MARKETS
making agribusiness work for Nigerian farmers August 6, 2010
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 -2 -
The demand for rice in Nigeria in 2009 was estimated to be 6 million metric tons.
This is equivalent to 110 million 50 kg bags ..or approximately 35 kg of rice per year for each Nigerian.
Urban consumers prefer long grain, polished and destoned imported rice over local varieties. Since demand for this type of rice is growing faster than local production, Nigerian dependence on imports is increasing. Supporting growth of Nigerian commercial rice processing is of integral importance for food security , job creation & prosperity of economy
Building a multistakeholders partnership based on complementary roles and responsibilities is a critical step towards assuring agricultural development
Scalability & sustainability Access to financial resources, development expertise, logistical capacity, and technologies Synergies resulting from joint efforts Sharing risks and benefits Bringing strategic perspectives to project implementation.
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 -6 -
Address systemic barriers to creating a good competitive environment (e.g., access to allocated funds) Ensure consistently available volume of paddy Ensure availability of the appropriate quality paddy Ensure efficient and cost-effective production Build a processing facility that has the capability to consistently produce the required volume Ensure your processing capabilities produce a product of the required quality Build a network of trusted distributors
DISTRIBUTION
Ensure your distribution network targets the right customers (geographic reach, market size, preferences, etc.) Ensure you are distributing to the right mix of lucrative buyers
MARKETING
Source:
Ensure packaging matches customer needs Develop a brand and marketing approach that builds awareness and distinguishes your rice
-7 -
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Rice Investors and Processors Federal Ministry of Agriculture Central Bank of Nigeria Bank of Industries Commercial Banks
1
10
April
Site
Visits
at
5
mills
14
April
Research
Design
Mee;ng
Rice
Farmer
Best
Prac;ce
Training
3
-
5
August
Research
Review
and
One-on-One
Mee;ngs
Source:
Focus: MARKETS staff gain a practical understanding of the current status of development of processing mills in various regions of Nigeria Focus: Agree upon the design of the end-consumer market to ensure it is practical and helpful to the rice stakeholders group Focus: Agree upon the scope and content of the rice processing training
Focus: Review findings from end-consumer research to identify implications for processors
-8 -
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Galvanized rice processors to collaborate Prompt response from BOI/other banks to open L/Cs and banking facilities (Labanas N500M loan).
Engaged a Nigerian Firm (PSI) to conduct point of sale field interviews in 12 States of Nigeria. Built capacity of PSI by training 89 staff in market research and data collection. Shared results of the Rice point of sales research with rice stakeholder group Held one-on-one meetings with select processing firms to adapt research results to their business models.
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
-9 -
Supporting firms as they assemble their processing plant and develop both out growers schemes and commercial rice cultivation. Identified training needs of firms and recruited a competent Nigeria firms to develop training modules Scheduled a one week training for 20 staff drawn from the 10 processing firms in Makurdi, Benue State from Sept 13 17, 2010 with hands-on-practicals at OLAM Rice factory. Working closely with NISER, Ibadan to obtain report of JICA funded study on Rice Paddy mapping in Nigeria. The result would be validated by Olam (Benue/Kwara), Ebony Agro (Ebony) and Labana Global (Kebbi State).
- 10 -
Paddy Mapping
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 11 -
Packaging
Pricing
Competitive Position
To develop a thoughtful strategy for your business even in a market with such clear demand you must make decisions in each of these seven areas Product, Packaging and Pricing define WHAT you are offering to the market
Distribution
Marketing
Distribution, Branding and Marketing define HOW you are bring your offering to the market These areas are intertwined and interdependent
BRINGING IT TO MARKET
Branding
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 12 -
How do I profitably sell more and more rice over time in the Nigerian market?
