Your typical Nigerian community bakery isn’t in want of demand. The bosses at these establishments may moan about flour prices and energy costs, but you’d seldom find a house of bread lacking buyers for their bakes. It’s no wonder that bakeries are close to the top of many an intending entrepreneur’s lists of possible ventures to start up.
Perhaps we should also be thanking our fluffy brown and white flour based loaves for making a hefty contribution to the country’s total income. Besides stuffing millions of mouths and filling innumerable bellies, it’s putting good money in the pockets of its makers, and adding to the variety of dishes they can afford to eat (as well as the number of times they can consume them per day). In summary, it’s keeping a lot of persons above the red line of lack and creating not a few millionaires too.
This point is borne out by analysts’ valuation of the industry. According to a report published by the global audit and market research firm KPMG, Nigeria’s bread segment was worth ₦122 billion in 2015. It was designated a fast growing one as well, with a Compound Annual Growth Rate of 14% in the five years preceding the report’s publication. It was also tipped to expand by a further 3% till 2019. In summary, the experts say bread will be raking in more money for a long while yet.
One thing going in the favour of the bread industry is that the factors spurring its growth aren’t showing any signs of fading. Nigeria’s population continues to increase at a rapid rate, and the preference for conveniently consumed edibles will gain even more ground in the years to come.
Perhaps the most important statistic about the industry’s role as a lifeline for numerous persons and families is the one which tells us how fragmented it is. It’s estimated that about 72% of bread production in Nigeria is artisanal; in other words, it’s local bakeries with smoke belching ‘ovens’, or slightly more decent facilities achieving limited daily output levels. These centres tend to be staffed (and sometimes run) by people on the lower end of the income ladder, who literally survive on the gains from the business.
However, contemporary bread production in Nigeria isn’t all simple and bland. For one thing, consumers are getting savvy about their bread choices. Euromonitor’s 2015 report on the country’s bread market indicates a faster rise in the consumption of packaged bread (3.4%) compared to unpackaged forms of the product (2.3%). And if you think about it, there’s also been an explosion in the variety (and quality) of bread on sale at your local store or mall.
For all its obvious potential, the bread segment isn’t having it all smooth. Besides the utility issues alluded to at the beginning of this article, there’s also the trouble with high priced material inputs, such as flour. Local producers have long opted for cassava flour over the more expensive and less readily available wheat. But the higher end of the market still loves its cereal derived flour, and buyers in this section have to pay considerably higher prices for their loaves.
Industry watchers also point out that the distribution networks for bread and other baked goods remain underdeveloped. While major urban centres have seen a linking of mainline bread suppliers with supermarkets, semi-urban and rural regions are yet to experience this transition in any truly noteworthy way.
The demand for bread in Nigeria also leans heavily towards the less expensive types of the product, which tend to be made by artisanal bakeries. It’s perhaps this tendency that prevents the growth of so-called premium brand bread in the country. There’s a consequence for this: the market isn’t likely to attain its growth potential. Only a significant rise in average real incomes will bolster the sort of demand needed to raise the foundations for a baking industry with higher quality output.
Wheat Based Consumer Goods In Nigeria (PDF), published in August 2016.