Unilever Nigeria’s home care and skin cleansing market share worth N50 billion is now available for competitors especially small and medium enterprises following the announcement last week Friday of its decision to exit this segment of the market in Nigeria.
The announcement came even as the company recorded steady growth in top and bottom lines, but the management of the firm is set to tap higher growth opportunities elsewhere.
“The company (Unilever) will make changes to its business model in order to accelerate growth and sustain profitability while enhancing its ability to meet consumer needs. The 100-year-old consumer goods company will repurpose its portfolio while putting in place measures to make the business more efficient and future fit.
“These changes will reposition the company to better meet the needs of consumers, shareholders, and employees. This will involve repurposing the portfolio by exiting the Home Care and Skin Cleansing categories to concentrate on higher growth opportunities, strengthening business operations with measures to digitize and simplify processes, and focusing more on business continuity measures that reduce exposure to devaluation and currency liquidity in our business model,” Unilever announced Friday in a note to the Nigerian Exchange Group.
According to Statista, a Germany-based market research outfit, revenue from Nigeria’s beauty and personal care market is expected to reach $7.87 billion in 2023, even as this segment of the market is projected to grow by 16 percent annually through 2027.
Unilever Nigeria Plc has two business segments, which are food products, and home and personal care. In 2022, the firm realised N88.72 billion as revenue out of which food products segment generated N42.6 billion or 48 percent while the home and personal care generated N46.09 billion or 52 percent of the company’s revenue. Almost all its revenue was generated in Nigeria.
The 2022 company-wide revenue was 25.8 percent higher than the N70.52 billion made in 2021. And by generating N31.01 billion in 2021, the food products segment accounted for 44 percent of the Unilever Nigeria’s revenue while the home and personal care generated N39.51 billion, representing 56 percent of the company’s total revenue.
Profit before tax in 2022 was N9.86 billion, divided into N4.74 billion from food products, while home and personal care accounted for N5.12 billion. In 2021, food products’ profit before tax was N906.26 million while that of home and personal care amounted to N1.15 billion.
“The exit of these two categories over 2023 will boost the vision to make Unilever Nigeria great, building on the impressive progress made in other key aspects of the business, and is envisaged to result in overall improvement in profitability, growth and a more sustainable Unilever Nigeria Plc,” the company added.
Opeoluwa Oluwa, an equity analyst with Cordros Securities Limited based in Lagos State, attributed the decision of Unilever Nigeria to exit this line of business to the declining disposable income and influx of cheaper products into the personal and home care market.
He said: “I believe Unilever is exiting due to the intertwin effects of the declining disposable income and influx of cheaper substitutes into the home and personal home care market.”
It should be recalled that in December 2022, the World Bank alerted the Nigerian government that the rising inflation in Africa’s biggest economy had reduced the minimum wage of N30,000 to N19,000.
And rather than subside, Nigeria’s headline inflation has maintained an upward movement rising to 21.82 percent in January 2023.
“Small local players mostly constitute the producers of the cheaper substitutes earlier highlighted. So, the exit may bode well for them as they may take up some of Unilever Nigeria’s demand,” Olowa said, noting that consumers these days are highly price sensitive.
