Renaissance Capital Launches Consumer Price Tracker, Nestle the preferred brand in latest report

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… Nestle’s Maggi is priced at a discount to Unilever’s Knorr seasoning cubes

Lagos, Nigeria: Monday 5 June, 2017 – Renaissance Capital, (RenCap) a leading emerging and frontier markets investment bank launched its Consumer Price Tracker which will collate and compare prices of major consumer brands in Lagos including products by Nestle Nigeria, Unilever Nigeria, Cadbury Nigeria and other competitors.

The Consumer Price Tracker will furnish investors, analysts, government and businesses with insight and data to make more informed investment decisions, as well as provide information useful in evaluating the impact of economic changes on the pricing of consumer goods – measuring price differences and similarities between competing brands – and tracking the country’s inflation rate.

The Price Tracker, which is similar to the well-received beer price tracker, was initiated in Lagos and Renaissance Capital is already collecting the prices of major consumer brands produced by Nestle Nigeria (MARKET PERFORM, TP NGN815.00, CP NGN870.00), Unilever Nigeria (UNDERPERFORM, TP NGN27.80, CP NGN35.75), Cadbury Nigeria (Under Review) and other competing brands.

Temi Popoola, Chief Executive Officer, Nigeria, commented: We have been advising investors in Nigeria and the rest of Sub-Saharan Africa for close to a decade and have built and grown our team of experienced analysts and economists who provide reliable and useful analysis that encourage investments in the region. We are seeing green shoots emerge in the Nigerian economy and our Consumer Price Tracker comes at a much needed time to contribute in maintaining the momentum as Nigeria regains its position as the leading economy in Africa.

Adedayo Ayeni, Consumer & Retail Analyst, Sub-Saharan Africa, also commented: Our consumer tracker is our way of bridging the information gap that some researchers, analysts and investors have experienced in the past. We are confident about our new product and its reliability in providing useful insights that will not only engender more informed investment decisions but will also highlight gaps in the consumer sector that must be closed.

Major findings from the most recent price tracker are that even with recent price rises, Nestle’s Maggi is still priced at a discount to Unilever’s Knorr seasoning cubes. The tracker also highlights the significant price rises Unilever imposed in 1Q17, explaining its impressive top-line growth.

Nestle’s Maggi stock cube pricing is up 11% YtD compared with Unilever’s price increase of c. 26-30% on its competing Knorr seasoning cubes. In December 2016, RenCap observed Unilever’s Knorr to be priced 13% higher than Maggi on a per-gramme basis.

“With Unilever imposing higher price increases, this pricing premium has now widened to 33%. This may indicate Unilever’s need for higher price increases (to recover operating margins) vs Nestle, given its FX exposure.”

RenCap noted that Unilever’s FX-denominated costs stood at 62.8% of production and operating costs in FY16, vs 40.0% for Nestle. Unilever’s operating margins fell to 5.4% in 3Q16 and only began to materially recover in 4Q16, when we believe the major price increases were put in place.

“This compares with Nestle’s 21.2% operating margins in 3Q16. While our price tracker misses critical price points in 2016, making YoY price comparisons impossible, the 1Q17 sales growth seen by Nestle suggests the average price increase on its food brands is c. 40% YoY.”

According to RenCap in a report made available to G&BJournal, given current prices of competing seasoning cube brands, we believe Nestle has additional scope to implement further price increases, given the observed discount vs Unilever’s Knorr, when the further currency devaluation we expect is implemented. Beverage prices indicate that Nestle has imposed a 28% price increase YtD on its 500g Milo. This compares with the 20-21% price increase put in place by Cadbury on Bournvita. On comparative pricing, the Milo SKU available in the store during our check was priced 3% higher than Bournvita in the same SKU. Please see the charts on page 2 for comparative pricing.

HPC: Mixed bag in the oral care vs washing powder segments

They also observed a material price increase of 33% YtD on Unilever’s flagship oral care brand, Close-Up (50g). However, it has imposed a more significant increase of 60% YtD on the 140g offering, with its brand now priced 7% above the next available brand on a per-gramme basis. Comparing all 140g offerings, Unilever’s Close-Up is priced 9% above the average price for the segment. The washing detergent/powder segment is a lot more crowded, with Unilever imposing the most price increases YtD. Unilever’s Omo brand is now priced 2% lower than segment leader (Ariel), after a 47% price increase YtD.

Nestle offers better exposure

“On net, we prefer Nestle to Unilever, given the company’s segment-leading brands and improved route to consumer, which management says has helped it gain market share. Nestle also appears to us to be a more resilient player in its segments than Unilever.-theG&BJournal exclusive

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