Nigeria is becoming a more and more important market for wine exporters.
Wines of South Africa (WOSA), an industry body representing the country’s wine exporters, has recently indentified Nigeria as a promising market for South African producers.
With a population of over 160 million and rapid economic growth, Nigeria is currently on the radar of various consumer focused companies. Many of the world’s multinational brewers, such as SABMiller, Diageo and Heineken, have invested in the Nigerian market. In 2014, Nigeria is expected to overtake the UK as the largest market for Guinness stout.
Nigerians are, however, also developing an increasing taste for wine. Total volumes of wines sold in Nigeria are forecast to grow by 6% a year, although the total value will only increase by 2%. The market is currently worth around US$300 million a year, and is expected to reach $370 million by 2015.
Sixty per cent of wine sold in Nigeria is imported from Europe. South Africa is, however, the second biggest exporter with 22% by volume share. South African wine exports to Nigeria also grew at 12% over the past year.
According to Sapta Bhattacharyya, associate vice president of research firm Aranca, Nigerians prefer red wine, which accounts for over 73% of total volumes sold.
Importer distributors are responsible for 70% of wine distribution in Nigeria, with the rest imported directly by retailers and the hospitality industry.
Opportunities at high-end of the market
A number of the world’s luxury brands have started to target wealthy Nigerians. Last month German carmaker Porsche officially opened a new car dealership in Lagos’ Victoria Island.
Bhattacharyya estimates that Nigeria could have up to a million customers in the market for ultra-luxury products.
According to Su Birch, CEO of WOSA, wine producers should not ignore the potential at the higher-end of the market. “Many of the global luxury brands have entered the Nigerian market and these include several famous-name spirits, as well as champagne brands whose products are being welcomed by the country’s affluent consumers. We know anecdotally from a number of South African producers that there is a robust appetite for premium and higher-priced local wines,” she explained.
During this year’s Ernst & Young Strategic Growth Forum Africa in Cape Town, Mark Turner, Africa director at Massdiscounters, a division of retailer Massmart, said that when the company opened its first store in Nigeria, it was surprised by how brand-conscious the consumers were. “One of the things that have amazed us, is that it is a very brand-conscious market … Particularly in our west African markets, in Ghana and Nigeria … it is a market that travels extensively and has access to internet. It is amazing how sophisticated that customer is.”
Even with growing interest in wine and rising spending power, Nigerian consumers remain very price-conscious, warns Bhattacharyya.
Before entering the Nigerian market, wine exporters should also take note of the 50% import duty as well as the cumbersome and costly bureaucracy, which includes registration with the National Agency for Food and Drug Administration and Control (NAFDAC). Bhattacharyya noted that exporters should also be aware of political unrest and corruption in Nigeria.
Despite Nigeria’s large population, it is estimated that 61% of Nigerians live on less than $1 a day. Whitey Basson, CEO of pan-African supermarket group Shoprite, however, doesn’t seem too concerned. “Even if you have 60% of the population living in poverty, 40% of the Nigerian population is still bigger than the South African population,” he told Reuters in an interview.