 3 major groups – Muslims (50%), Christians
(40%), Indigenous tribe (10%);
• Religious tension between the Muslims & the
Christians
• People love watching movies (Nollywood
makes the 2nd largest number of movies after
Bollywood)

Nigeria

Economic
• High economic growth rate, but highly volatile
due to dependence on commodities
• High unemployment & inflation rates
• Interest rates are very high – affects businesses
adversely
• Imports most of its food items, so high world
food prices affect the economy
• 55% of population live under a $1 a day
Technological
• Spends 0.05 - 0.1% of GDP on R&D per year
• 60 Universities and colleges
• Internet penetration is low (less than 10%), but
increasing rapidly
• Government is encouraging R&D and has
increased its focus towards scientific
innovations

Figure 1: Nigeria - PEST Analysis

As a country, Nigeria is very diverse with many ethnicities (>250) and languages. Nigeria is dominated
Muslims, Christians and indigenous tribes. Religious tension between Muslim dominated northern Nigeria
and Christian dominated southern Nigeria is not very uncommon. Every few km, ethnicity and language
change. Nigerians love movies and football. After Bollywood, Nollywood (Film industry of Nigeria)
produces largest number of movies in the world however is severely affected by rampant piracy. Nigerian
Football team ranks among top 40 teams worldwide and 3rd in Africa according to latest FIFA ranking.
Nigerian economy is growing rapidly however much of growth is fuelled by rising oil prices. Oil exports
contribute a significant proportion of Nigeria GDP. Most of wealth generated by oil industry is controlled
by a handful of people and it is not tricked down to the lowest strata of the society (indicated by high Gini
coefficient). High inflation and high unemployment rate mars the economy. Lack of robust banking
institutions (recently run on bank was observed) as well as standard practices of credit rationing (family
relationship and tribes are considered as criteria for risk assessment) further hurts the economy. Import of
critical inputs to the system puts pressure of foreign reserve of the country. A large part of population
(>55%) still has to live under $1 per day.
Government has taken several initiatives to improve level of education and increase research and
development activities in the country. Though internet penetration is quite low, mobile penetration is
quite high (48%).

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Comparative Analysis of Nigeria with India

There are a many similarities between India and Nigeria in terms of demographics, religious and cultural
diversity and fast economic growth. What Nigeria is going through today (economically and politically),
India has gone through the same phase 20 years before. So, in terms of the economy, Nigeria is very
similar to India after liberalization (high economic growth, high levels of poverty, less developed markets,
high tariffs etc.). The tables below give the comparison between India and Nigeria in both economic and
non-economic terms.
Parameter Nigeria India
GDP (USD bn) 214 1,367
GDP per Capita (USD) 1,405 1,124
GDP Real Growth Rate 6.8% 8.3%
GDP - Composition by sector
Agriculture 31.9% 16.1%
Industry 32.9% 28.6%
Services 35.2% 55.3%
Labour Force - by occupation
Agriculture 70% 52%
Industry 10% 14%
Services 20% 34%
Unemployment rate 4.9% 10.8%
Inflation 13.9% 11.7%
Exports (USD bn) 76 201
Investments (gross fixed) - % of GDP 11.6% 32.0%

Table 1: Economic Comparison between India and Nigeria

Nigeria is also witnessing high growth rate but experiencing high inflation rate just like India and has a
comparable GDP per capita to India. And like India, large population of Nigeria is involved into agriculture
(70%).
Parameter Nigeria India
Area (million sq. km) 0.92 3.29
Coastline (km) 853 7,000
Population (millions) 155 1192
0-14 years 42% 31%
15-64 years 56% 64%
65 years and over 3% 5%
Median Age (years) 19.1 25.9
Population Growth Rate 2% 1%
Urban Population - % of total population 48% 29%
Rate of urbanization 3.8% 2.4%
Gini Coefficient 43.7 36.8
Sex Ratio - male(s)/female 1.06 1.12
Literacy Rate 68% 61%
Male 76% 73%
Female 61% 48%
TV Penetration
Mobile + Telephone 48% 59%
Internet Users 28% 5%

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 Railways (km) 3,505 64,015
Roadways (km) 1,93,200 33,20,410

Table 2: Non-Economic Comparison between India and Nigeria

Nigeria population is very young with median age of just 19 years. Notable difference between India and
Nigeria is that in the age group 0-14 years, population is Nigeria is much higher than India. In 2030, Nigeria
is going to have a very young population. Literacy rate is comparable to India. However, in terms of rail and
road infrastructure, India is much ahead of Nigeria.

FMCG Market in Nigeria

An overview of the FMCG market in Nigeria is captured in Figure 2: FMCG Market in Nigeria. The sector is
growing at a very healthy CAGR of 15%, though the current size is relatively small. Currently global firms
dominate the sector but their product line and depth in Nigeria is also limited. One important thing to note
is the North vs. South divide. South Nigeria is better-off on all economic indicators compared to North
Nigeria. There are both economic as well as historical reasons for this divide. The difference in economic
levels also leads to difference in spending and consumption patterns.

