Key distribution of Fast Moving Consumer Goods (FMCG) is an age-long sub-sector. Indeed, this area of commerce is as old as the initial operations of manufacturing companies like Nestle, Coca-Cola, Johnson & Johnson, etc.
Mega Distributors of the yesteryears include John Holt, GB Ollivant, Leventis, Kewalram Chanrai Group, MDS, WAD, and several other indigenous distributors.
The FMCG market in Nigeria is part of the growing commercial innovations of the last 20 years. This growth has not been exponential. The growing middle class, possessing greater spending power, will spend more on FMCG items. This factor, aligned with large market size, improved education standard, stronger mobile and internet penetration, a young and growing population and increasing urbanization is expected to grow this market.
However, the distribution landscape has changed over time from the largely mundane and unstructured business to a fairly structured modern business and processes. More educated individuals have driven an influx into the subsector and their coming has digitalized the processes.
Generally, FMCG products have lower profit margins. The sub-sector is driven by scale and volume to drive profitability, which in turn depends on the purchasing power of the right segment of the population.
The distribution landscape in the ’60s and up until the late ’90s was largely mundane and unstructured. Consequently, it was seen as a space for old, uneducated fathers and mothers. The younger generation did not see a vibrant and futuristic sector.
Further adding to this prevailing mindset was the ubiquitous presence of kiosks peddling FMCG products at virtually every street corner. The products are often referred to as ‘provisions’, further lending a sense of a pedestrian business.
In addition, there is a growing sense among the youth that the FMCG business does not hold huge margins that will see them become mega-millionaires, especially when compared to other attractive sectors such as technology, telecoms, banking, etc.
- Space is highly competitive, further driving margins low
- Very unstructured and mundane to the younger generation
- Some manufacturers are interested in maximizing their profit much more than growing the brand and partnership
- Being a highly unstructured space, stock and credit control are major issues
- High logistics costs and a high rate of returns for rejects and damage
- Lack of continuity and succession planning leading to early exit or demise for the venture
- The younger generation see the FMCG space as hectic, unattractive and not futuristic
In Nigeria, a new set of companies have redefined FMCG mega-distribution by digitalizing the process using current technology and up-scale professionals who are experts in their field. The current trend is to subdivide the mega-distribution into Modern Trade, Neighborhood, and Open Market distribution.
Furthermore, structured invoicing, inventory and vehicle tracking have been employed by some of these modern FMCG key distributors to monitor tracking and delivery. Educated drivers and warehouse managers have also been deployed to improve the supply chain process.
A very good example of this is the landmark strides being recorded by a foremost FMCG distribution company headquartered in Lagos. TDiLife has achieved a remarkable measure of growth over the last 18 months by redefining the scope and nature of FMCG distribution in Nigeria and ultimately Africa, by deploying technology and creating an efficient supply chain and adding value to the entire business processes of the sub-sector.
Equally important, social media strategies and techniques have become a core part of the marketing mix to reach out to a wider and younger consumer market who can now shop online for their daily needs. To this effect, E-commerce companies are now creating pages for these daily needs and driving them online. Insights from the E-commerce space further reveals that one of such online stores with its dedicated page – iGroceries – has recorded huge patronage on Konga and Jumia over the past few months since it was set up.
To be continued…