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Beverages: What the Next Generation of FMCG Customers Want

Beverages: What the Next Generation of FMCG Customers Want

Beverages constitute an integral part of our diet and are usually consumed for different reasons – thirst, taste, energy, hunger, boredom, fun, to cool down, and even warm-up. Many beverages are also part of our social occasions with family, friends, at special events, and holidays, which further increases the consumption rate[1].

Source: Statista

Alcoholic drinks: Beers, Wines and Spirits

Other beverages: Energy drinks, Sports drinks, Ready-to-drink tea and coffee

The global dietary database has revealed that beverage consumption is generally highest among younger people in about 185 countries around the globe, including Nigeria.[2] The existence of these realities has spurred the need to discover the beverage preferences of Nigerians aged between 5-30 years – the major consumers of beverages in the country. Our survey data comprising of 226 respondents revealed that beverage composition was the major factor that influenced the beverage choices of this age group (5-30 years), and their favorite beverage categories were found to be juices, yoghurts, and smoothies.

In 2018, a report published by Research and Markets estimated the global beverage market at $1.54 trillion and it is projected to grow annually at the rate of 3.1% to $1.85 trillion by 2024.[3] According to the report, this growth will be as a result of the growing per capita global consumption of drinks in major developing regions owing to rising disposable incomes and changing preferences of consumers towards ready-to-drink beverages and premium products. The National Bureau of Statistics reported that the Nigerian food, tobacco, and beverage industry contributed 3.97% of the nation’s GDP in Q4 2019; and 4.45% in Q1 2020; representing a 12.1% increase.[4] The food and beverage industry also employs about 5%[5] of Nigeria’s manufacturing workforce.

A major factor for this growth is the fast-growing population of young people, who are major consumers of beverages. The United Nations Population Fund in 2019, ranked Nigeria as one of the top 10 countries with the highest youth population in the world. The UN report showed that Nigerians within 0-14 years and 10-24 years constituted about 44% and 32% respectively of the country’s 201 million population.[6] Another factor contributing to this growth is the heavy investments of key market players in mergers, acquisitions, and product launches; and the launch of drinks with healthier and zero sugar content. However, rising health concerns regarding the sugar content of packed beverages, and health concerns regarding consumption of alcohol may hinder the growth of the industry.6

Generally, FMCG products have lower profit margins; causing profitability in the sector to be largely driven by scale and volume. This in turn depends on the purchasing power of the right segment of the population. A report by LNG Analysis has shown that Nigeria’s beverage industry is poised to report a strong growth rate by 2026 due to the increasing population, rising disposable incomes, changing trends, and product innovations. On the other hand, intense government regulations and raw material price fluctuations were projected to potentially impact the growth of the market negatively.[7]

Trends in the Nigerian FMCG sector have shown FMCG companies making strategic shifts to increase their market share locally by introducing smaller packaging sizes for products to appeal to lower-income segments. For example, Unilever has started micro-packaging tea into packets containing just a teabag. FMCG companies are also manufacturing more products locally to reduce import costs caused largely by the fluctuations of the naira against the dollar.[8] Some demand drivers for the Nigerian Beverage FMCG market are[9]

  • The large and growing youth population
  • Product-price sensitivity of consumers
  • Rising urbanization and middle-class structures
  • Changes in consumer behavior patterns and tastes
  • Changing disposable and discretionary income

To gain deeper insights into beverage preferences, a web-based survey focusing on the factors affecting beverage choice, and expectations of the next generation of beverage consumers, was conducted by Ciuci Consulting featuring 226 respondents aged between 5-30 years in the South-Western region of Nigeria.

All age groups chose the juice, yoghurt and smoothie category as the overall favorite, while the alcoholic drink category was the overall least favorite. Ages 21 – 25 and 26 – 30 overwhelmingly voted alcoholic beverages as their least favorite overall. For those aged between 5-10 and 11-15 years, the soft drinks and malt category was their favorite; while bottled water was the favorite beverage category for the other age groups.

Furthermore, the dataset from the survey revealed that the predominant factor influencing the respondents’ choice of their favorite beverage category was the composition of the beverage, followed by its price. The least factor influencing the respondents’ favorite beverage category was the excitement or anxiety to buy a new product.

The loyalty to each brand category was also assessed, and the brand loyalty level ranked highest for soft drinks & malt; juices, yoghurts & smoothies; and bottled water, respectively, while sports & energy drinks; herbal/natural drinks; and alcoholic drinks were ranked as categories with the lowest brand loyalty level.

The study grouped consumers’ purchasing channels into two broad categories: physical stores and online stores. It appears that almost all consumers preferred purchasing beverages in physical stores. 97.8% of the respondents chose physical stores as their preferred purchasing channel, showing that the switch to buying beverages online is a long while away in Nigeria. For the factors influencing their choice of purchasing channel, the respondents indicated that the availability of the product influenced their choice most, while the speed of delivery was the least influencing factor.

Across all age groups and beverage categories, the respondents indicated that they had never bought beverages online.

Recommendations

Insights gotten from survey responses regarding what customers expect next from the beverage industry that will influence their purchasing decision include:

  • Improvement in the composition of beverage products, a reduction in price, and steady supply
  • A shift towards healthier drinks due to increasing awareness of the benefits of good health
  • More competition in organic beverage sub-sector
  • Home delivery
  • Use of vending machines in strategic locations

It will be beneficial for beverage producers and other related businesses to use the insights gathered from this survey in the formulation of strategies that would propel their brand to survive and thrive. Some of these strategies include:

  • Seek advice and support from teams of young people in relevant age groups in the creation of new beverages and campaign concepts. This gives additional value because concepts created using direct insights from your target audience have higher chances of success.
  • Establish trust with customers by being transparent about production processes and beverage composition. This can be done through online and offline adverts and awareness drives.
  • The use of biodegradable or recycling materials like aseptic cartons which could increase the potential of attracting environmentally conscious customers, and also improve the reputation of the organization.

Conclusion

The next generation of consumers is experiencing a shift when it comes to their beverage preferences. This has stoked the need to understand their expectations in order to provide businesses with the relevant information needed to boost their product development. A key challenge that FMCG companies are faced with is how to understand and predict consumer behavior and psychology, as well as trends that will shape the industry in the future.[10]

The latest generation of consumers poses a challenge to businesses, especially in terms of product content, brand communication, and marketing channels. Hence, the required strategies to reach the new generation of consumers is a huge concern. This generation not only consume and interact but also want to actively shape and create socially-responsible and environmental-friendly products.[11] Therefore, any company that wants to stay relevant over the coming years needs to deftly adapt to the changing circumstances and come up with ways to ride the raging tides triumphantly.


[1] (Fiji Beverage Group, 2020)

[2] (American Society of Nutrition , 2019)

[3] (BusinessWire, 2019)

[4] (National Bureau of Statistics, 2020)

[5] (VanguardNG, 2016)

[6] (United Nations Population Fund, 2019)

[7] (Market Insights Report, 2020)

[8] (Oxford Business Group, 2019)

[9] (Cowry Industry , 2012)

[10] (Ciuci Consulting, 2020)

[11] (Auen, 2019)

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