Growing Market Consumers

•Growing at CAGR of 15%
•Market Size relatively small ($887 m)
•Rising disposable income and middle class
•Very young population (Avg. age 19 yrs.)
•Demographic dividend (high population in 0-14
years age bracket)
•Brand Loyalty
•West is Best – Quality is important
•Major purchasing decisions of household goods
with females
•Youth dictates purchase decisions in few items
•Diversity -North vs. South divide

FMCG - Nigeria

Firms Issues
•Dominated by global majors – P&G, Nestle, •Marred by poor infrastructure – electricity,
Unilever, GSK transport network
•Product lines limited in terms of both width and •Raw material not available in the local market –
depth have to be imported (70%)
•Promotion focuses on sports and entertainment •Import duty high on finished goods
•Low penetration of organized retail
Figure 2: FMCG Market in Nigeria

FMCG market in India: Lessons for Nigeria

Many of the challenges faced by FMCG companies in Nigeria were also faced by FMCG companies in India.
Infrastructure, though getting more and more investment from government and private player, is still poor
and is marred by lack of regular electricity supply, poor road network. Diversity level in Nigeria is similar to
that in India with numerous castes, languages and they all have different tastes and preferences in terms
of consumption pattern. Poverty level is quite high in India with GDP per capita around $1100 and a

Applying Indian FMCG Lessons in Nigeria Page 4

significant population living below poverty line. Reaching to the masses, especially in rural areas and
enticing the poor population to use product remained the biggest challenge to FMCG firms in India.
To address the underlying problems, FMCG firms in India responded with several innovative approaches.
Products of different quality and quantity were launched to satiate the tastes and preferences of various
segments of consumers. Some companies realized that people always do not want the best quality and
want something which is just good enough at an affordable price. Introducing recyclable packaging reduces
the overall cost of the product by reducing the packaging cost. A single product can be put to different uses
such as coconut oil which is used differently in North and South India. Amul is an example of a co-operative
movement which created supply chain from scratch.

How to enter a highly competitive FMCG market: Lessons from Nirma

Nirma is one of the most successful Indian FMCG brands today and rewrote the rules in marketing to win
the heart of the consumer. This example provides different lessons for companies, how to enter the highly
competitive FMCG market.
Nirma was established in 1969 and today has an annual turnover of over Rs. 2,500 crores. In India, Nirma is
the largest detergent and the second largest toilet soap brand with a market share of 38% and 20%. The
success of Nirma is especially visible in the fact that in 2004 the company sold one of the world’s largest
volumes (800,000 tonnes) of washing powder under a single brand.
In the 1960s and 70s the domestic detergent market had only very few players who offered products in the
premium segment, this is when Nirma aptly concentrated all its efforts towards building and creating a
strong consumer preference towards its ‘value-for-money’ products. The company captured the market
share by offering value-based marketing mix of the four P’s, perfect match of product, price, placement
and promotion. It has been persistent effort of Nirma to make sure finest consumer products are available
to the mass at an affordable price. Nirma has gone for massive backward integration and has a distinct
market vision and robust infrastructure which enables Nirma to pursue a cost leadership strategy.
Furthermore a lean distribution network and low profile media promotions allow it to offer quality
products, at affordable prices2.
All these lessons from Nirma entering the Indian market can be applied when entering the Nigerian market
because of the high similarity of the counties, the FMCG market and the very diverse consumer tastes.

Innovative Promotion Strategies

To tap the scattered populace of Rural India, firms have adopted many innovative marketing
strategies. Some of these concepts are listed in the table below:

Concept
Mandi In India, the rural population is widely
(Village dispersed in the villages with poor
Fairs) road connectivity and infrastructure.
The problem for FMCG marketers was
to reach these rural customers at one
location.
Sports India has vast cultural differences and
appealing to such a diverse set of
people and promoting to them is a
problem for FMCG companies.
Idea
To reach the rural population at one
location the FMCG companies targeted
village fairs where rural population meet
every week to buy and sell things. Point of
purchase becomes quite important here &
marketers convince people to buy their
products.
Cricket is one sport which binds the country
together. Almost every Indian is passionate
about cricket. Even in villages, people listen
to radio to keep them updated about

