By Jaco Maritz
A while ago I came across a LinkedIn post in which sales and marketing expert Kelechi Kalu explains why consumer goods companies and retailers cannot operate in northern Nigeria the same way they do in the country’s commercial hub Lagos. Kalu, based in the city of Kano, works for brand communication company Activationplus; his previous experience includes roles at Unilever and Dangote Group.
Earlier this week I gave Kalu a call to learn more about the northern Nigerian market, the available business opportunities and what it takes for consumer goods companies to be successful in this region. Here are the main takeaways from the conversation.
Consider the cultural realities. Kalu says companies need to be aware of the cultural differences between northern and southern Nigeria. Marketing communication content needs to reflect the sociocultural dynamics. The majority of the consumers in the north are Muslims, whereas the south of the country is predominantly Christian and progressive Muslims.
Generally speaking, northerners are more communal-minded, whereas southerners are more individualistic. The implication is that local opinion leaders are powerful influencers who impact the purchasing decisions of others. Education levels in the north are also lower than in the south, which means brands need to communicate with customers in the local Hausa language.
“Anyone who is trying to launch a brand needs to take these factors into account … If not, you are heading for failure,” notes Kalu.
Consumers are price-sensitive. Per capita income in northern Nigeria is much lower than in the southern parts of the country. The prices and package sizes of consumer goods need to account for this.
Kalu gave the example of a popular dry milk brand that sells mostly large bulk package sizes in northern Nigeria, whereas in Lagos its individual- and family-size packs are more popular. The reason? Shopkeepers in northern Nigeria buy the 50kg pack and repackage the product into tiny volumes that people can afford. The same applies to sugar: whereas cubes dominate shelves in the south, 50kg pack sizes sell more in the north due to repackaging.
He adds that more often than not, consumers choose price over quality, as long as it serves their basic needs. “You see people like the Lebanese and the Indians, who understand the dynamics of the local market, setting up factories producing fast-moving consumer goods (FMCG) products locally in northern Nigeria. Even though the quality is not the best, they are selling at prices the market can absorb. And they are making a profit.”
Despite the region’s general low purchasing power, Kalu does, however, point out that northern Nigeria has a sizeable wealthy elite: Nigeria’s richest man, Aliko Dangote, hails from the north as do many of the country’s most prominent politicians.
Retail dynamics not the same as Lagos. In 2014, South African supermarket chain Shoprite opened its first northern Nigerian store in Kano, the region’s largest city. Shoprite had already been operating in Lagos and other parts of the country for several years.
According to Kalu, Shoprite is leaving money on the table by not being sensitive enough to local spending-power and consumer perceptions. He says many people in Kano perceive Shoprite as an elite brand. “Many people go to Shoprite as a recreational activity and to take pictures, not necessarily for shopping.”
Large parts of the population still prefer to shop at traditional markets. Kalu says cost-conscious consumers that do frequent modern stores, however, often choose local chains such as Sahad and Jifatu, which offer discounted prices. “Jifatu and Sahad understand the mindset of the people … They know the prices at traditional markets and neighbourhood stores, and just make theirs slightly cheaper.”
The phenomenon of kantin sauki (roughly translated as ‘low price shop’), is a prevalent value proposition of many local outlets. The game lies in been able to price popular brands with low margin and recoup the difference from higher-end brands that have a social ring to them.
He adds that retailers should learn to adapt their product mix to local needs and the way of life. Shoprite, for instance, needs to also offer bakery product variants that can compete with the many local bakeries in Kano.
Large northern Nigerian cities are regional trading hubs. FMCG distributors from neighbouring Niger, Chad and Cameroon come to cities such Kano and Maiduguri to buy products that they then take back to their countries to sell. “More than 30% of the products coming into northern Nigeria are consumed in neighbouring countries,” explains Kalu.
Consumer goods manufacturers need to be cognisant of this when they develop their price points, packaging and sales teams.
Unexploited opportunities in rural areas. Companies and entrepreneurs seeking untapped opportunities in northern Nigeria should look at the underserved rural areas, according to Kalu. He says mobile telecoms company MTN recognised this when it chose to launch its mobile money service Momo in Danbatta, a local government area north of Kano city. “When MTN launched Momo, they focused on the rural area, whereas most of their competitors launched within the Kano metropolitan area. They understand that most of the underserved market in northern Nigeria is in the rural areas, not necessarily the urban areas. Multipro, the distributors of Indomie (instant noodle brand) and Hypo (hygiene and sanitation products brand), also have a rich rural sales system. So if you want to succeed, you have to create a strategy that also serves rural communities.”