Bringing it to Market
Import
Local Product
What must physically change about your rice to successfully compete given customer expectations for quality and available resources, Number and size of packages to be offered beyond the standard 50 kg bag given customer buying patterns and willingness to pay a premium for packaging Price at which to sell rice, relative to other rice in the market and relative to what customers will pay
- 13 -
Distribution
Future Focus Amount and type of investment in branding and marketing to solidify your competitive position and reach your target customers
Packaging
Branding
Pricing
Marketing
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Brand Inventory
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Individuals
Households
Position in HH
24% were male head of household / husband 44% were female of household / wife
Size of HH
49% have 3 or fewer members 31% have 4-6 members 20% have 7 or more members
33% 33%
2% 20%
24%
17%
11%
19% 30%
71%
47%
In the Southern regions, the rice purchaser tends to be the Lady of the House In the North, purchasers are somewhat split between Head of Household, Lady of the House and a minor member of the Household
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 15 -
North East
North Central
North West
Weekly RICE expenditures are more consistent across regions, with roughly 50% of respondents spending less than N1,000 / wk
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 16 -
90% Imported
3% 4% 11%
74%
Thailand
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 17 -
Awareness
Mentions of a brand by survey respondents when asked what types of rice they are aware of in Nigeria
Purchase
How frequently a brand was purchased by respondents to our survey
Distributor demand
Availability
Purchase
MARKET SHARE
Awareness
Customer demand
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 18 -
North East
Available: 29 Brands 13% local 87% import
Awareness: 3 brands Purchased: 49% 10 brands
North Central
Available: 54 Brands 8% local 92% import
Awareness: 32 brands Purchased: 10 brands
49% 46% 36% 51%
South South
Available: 38 Brands 6% local 94% import
Awareness: 28 brands
49% 46% Purchased: 17 brands
South West
Available: 58 Brands 10% local 90% import
Awareness: 35 brands
Source:
South East
Available: 31 Brands 12% local 88% import
Awareness: 30 brands
49%
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Positively differentiating versus imports -- or being accepted as an import -- is the first priority for commercial rice processors For now, regional focus minimizes competition amongst stakeholders. However, second priority is creating a clear competitive advantage versus other domestic rice processors to ensure individual market share.
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 20 -
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 21 -
+ Im proud to buy Nigerian products - Nigerian rice will never be as good as imported
USAGE BENEFITS
+ Imported + Stone-free - Cant be sure the rice is actually what the bag says
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 22 -
Both Wholesale and Consumer Buyers Select Primarily Parboiled, Unbroken, Branded and Unpackaged Rice
Type of Rice Purchased
White Parboiled Brown Ofada Other
0%
0.6% 0.5% 6.2% 5.4% 87.3%
Broken
8.0%
Flour
0.2%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
Branding
Known Brand Unknown Brand
59.9%
Packaging Type
Packaged
20.1%
25.7%
Unpackaged
74.3%
Unbranded
20.0%
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
79%
Wholesale Buyers
86% 14%
Imported
No Preference
Prefer Local
USAGE BENEFITS
What matters most to buyers is taste, swelling, lack of stones and cleanliness of the rice Imported and Branded are most likely shorthand for the quality of the rice
Stone free 280 Quality 228 Cleanliness 197 Price 183 Color 180 Available 139 Long grain 110 Appearance 77 Higher number of Dry 54 selections 44 Attractiveness Unbroken grain Number of Mentions 14
(out of 3065 total responses)
- 25 -
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Purchase rice of the same quality, even if the price were a bit higher (Price Shopper)
84.5%
15.5%
0%
20%
40%
60%
80%
100%
Purchase rice of the same price, even if it were of lesser quality (Quality Shopper)
Buyers of branded and packaged rice are particularly willing to pay for quality, as are higher income buyers (who are also more able to do so).
Brand Buyers
Packaged Buyers
Known Brand
90%
10%
Packaged 91%
150, 000+ N
87%
12%
9%
50,001 150,000 N
Unknown Brand
80%
20%
87%
13%
82%
18%
< 50,000 N 81%
26%
19%
Note: Source:
Tradeoff n=1080, Brand Buyer n=1080, Packaged Buyer n=1080, Higher Income n=850. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 26 -
Nigerian consumers are astute in their ability to assess the quality of rice and in particular of unpackaged rice. Buyers focus, first, on tangible attributes such as color, stones, cleanliness and grain length. Tangible factors are indicators of the likely taste and volume of the rice. Taken together, these factors are definitional of rice quality. Buyers even those with lower incomes -- indicate that they are willing to pay for quality. Quality may be strongly associated, in the eyes of the consumer, with imported, branded and packaged rice.
Rice processors must upgrade to ensure they are meeting consumers standards for quality and consistency of their rice.
Open pot parboiling is no longer viable, as it does not support the required levels of consistency. The level of processing and loss from paddy must fluctuate, not quality of the rice provided. Customers dont care what it takes you to get the quality; if it is not there, they will buy a different rice.
