By Chinwendu Obienyi
In the ocean of volatile industries, Fast Moving Consumer Goods (FMCG) industry represents an island of stability during times of economic uncertainty.
Among the various industries that characterise modern global economy, the FMCG industry appears to be the most resilient to economic shocks.
Unlike other industries, the FMCG sector is not prone to mass layoffs or substantial dips in profit when the economy slows down. This is due to the nature of the goods themselves.
It is sometimes easier for people to cut back consumption on luxury products during recessions, however, this does not hold true for daily essentials like food, toiletries or medicine. In effect, buyers shift consumption to more economic-alternatives of the same product. Hence, the demand for these goods remains relatively stable.
This is to say the role of the FMCG in an economy has its impacts. However, there are many local and regional firms from emerging markets which remain active, profitable and well positioned amid inflationary pressures as well as other factors that could inhibit growth in an economy, especially Nigeria.
One of such giant companies is Nestlé Nigeria Plc. With its headquarters in Switzerland, the company which began operations and listed on the Nigerian Exchange Limited (NGX) in 1961 and 1979 respectively, is known for its active role in backward integration and local sourcing of raw materials in the country.
According to its 2020 manufacturing operations report, the company purchases raw and packaging materials majorly from local sources, as it hopes that it will help develop the economy, create job opportunities and strengthen the Naira.
It sources 80 per cent of its maize, sorghum, millet, soya, cassava starch, cocoa powder from over 41,600 local farmers and processors scattered across the country.
Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, it engages a lot of farmers, thereby raising their incomes while reducing unemployment. In the course of this project, the food and beverage giant has engaged no less than 10,671 farmers.
Despite having a wide variety of products ranging from cereals to milk, coffee, seasoning, spices to beverage, Nestlé is the fifth largest company in the Nigerian bourse after Dangote, MTNN, Airtel Africa and BUA Cement Plc.
Financial and market performance
Nestlé, with a strong portfolio, has been on top of its game for many years and has maintained a profile of continued growth in revenue and profits, surviving economic headwinds unlike many peers in the FMCG industry.
For instance, the company announced 30 percent growth in revenue to N222.5 billion in its half year (H1) unaudited financial statement for the period ended June, 30, 2022, from N171.4 billion announced in prior-year (H1) results.
Further look at its unaudited financial statement submitted to the NGX revealed a 31 per cent increase in Profit Before Tax (PBT) to N43.7 billion in H1 2022 from N33.4 billion accounted for in H1 2021.
The group unaudited result showed Profit After Tax (PAT) of N21.7 billion recorded in the prior year-period of 2021 to N27.7 billion recorded in the comparable period of 2022, representing a 28 per cent growth.
The cost of sales observed massive increase during the period, reporting a 35.5 per cent rise to stand at N142.2 billion in H1 2022 from N105 billion achieved in H1 2021. In addition, the fast moving consumer goods company grew its Earnings Per Share (EPS) by 28 per cent to N35.01 in H1 2022 from N27.42 generated in 2021.
Also, it remains one of the top performers on the exchange with a share price of N1,215 per share.
CSR Activities
Being an advocate of giving back to communities, Nestlé Nigeria actively engages in corporate social responsibility (CSR), especially in activities that centers towards Agriculture, SME development, environmental protection, and technological advancement, among others. The company recently launched the Nescafé Plan in its bid to help make coffee farming more sustainable, reduce greenhouse gas emissions and improve farmers’ livelihood. The brand is said to be investing over 1 billion Swiss francs by 2030 in the Nescafé Plan 2030.
Earlier in the year during the International Youth Day, the company in collaboration with the Alliance for Youth Nigeria, announced the conclusion of a vocational skills training program reaching over 350 young Nigerians in Lagos and Kano States. The training, which covered four skillsets – Solar panel installation, Graphics Design (Designs, social media and web design), CCTV and Cable installation, and Beauty Care (make-up,aromatherapy and massage), were delivered in collaboration with Whitefield Foundation.
The company in 2019, established its Research and Development (R&D) Innovation Challenge as part of the efforts to contribute to the local innovation ecosystem, with the hope that it will help boost local entrepreneurship as well as provide a platform for start-ups, researchers and developers to contribute to local sustainable growth by bringing breakthrough ideas to the market.
The company, also in 2019, partnered with Wecylers, a start-up recycling firm to achieve a clean and healthy environment whilst stating that this was done as regards its drive for zero environmental impact in its operations.
The list of its activities are endless and this goes to show that the company is well focused on limiting the impact of the unprecedented inflation bedeviling the economy currently. Speaking to Daily Sun via a statement, the company’s Chief Executive Officer, Mark Schneider, said the company’s performance this year has been commendable while adding that its strong organic growth was down to its implemented price increases, disciplined cost control and operational efficiencies despite the harsh operating environment.
“We delivered strong organic growth and a significant increase in underlying earnings per share. Our local teams implemented price increases in a responsible manner. Volume and product mix were resilient, based on our strong brands, differentiated offerings and leading market positions. We limited the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies. At the same time, investments behind capital expenditure, digitalization and sustainability increased significantly.
We are focused on creating shared value over both the short and long term. Growing food insecurity around the world and heightened climate concerns, following an increase in unusual weather patterns, underlines the importance of this strategic direction. Good for you and good for the planet are the two key strategic pillars that our company pursues in an unwavering manner, even in the face of significant short-term challenges”, Schneider said.