Nestle Nigeria has reported a 28% increase in net profit for the full year 2018, driven by a 90% reduction in net finance cost. Revenue grew 9% from N244bn ($670m) in 2017 to N266bn ($740m). The results are another sign that, having tamed rampant cost increases, surging consumer demand is driving profit growth for FMCG companies in Nigeria.

Nestlé has said that net profit rose from N33.7bn ($93m) to N43bn ($120m). Apart from falling net finance costs and cost containment, the company identified consumer loyalty and innovation as key drivers. However, under innovation, it highlighted adding iron to its Morn Puffs breakfast cereal range  -hardly a revolution in the brand landscape. Another contributory factor is surely that Kelloggs has still yet to put its breakfast cereal distribution on track after the acquisition of its manufacturing joint venture with Tolaram in May 2018.

Nestlé has issued a generic positive statement about prospects in 2019. The reality is that, as for other major manufacturers in Nigeria, the last few years of slow growth and Naira devaluation have brought about a much stronger focus on using domestic inputs, managing costs, and growing the value sector for products. These learnings have been invaluable for the company, which is well-placed to benefit from the engine of population growth and the creation of new waves of (mostly low income) consumers.

The challenge for Nestlé as the economy picks up is to kick start its innovation programme once more. It has a solid, well loved and widely distributed product portfolio that includes blue chip brands such as Milo, Maggi, Nido and Carnation. But it needs to put more energy into growing its premium product ranges and its growth sectors, such as soft drinks.