Creating a mid-grade rice will not support success over the long-term. Instead, processors should create different grades of rice , which will meet the quality and price standards of a wider range of customers
Note: this also supports the importance of moving into more targeted marketing as competition intensifies
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 27 -
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 28 -
Bulk Product sold in one large (bulk) package Opened and broken down for sale of smaller amounts Manufacturers begin to provide additional package sizes Select priority package sizes to offer based on customer demand Larger packages still opened to sell smaller amounts Counters brand dilution from rebagging
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Packaged Product sold in packages of a variety of sizes Sold as is, i.e., unopened Sizes determined with an understanding of customer purchase preferences Provision of additional packaged builds and reinforces brand
- 29 -
Origin
Thailand -Thailand Thailand Nigeria Nigeria Thailand Thailand Thailand Thailand USA Thailand
2 kg
X
5 kg
10 kg
12.5 kg
X
25 kg
X X X X X X X
50 kg
X X X X X X X X X X X X
X X
X X X X X
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 30 -
68%
40%
Bulk Packaged
20%
24%
32%
0% North West North Central North East South South South East
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 31 -
Big ike Paint ike Rubber Mudu Big derica / paint Kongo Medium derica Small derica Cigar cup Cup / Milk tin
To analyze and compare bulk purchase amounts, we had to determine the kg equivalent of the various measures of rice used for bulk purchases. This enables us to determine those package size it may be most attractive to offer.
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 32 -
30%
20%
10%
As sizes increase, consumers feel they are getting less value for money. It seems they focus on total cost as opposed to unit cost. This tendency could support sales of smaller packages of rice.
Note: Source: n = 1020. Responses to the question Would you say the price you paid today was cheaper than expected, good value for money, or more expensive than expected? USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 33 -
60.7%
Quality
You trust what the package says (for example if it says it is stone-free or a specific volume) When you buy unpackaged rice, you are concerned that the rice you are buying is not the actual brand claimed. When you buy unpackaged rice, you are concerned that the volume of rice you buy is not the actual brand claimed Small packages of rice are more convenient to buy than large packages of 25-50 kg
0% 20% 40% 60%
63.6%
49.3%
Trust
47.8%
66.4%
80%
Convenience
100%
BARRIERS
73.8%
Quality Assurance
You prefer to buy unpackaged rice because you can more easily see the size of the grain, the color and the consistency of the rice You prefer to buy unpackaged rice because you can touch it to check for stones or dirt
60% 40% 20% 0%
73.1%
80%
100%
Note: Source:
Responses provided by all consumer buyers, n=1020. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Packaged rice is felt to be higher quality. Yet ability to inspect the rice is seen to be vital. This is most likely because affordable small packages are not yet consistently available.
- 34 -
Many retail buyers prefer to purchase smaller amounts of rice (or must do so given cost constraints). Openness to smaller packages of rice is likely to be high, assuming the price is within reach. Perception of value for money decreases as package size increases, indicating a tendency to focus on absolute, rather than unit, cost Packaged rice is felt to be higher quality. However, for most consumers, purchase of unpackaged rice is the only option, so inspecting the rice is vital In both cases, quality assurance is the key to purchase
The key benefits of packaging are easier transaction, portability and trust in quality Rice processors should test the interest f consumes in urban open markets in purchase of 2.5, 5 and 10 kg bags Do so without investment in equipment or alteration of processing lines Will enable understanding of who will purchase and overall viability
Initially, the price of smaller bags may have to be at parity with unpackaged rice (loss leader). The price can rise as consumers associate quality with the packaging and the brand Packages should include a tamper proof seal or other indicator that the rice has not been rebagged, as a value signal to customers
- 35 -
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 36 -
HIGH
Imported Rice
Product
Local Rice
LOW
Quality Competition: Able to compete in the market base on relative quality of product, a more flexible position
Price Competition: With this approach, you default to competing in the market based on ability to provide lowest price product
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 38 -
Origin
Thailand Thailand USA -Thailand Thailand Thailand Nigeria Nigeria Thailand Thailand Thailand
N/ Kg
172.81 171.00 170.67 164.57 162.50 162.29 160.75 161.64 160.12 149.11 146.96 145.50
Texas Gold Dangote Rice Master Caprice 500 Siamese Mama Africa Mama Gold
Mean Median Mean Median
60 Imported
76
Local
Note: Source:
all n=533; local = 60; Imported = 463 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 39 -
Local Imported
126
199 152
205
160 120 80 40 0
132 106
White
Parboiled
Brown
Other
Unbroken
Broken
Flour
Branding
240 200
Naira / kg
Packaging Type
240
207
172
212
236 189
140
160 120 80 40 0
Unbranded
Packaged
Unpackaged
n=1020 for all charts. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 40 -
But Buyers of Both Import and Local Assess Price Fairness Similarly
All Buyers
% of Respondents
4% 27% 69%
More Expensive than Expected Value for Money Cheaper than Expected
80%
