This slide of the month tries to shade some light on the plastic packaging sector in Nigeria. Nigeria’s packaging industry is projected to be worth $294 billion by 2020, up from $178 billion in 2012. Local market experts further suggest the market is 15 years behind India and about 30 years behind Europe but it is on a steady growth path as innovative solutions are being introduced into the market from across the world. By far, BOPP is the most utilized packaging material used in Nigeria followed by PE which has very diverse applications, same as BOPP. Plastics top the chart for most preferred packaging product used by manufacturers in Nigeria with soft drinks, beverages (currently at 10% CAGR) and personal/home care products driving this trend.
This slide shows the result of a recent study of one of africon´s employees. Aim was to identify firm capabilities, that have an impact on various aspects of performance of German companies operating in Nigeria. The study was based on existing research findings, as well as a survey of senior staff of 40 German firms operating in the country with at least with an appointed distributor (or own staff etc.). As only very few German firms are invested in large own local structures, it emerged that especially the marketing capability in terms of brand building, gathering market intelligence and strong sales channels are key for success locally. Efforts by the German firms can be supported by strong partners – leaving all the work to these partners is however not enough. Interestingly, factors such as adapting products to local needs, lobbying the German or Nigerian government, as well as attending Nigeria focused trade shows did not have a significant impact.
The BRS Market Attractiveness Index is intended to help companies select attractive African markets for potential market entries and raises awareness for the African continent. The index will support companies in the early stages of their market entry decision with profound knowledge and helps them plan the next steps of their market entry.
The index uses the combined knowledge of the following parties who officially signed the co-operation document:
- BRS Institute of International Studies – representing the academic research
- africon GmbH – representing the local market knowledge in Africa as well as the consulting expertise with having supported more than 60 clients on their way to Africa
- BVMW, the Federal Association of SMEs in Germany, – representing the interests and expectations from German SMEs
- Ebner Stolz – representing tax and accountancy research
The BMAISA (BRS Market Attractiveness Index SME Africa) will fill the market gap between consultancies and publicly available information. It provides more customized market information, as companies become more involved in a market entry.
Prior to the signing ceremony, the World Café workshop was held in collaboration with the four parties signing the contract during the event to give the opportunity to participants to discuss the important issues for the development of a German SME specific index and how such an index can support companies in ways that are currently not available.
The workshop provided insights on the following questions:
- What are key skills and resource constrains faced by SMEs when entering the African Markets?
- What are key advantages of SMEs compared to larger firms
- Which aspects of market environments in African countries are particularly important for a successful market entry
The index through its unique features will offer SMEs a perfect start to plan a successful market entry to Africa.
In the past months africon conducted two market assessment projects and one very successful business trip to Kenya for major international players of the plastic packaging sector.
Promising future market in Nigeria
The two market assessment projects had Nigeria as their focus market and more than 100 interviews were conducted with all relevant players of the plastic packaging sector locally.
The results concluded from the analysis of all interviews and market data in Nigeria is very clear: the plastic (packaging) sector in Nigeria is very vivid and growing at a high pace. Nevertheless, the Nigerian market is highly cost conscious. Competition is set on pricing strategy: the cheaper the product, the more sales a company makes. Most manufacturers still shy away from cost increases even marginally. The majority of consumers do not care much about quality as they do have an open eye for the cost.
At the same time the future is certain to come with changes. The upper middle class is expanding and there’s a growing awareness on quality products among Nigerian consumers generally.Any high quality / high price level company entering the Nigerian market will need a targeted product awareness campaign to help realize the market potential for their products. Both end users and converters need some form of education on the use of the products.
Modest expectations in Kenya
For Kenya, which has only a quarter of the population that Nigeria has and which’s BIP is 5 times smaller, the picture looks a bit different. The local production of BOPP film is for example not meeting its expectation in terms of capacity as it stands at around 30,0000 tons per year in Nigeria. Also, the import of machinery to manufacture plastic film stands at $ 87m in Nigeria but only at $ 38m in Kenya. But with the growing food manufacturing sector in both countries it is expected for the plastic packaging industry to grow as well. Since importing ready-made plastic film comes definitely more costly at one point than local production.
For any questions regarding this project please feel free to contact our practice leader Ms Lena Schwoerer.
The conference took place at our partner the Hochschule Bonn-Rhein-Sieg on the 13th and 14th of last month.
africon’s Managing Director, Marc Zander, moderated and led the panel of discussion of the first day ” To what extent can universities facilitate market entry for industries” with panelists representing different business fields and academic backgrounds. The panel of discussion highlighted multiple important points about private sector in Africa:
- Opportunities of cooperation between universities and businesses
- Entrepreneurship and development in Africa
- International business between Germany and Africa
- Development of enterprises and training and recruitment of qualified personnel
After covering those important points, the audience was given an adequate time to ask questions related to the panel. At the end of this successful day and panel, the signing ceremony of BRS Market Attractiveness Index SME Africa took place.