Comment - Soft Drinks & Water - Bottled Water in Nigeria
By Ray Rowlands | 2 November 2012
This month, Ray Rowlands, from independent beverage research company Drinksinfo, takes a closer look at the massive and constantly-expanding Nigerian packaged water market.
Over the past four decades, the idea of selling packaged water has developed from a novel business proposition into a multi-billion dollar industry that continues to challenge CSDs as one of the world’s top selling soft drinks categories. A major watershed in the category’s evolution was the introduction of polyethylene terephthalate (PET) bottles, patented as recently as 1973.
Today, everyone in the global water industry is aware of the major role played by PET. Four out of every five litres of packed water are housed in this plastic. Obviously, this has resulted in PET receiving a high level of attention in terms of marketing, promotion, brand identity and innovation (e.g. bio-degradable bottles and thinner plastic). However, PET is not cheap and, whilst prices have bounced around, they are tending to edge ever higher.
In less developed areas of the world, PET bottled water is already seen as a premium purchase item. In India, only around half of all packaged water appears in PET, while in Nigeria its share is calculated at less than 10%. Price rather than image or brand loyalty is the key determining factor for most households in such economies.
According to the country’s National Bureau of Statistics, in 2010 100m Nigerians (over 60% of the population) lived in poverty, surviving on less than U$1 a day. Consecutive governments have failed to provide their people with reliable drinking water supplies. Even where households have private boreholes, the purification system is often poor. Consequently, the majority of the country’s inhabitants depend on packaged water, and not purely for immediate hydration purposes.
In the absence of widespread refrigeration and dairy processing plants, Nigerians are heavily reliant on imported powder for their milk needs, equating to around 1bn litres a year. This powder needs to be mixed with a dependable water source, as does the sorghum paste and porridge that form the stable food supply for many families. On top of this, popular beverages like hot chocolate, tea and, to a lesser extent, coffee, squash and fruit powders also require a reliable water source. It is not surprising therefore that packaged water consumption is an integral part of Nigeria’s culture and demand, like the population, continues to grow.
Much of this packaged water is unregistered and unrecorded but taking the above factors into account, the total market in Nigeria easily exceeds 4bn litres. According to the Director General of the National Agency for Food and Drugs Control (NAFDAC), transactions in the production, sale and consumption of pillow pouch water (alternatively known as sachets) across the country is estimated to generate a staggering NGN7bn (US$44.1m) daily.
The preferred water pack type is the low-density polyethylene (LDPE) 50cl pillow pouch, whose origins in the country date back to the early- 1990s. The pouch is much cheaper that PET but even the cost of this material is deemed too expensive by some suppliers who have moved over to linear low density polyethylene (LLDPE). Today, the average price of one pillow pouch is a mere NGN10 (US$0.06). On a per litre basis, this represents a quarter of the price of PET bottled water, such as Eva, the brand leader from Coca-Cola Co.
These pouches enjoy widespread distribution, from remote rural villages to the country’s swelling towns and cities. Whilst generally absent from the emerging modern supermarket sector, they can be bought in all traditional markets that still form the mainstay of the county’s retail network, or from the numerous roadside vendors who ply their trade walking up and down the lines of traffic on the country’s unmaintained roads.
Popularly called 'pure water', the start up and production costs for these pillow pouches is relatively low. Many of the numerous, generally small-scale producers, do little in the way of water treatment or branding. Being small scale, most supplies are also localised. There are currently no known national brands. Coca-Cola bottlers did once enter the market with a brand called Paani, but it was dropped several years ago with attention focusing on the more lucrative PET segment of the market. Whilst some regional pillow pouches are branded, such as Blessed, Cool and Magnor water, many more merely carry NAFDAC (National Agency for Food and Drug Administration and Control) registration numbers.
An illegal package water business is also thriving in the country. Some producers indulge in sharp practices, such as packaging of untreated water, production under unhygienic conditions on unapproved premises, use of non-food grade plastic, improper usage of treatment chemicals and the release of water without date registration markings. Uunlicensed producers even go as far as copying the same packaging as those suppliers recognised by NAFDAC. This has led to numerous purges on unregistered facilities. In March, ten pillow pouch manufacturing factories were shut down in and around Port Harcourt. But, there are thousands of local suppliers and as one closes down another two set up in business.
There have also been heightened calls for a ban on water pouches whose indiscriminate disposal has inevitably become a major litter problem. However, according to Nigerian press sources the known pillow pouch industry provides jobs for about 800,000 people. Closing down production would put a lot of people out of work and merely add to the serious problems of unemployment in the country. The unemployment rate reached almost 24% in 2011.
Consequentially, in the absence of more affordable and reliable water supplies, the pillow pouch and its numerous suppliers will remain of paramount importance in satisfying Nigeria’s insatiable water needs.
Synopsis A competitively priced comprehensive overview of the bottled water market in Nigeria Summary Published by Canadean, the Nigeria Bottled Water Category Profile comprises of text, data tables and charts. Supported by market commentary, data includes consumption trends (historical and forecasts to 2014), segmentation data (carbonated vs still, table vs mineral/spring), packaging analysis (pack material, refillable vs non-refillable, multi vs single serve), distribution splits and leading companies percentage market share. Market commentary also looks at private label and pricing including market value (at consumer price) for 2010 . Scope This report includes historic and forecast consumption trends along woth segmentation data, packaging analysis, distribution splits and leading companies percentage market share. Reasons To Buy Nigeria Bottled Water Category Profile from Canadean provides a comprehensive overview of the bottled water market in Nigeria. Category profiles are a cost effective way of quickly gaining an understanding of the dynamics and structure of the market. Available in over 800 country category combinations, making them ideal for comparisons between markets/categories. Key Highlights Consumption volume (million litres and litres per capita) 2005 to 2010 plus forecasts to 2014 Import volumes and imports’ share of consumption 2005 to 2011F Market commentary on current and emerging trends Further commentary on private label, marketing Percentage growth rates (CAGR) 2005-2010, 2007-2010, 2009-2010 Market value 2010 (at consumer price) Segment analysis (carbonated vs still, table vs mineral/spring) 2009-2011F Packaging analysis (pack material, refillable vs non-refillable, multi vs single serve) 2009-2011F Distribution splits (off-premise/retail/at-home vs on-premise/away from home) 2009-2011F Leading companies’ percentage share 2009-2010
Companies: Coca-Cola Co
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Comment - Soft Drinks & Water - Bottled Water in Nigeria
2 Nov 2012 -