More Expensive Than Expected Value for Money Cheaper than Expected 70% 69%
60%
40%
29%
20%
17%
13% 2%
0% Local Imported
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 41 -
244
236
38 N
100%
% Respondents who Said Value for Money
Processors ability to price highly depends upon their ability to add value to the rice- through packaging
58% 46%
All Parboiled
Note: Source:
parboiled n=866; parboiled and unbroken n=827; parboiled, unbroken and branded n=536; parboiled, unbroken, branded and packaged n=176 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 42 -
500 270
Mean Median
200
Mean Median
147 41 Consumer
Median Mean
100 30 Wholesaler
60 Imported
76
Local
Note: Source:
all n=533; local = 60; Imported = 463. N for Consumers = 346, n for Wholesalers = 59. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 43 -
Pricing relative to imports results from charging a fixed margin below the prices of imported rices available in the Nigerian market. This approach results in fluctuation in rice pricing (albeit less than Cost Plus) Advantages Prices will tend to be higher than cost plus May reinforce higher quality perception of rice (if price signals quality) Disadvantages Pros and cons of variability noted Automatically sets a price ceiling for domestic rice. For processors aiming to product highest quality rice, this strategy leaves value on the table
Value-based pricing results from charging a price that directly correlates to buyers perceived value of your product.
Value-based Pricing
Advantages Least variability in price over time, which aids strategic and operational planning
Disadvantages Striking the right balance between quality to achieve and price that domestic prices can feasibly command in the market will be a challenge at first
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 44 -
The price ceiling in the market is set by imported rices, which have a wide variety of selling prices What matters for pricing is buyer perceptions of quality; must price relative to these perceptions Domestic rice is consistently lower priced than the average imported rice; there is a penalty, rather than a premium, for being locally-produced
This is true even for higher quality rice (e.g., Olams Mama Gold, Mama Africa) Buyers do not yet associate domestic rice with quality levels that command a premium price
Processors must select their approach to pricing, in large part based on their fixed costs and the planned quality of their rice Those who are backward integrated with more control over their input costs will be better able to adopt value-based pricing Processors who go to market as a purely imported product (e.g., by mimicking an existing brand) may be able to command a slightly higher price in the short run In the long run, however, promoting the attributes of domestic rice that people value (e.g., freshness, taste) will allow processors to largely decouple the price of their rice from fluctuations in either input costs or import rice prices
Packaged rice commands a premium price, yet is seen as less value for money by cost-conscious buyers
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 45 -
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 46 -
Retail Channel
Wholesale Market
End Consumer
While you may wish to serve specific regions and markets, for most of you, your only real choice is:
Who is my distributor?
Northwest
Southwest
Small Retailer
Your ability to work with your distributors so that you both profit from selling more rice at higher prices is dependent on you knowing:
Which regions, market locations and customers are most attractive for you to serve?
Southeast
Distributor
Retail Location
Consumer
Product
Package
The vast majority of rice is sold in 50 Kg bags. When distributors carry smaller bags, they are always bundled inside 50 Kg wrappers. They assess rice quality based on whether it has import quality packaging (high quality bags, nice printing, clear branding, well sealed).
Implications: High quality packages are a must to work with distributors, as they are a strong signal of the value of the rice. Must convince distributors that there is consumer demand for smaller packages of rice in order for them to accept them.
Pricing
Recurring relationships garner the best prices, both for suppliers and for retail buyers. Distributors are accustomed to working with importers and would prefer that their suppliers mirror the service and terms that importers provide. Distributors expect marketing support from their importers, and would expect the same from local mills. There is an expectation of product promotion: advertising support, sample distribution, etc.
- 48 -
Implications: Set up terms that match standard for importer distributor relationships, e.g., credit terms, FOB pricing, marketing support, incentives
Go to Market
Implications: Some degree of investment in sales and marketing, as well as incentives to distributors, may be necessary to build demand for new brands of local, premium rice.
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Distributor
Retail Location
Consumer
Product
Package
Implications: Lower investment in packaging required to partner with local distributors. Less of a push for smaller packages of rice
Pricing
Domestic distributors buy all the rice up front and prepay in order to secure volume. They estimate processor total costs based on their knowledge of paddy prices and production costs, and create a fixed margin above this level. They treat purchased on a cost plus basis, with little pricing premium for quality. No expectations of marketing on the part of the supplier. Local distributors do any marketing / branding themselves. Availability is what matters to them. Incentives for uptake of rice are common, to encourage distributors to aggressively market a given rice.
