Key questions this article answers:
Unilever Nigeria announced plans to cut down its operations in Nigeria due to the tough operating environment. How bad is it for Unilever Nigeria, and what are the implications?
Global fast-moving consumer goods (FMCG) companies have recently been cutting down on producing key products. Why has this been happening?
On the 17th of March 2023—the eve of the Nigerian gubernatorial elections, Unilever Nigeria Plc shocked most Nigerians as it announced it was winding down some of its production in Nigeria.
In its statement, Unilever stated that it was “exiting the Home Care and Skin Cleansing categories to concentrate on higher growth opportunities”, citing Nigeria’s macroeconomic woes as its reasons.
In simpler terms, Unilever Nigeria said it was stopping production of three key products—Omo, Sunlight, and Lux (due to the impact of the persistent dollar scarcity, weak and, most recently, scarce naira) to remain profitable.
This announcement to cut production of key product lines came just two years after the fast-moving-consumer-goods (FMCG) giant spun off its tea businesses (e.g. Lipton) to a separate legal entity under the Unilever global group.
Discontinuing operations in some product lines is part of a global brand strategy for Unilever (i.e. the parent company) to improve profit margins. The group had sold off its entire tea business for €4.5 billion, and the Nigerian unit (Unilever Nigeria Plc) earned a one-off income of €6.3 million (i.e. ₦2.8 billion)—which helped boost profitability in 2021. In 2017, it also sold off its spreads business (e.g. Blue band butter) for €6.8 billion.
In February 2023, the British-owned FMCG warned that customers would buy fewer of its products, following a 2.1% decline in volume growth in 2022 and expectations of worse volume growth this year.