2
Source: Company Website – Nirma

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 cricket. Associating to cricket stars thus
became a common route for promotion.
Self-help Establishing an effective distribution in Project Shakti3 was launched by HUL to
groups rural areas was a problem. Also, rural create self-empowered rural women
households are less exposed to media entrepreneurs. These women were given a
so it is difficult to educate them about small start-up capital and were used as
new products. Also, rural women may medium to sell FMCG products in their
not be comfortable to being educated area. P&G uses such self- help groups to
about products like sanitary napkins in create awareness of using sanitary napkins
public. rather than unhygienic clothes.
Village Customer relationship management in Rural Relations4 is a company started about
Elders rural areas. 15 years ago. Today it covers about 5,000
villages in 8 states providing important data
about rural villages to FMCG giants such as
HUL and P&G.
Music/Folk Promotion to the rural customers Music/folk shows serve as an ideal medium
shows while at the same time appealing to for FMCG companies to promote their
their local taste. products. Bollywood is equally popular
amongst the masses. During movie
intervals, products were advertised and
rural people were convinced to buy
product.
Mobile Promoting through a medium which Indian mobile tele-density is 59% with rural
Phones has wide penetration tele-density of about 25%5. So, mobiles
serve as major medium for promotion.
Already firms like Rural Barometer are
using this channel to penetrate the rural
population.

Table 3: Innovative Promotion Strategies

These ideas do find application in Nigeria as well, showing that the innovative marketing strategies
adopted by the Indian firms are applicable in the Nigerian context, though with small changes based
on the local context. While the sports concept can be applied in Nigeria but with football as the
target sport, the use of mobile phones for effective and low cost marketing campaigns is also an
attractive proposition. Mobile marketing gains more importance because this medium is being
effectively utilised for initiatives like mpesa6.

Idea Applicability (In Nigeria)

Mandi (Village Fairs) Such an idea can be applied to rural markets of

Nigeria if there exists a mandi or village fair
gathering happening every week or at periodic
intervals

3
http://www.unilever.com/sustainability/casestudies/economic-development/creating-rural-entrepreneurs.aspx
4
http://www.ruralrelations.com/
5
http://www.trai.gov.in/annualreport/AnnualReport_09_10English.pdf
6
http://www.telecomcircle.com/2010/01/m-pesa/

Applying Indian FMCG Lessons in Nigeria Page 6

Sports Similar to cricket in India, football is extremely
popular in Nigeria. Thus FMCG companies can
use the football stars to promote their product.
Many companies are already using this channel.
Self-help groups Such a business model can be easily applied to
Nigerian markets as it creates an incentive for
rural women to play a role in the promotion of
FMCG products.
Village Elders In Nigeria also, villages have tribal heads/chiefs
that have considerable influence over the
people. So, this idea can be directly applied
there.
Music/Folk shows People in Nigeria are also fond of music and
movies. Thus this idea has great applicability in
Nigeria as well.
Mobile Phones Similar to India, Nigeria has also high tele-density
of 48%7 which presents an attractive means to
promote to the masses.
Table 4 Applicability of Marketing Innovations

Innovative Product Strategies

Besides creating innovative marketing strategies to extend the reach of their products, firms also
modified their products so that they could better address customer’s needs. Two such concepts are
shown in the table below:

Concept
Nano-Marketing Rural customers have lower income
compared to the urban population,
and as such find it difficult to afford
the products designed for the urban
consumer.
Price vs. Quality A higher quality means a higher price
for the consumer, which makes it
unaffordable to lower segment of the
society.
Table 5: Innovation Product Strategies
Idea
Miniaturization in the form of
sachets, costly products became
easily affordable for the poor and
especially for the rural masses.
Sachets of detergents, shampoos,
small portion sized biscuits, curd,
milk, and even 200 ml coke were
some of the innovations that
helped companies like Coca Cola
and Pepsi to expand their customer
base in India.
There is always a trade-off
between price and quality. A large
customer group can be tapped by
launching products at low price
point.

These ideas have applicability in Nigeria as well. Nano-marketing is already being employed for dairy
products8. This concept can easily be applied to other products as is done in India. Nirma had

7
CIA Factbook
8
http://www.frieslandcampina.com/english/news-and-press/news/corporate-news/2010-05-06-innovation-
award-for-milk-in-sachets.aspx

Applying Indian FMCG Lessons in Nigeria Page 7

understood the Price vs. Quality trade-off and used it to build one of the largest Indian detergent
brands.

Idea Applicability (In Nigeria)

Nano-Marketing The idea can be easily replicated to the Nigerian
market as large population of Nigeria lives below
poverty line.

Price vs. Quality The exploitation of price and quality trade-off is

clearly applicable to Nigeria.
Table 6 Applicability of Product Innovation Strategies

Conclusion

The lessons learnt on the erstwhile dusty roads of Rural India do have global relevance and impact.
The applicability of the methods adopted by Indian FMCG firms to Nigerian markets shows that
these methods can be used in other markets as well. Besides the MNCs which would copy these best
practises across borders, it also creates new avenues for Indian entrepreneurs. Firms like Rural
Relation for effective targeting should have good reception in Nigeria. Indian software firms can
create software for hosting and running a mobile advertising campaign.

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