- 49 -
Implications: In start-up phase, will be easier for rice processors to work with local distributors who are able to pay in advance for rice. Downside is the loss of premium pricing opportunity.
Go to Market
Implications: Relationship based go to market approach, with some investment in incentives to distributors required.
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Distributor
Retail Location
Consumer
0%
Approaching local importers and local traders could be a viable channel for distribution of your rice
Note: Source: Rice Sources n=203; Channel Share n = 1020 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 50 -
Distributor
Retail Location
Consumer
5
Very Likely
5,229
4,935
3
4,971 4,800
2
Not at All Likely
Wholesale buyers especially retailers are open to trying domestic, commercially-processed rice. However, their estimated price for a 50 kg bag reflects a significant discount from imported rice.
Note: Source: Rice Sources n=203; Channel Share n = 1020 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 51 -
Institution/Others
Eatery
Institution/Others
Eatery
Distributor
Retail Location
Consumer
64.5%
35.5%
40%
60%
80%
Wholesale
Go to a different wholesaler at this location or a different location to find the rice you want
61.1%
38.9%
Buy a different type of rice from the same wholesaler at this location
100%
0%
20%
40%
60%
80%
Customers are more likely to go to another retail location in search of a particular type of rice than to remain location loyal. Ensuring your rice is consistently available in locations where it is introduced will be vital to buyer uptake.
Note: Source:
Consumer n=1020; wholesaler n=58 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 52 -
Distributor
Retail Location
Consumer
Wholesale Consumers
63%
Lower prices
54%
Lower prices
31%
Easy to find the rice I want to buy Variety of different brands to choose from
53%
30%
42%
28%
39%
I trust this vendor Variety of different brands to choose from Could not find my rice at my regular outlet Other
24%
I have a specific vendor / supplier I buy from Closer to me / my organization Variety of different wholesale vendors to choose from Could not get my rice from my regular wholesale channel
37%
17%
27%
5%
20%
2%
3%
Retail buyers choose a location based on proximity first. Price and quality of products, however are important choice factors. For wholesale buyers, value and ability to find preferred rice are the key drivers of location choice.
Note: Source: retail n=1020; wholesaler n=59 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 53 -
Distributor
Retail Location
Consumer
Purchase Frequency
37%
40%
39%
30%
27%
28%
16% 9%
14%
14%
5% 1%
0%
300 or Less than 120 to 180 to 120 N/Kg 180 N/Kg 300 N/Kg more N/ Kg
Every day
Objective: Find customers who want my rice AND who frequently buy larger volumes at higher prices
Note: Source: Rice Sources n=203; Channel Share n = 1020 USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 54 -
Distributor
Retail Location
Consumer
250
40.0
153 151
200
30.0
150
Naira
20.0
18.4 13.4
100
9.8 6.7
10.0
50
Kg
N /Mo
Kg
N /Mo
North West
Customer Value N 6,579 / month
North Central
N 11,655 / month
North East
N 8,553 / month
South West
N 6,298 / month
South South
N 7,017 / month
South East
N 8,869 / month
Note:
Source:
n=987; Volume = (average Purchase size, Kg; Price = N/Kg; Frequency = Purchases / Month); Customer Value is the average of Customer Value calculated for each respondent; Respondents selecting a purchase frequency of once per month or less were calculated as 1/month. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 55 -
Distributor
Retail Location
Consumer
40.0
30.0 150 20.0 100 10.0 2.5 Kg Naira /Month Kg Naira /Month Kg Naira /Month
7.8
9.0
10.1
8.4
50 0
Supermarket
Customer Value N 15,875 / month
Small retailer
N 5,828 / month
Open Market
N 8,582 / month
Note:
Source:
n=987; Volume = (average Purchase size, Kg; Price = N/Kg; Frequency = Purchases / Month); Customer Value is the average of Customer Value calculated for each respondent; Respondents selecting a purchase frequency of once per month or less were calculated as 1/month. USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 56 -
Distributors of imported and local rice have very different approaches to and demands of their suppliers
Payment and credit terms Marketing expectations
To compete effectively with imports, rice processors should explore working with imported rice distributors
However, in the short term, while cash flow is constrained and volume uncertain, working with local distributors may be the best option
Retail locations use a mix of both import and domestic channel suppliers. Those using import suppliers may be attractive for highquality domestic rice producers
They exhibit openness to trying domestic, commercially-processed rice But they dont expect local processors to produce a rice with quality worth more than 5,000/ 50 kg bag
Processors should seek distributors who sell their rice on to those market locations frequented by higher value customers
The goal is targeting customers who have ability and willingness to pay the premium for high-quality domestic rice
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 57 -
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 58 -
Switch
Buy
Loyal
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 59 -
Switching Frequency
How often do you try new brands of rice?
