Why you should care about Maggi stock cubes in Nigeria

by Tamara Pitelen
Did you know that people in Nigeria drink more Guinness beer than in the US or in Ireland? No, neither did I till a few hours before the earthquake that hit Iran on Tuesday [which, just as an aside, was felt frighteningly strongly by those of us sitting on the 33^rd floor of the CPI Financial offices in Dubai Media City].

Why you should care about Maggi stock cubes in Nigeria - cpifinancial.net

I learnt that fascinating little fact about the Guinness-loving African nation at a Mutual Funds conference sponsored by Allfunds Bank - it was an excellent event. I also learnt that every day in Nigeria, 60 million cubes of Maggi food stock are sold for less than 10 cents each. If you include the whole of West Africa, 100 million Maggi cubes are sold per day.

This is why Africa, in particular Nigeria, has asset and wealth managers so very, very excited. The demographics are the kind that make asset managers sing and skip. About 150 million people most of whom the median age is 19.

N-n-n-n nineteen [random reference to 1980's hit anti-war song by Paul Hardcastle that has nothing to do with Nigeria but may press home the point that these people are YOUNG. As a comparison, the median age in Europe is 40s, which does not inspire much dancing from wealth managers].

Sure, most Nigerians may currently be living on $1 to $2 a day but, as you can see from the Maggi stock cubes example, the quantity of people means companies targeting this market are still making a lot of money.

Why are so many stock cubes sold per day? I’m glad you asked because it’s very interesting. This is what Senior Portfolio Strategist for Goldman Sachs Asset Management (GSAM) Katie Kochs had to say about it, while speaking at the Allfunds Bank Mutual Fund Connection conference:

“The good news story coming out of Nigeria is that it’s had the strongest improvement in its Growth Environment Score… and if it continues to improve at this rate, it’s possible that Nigeria will be larger than South Africa in the next 10 years. If you project very far out, it could actually have an economy the size of Germany by 2050.”

Ok, here’s the bit about the stock cubes. Maggi make three flavours, chicken, shrimp and beef. According to Koch, there are three positive attributes of the wee cube. First, it tastes good. “It flavours food, so if you’re living on a couple of dollars a day, you can’t afford to buy beef or chicken or shrimp to put on the table for your family but you can afford to buy this cube. So you make a vegetable based meal, you add this and you get the protein flavouring that you might not be able to afford,” Koch said.

“Second, it’s fortified with a couple of different micro nutrients, iron and iodine. In Nigeria, 25 per cent of pre-school aged children could be classified as anaemic because of iron deficiency in their diet. Iodine is extremely important for pregnant mothers, they have to have enough in their diet for foetal brain development.” The company has gone out of its way to spread this message and educate Nigerian mothers about the importance of iron and iodine for their children.

Third, stock cubes are cheap. Families living on a shoestring can afford them.

Why is this all so very exciting for wealth managers? Because it’s a specific and very real example of one of the biggest – if not THE biggest – themes for global economic growth in the next decade or so, namely the rise of the domestic consumer in developing markets.

When millions and millions more people in Africa and Asia have greater discretionary income, it’s big news for companies providing basic goods in areas like healthcare (painkillers), personal grooming (shampoo, soap, toothpaste, etc), food products, and more.

As a result, GSAM have companies like Maggi in their portfolio as well as a Nigerian beer company, for reasons that should be obvious based on the first sentence of this blog.

I’ll give Koch the last word on this, “the consumer story is really important to growth markets over all, I’m extremely excited… if I had to pick a theme within the theme that I was most excited about, it is the rise of the domestic consumer.

“We think by the end of this decade, we think we’ll have over one billion individuals entering the emerging market middle class. It is going to have a dramatic impact on the fortunes of both developing and developed market companies.”

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