80%
8% Unlikely
12% Unsure
Although buyers do not often switch rice, many indicate that they are curious to try a domestic, premium-quality rice.
Note: Source: n=1080 for all charts USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 60 -
Quality and taste drive choice to switch rice, but trying new brands and brand availability are close behind.
1% 2%
Percentage of total mentions of buyers of branded or unbranded rice
Note: Source:
n = 252 frequent switchers and 768 infrequent switchers; n=863 Branded and 217 unbranded USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 61 -
Quality at an Affordable Price will be the Key Lever for Domestic Commercial Rice
Likely to Try
Unlikely Unsure Likely to Try
9%
Percentage of Total Respondents
8% 13%
Percentage of total mentions of buyers of of Percentage of total mentions of buyers branded or unbranded ricerice (rice 1 only) branded or unbranded (rice 1 only)
11%
25%
15%
15% 13% 7% 4% 2% 3% 2% 3% 1%
80%
79%
6%
Quality
Branded
Unbranded
Support economy
Price
Taste
Local
Unbranded buyers will buy because youll solve their quality problems, while branded buyers will buy because youll meet their quality threshold while offering them the chance to support the growth of Nigeria
Note: Source: n = 1080 overall; n = 863 branded; n = 217 unbranded USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 62 -
Distributors / retailers and Friend / Family are the two most powerful levers for influencing buyers to try new rice. Rice processors should focus marketing activities in ways that promote word of mouth in these two groups.
Loyalist
Objective: Only buy your rice
Trust
Consistency
Availability
USAGE BENEFITS
Buyer
Objective: Repeat choice of your rice
Quality
Tangible Proof of Quality
Switcher
Objective: Try your rice
Time
Initial Awareness from advertising or market presence Association of brand with first use / experience Easier repeat purchase as brand becomes proxy for quality Brand ensures a buyer the same level of quality over time
Buyer associates emotion benefits from brand (pride in Nigeria, buys the best, etc.)
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 64 -
Requirement Positively differentiate versus local and Imported rice currently available in the market
Requirement Ensure price of rice is comparable with that of available local rice
Challenge Ability of commercial rice processors to offer import-quality rice. If not, this could be short-term win, longterm loss.
Challenge Balance higher operating costs and higher quality requirements to offer a premium-quality rice at a more affordable price than imports
Challenge Can commercial processors offer their rice at a comparable price point given their fixed costs?
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 65 -
Domestic
New Category : Commercially Processed Domestic Rice Needs to be seen as better / different than current local rice and value compared to imported rice. Build brand based on quality, freshness, local flavor, and Nigerian pride Targeted mix of bulk and smaller packaging to match customer preferences for purchase amount Price relative to imports (and to value). Seek higher prices in future as category and brand become established Invest in promoting name of rice, quality, and associated non-product benefits Focus on customers with interest in Nigerian rice and ability to pay
- 66 -
Package
Pricing
Go to Market
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
Contents
Review of MARKETS work with Rice Processors and Investors Focus of Rice Point-of-Sale Market Research Competitive Landscape (Brand Inventory) Defining the Product Offering Determining Package Sizes Identifying a Price Point Bringing Your Product to Market Promoting Switching to Domestic, Premium-Quality Rice Potential Next Steps with Rice Processors
Source: USAID Markets / Lodestar International Rice Point of Sale Survey June 2010 - 67 -
Continued support for outgrower development and farmer technical training (ongoing) Training on best practices in rice processing (Sept. 2010)
Support creation of a formal rice processors association, which can serve as a venue for advocacy, best practice sharing, joint marketing and enforcement of standards (e.g., Proudly Nigerian)
Potential
Training on and support for implementation of best practices in packaging, branding and pricing Price tracking for key rice categories to chart annual fluctuations (paddy prices, truly local rice, high quality domestic and imported) Validation of key findings from JICA-funded report on paddy mapping
Source:
USAID Markets / Lodestar International Rice Point of Sale Survey June 2010
- 68 -