Innovate or Exit the Scene, Unilever Discontinues Omo, Lux brands in Nigeria

It is what it is: markets release waves and only great companies have the right antennas to pick the signals.  Those which do not, fade over time. This can be at a company- or brand-level. We’re seeing that play out in Nigeria as Unilever Nigeria discontinues some iconic brands in the nation. 

Yes, Omo and Lux are gone: “On 17th March 2023, Unilever Nigeria Plc announced changes in its business model to exit Homecare and Skin Cleansing categories. These categories are margin dilutive and the exit is part of the company’s aim to make its operation in Nigeria competitive and profitable.” 

Unilever’s Lux has no chance in this age where many Nigerians are becoming “whiter” and “fairer” to the extent you may mistake your ex-classmates a few years down the line. So, Nivea (which whitens skin) killed Lux while Ariel took down Omo. The Ariel frontal assault on Omo was through sachetization (making small packages) where Omo’s big box was disintermediated. Since that happened in the 1990s, Omo has not recovered. Omo used to be the king and its main competitor was Elephant. But Ariel arrived and knocked them out.

As a student in FUTO, I was among the regional sales network for Royal Crown, a haircare maker. My distribution center was then Hotel De General Nwankpi in Orlu. It was a great business and I saw first hand how innovation worked. Kessingsheen Hair Cream was very popular.

But  Royal  Crown came and caused wahala. But Royal Crown then quickly faded with the likes of Soulmate using effective pricing and stylist support system to win market share. Stylists (yes, hairdressers) were the most important entry points.

For the fall of Omo and Lux, you will read about high prices of local raw materials and forex difficulties as the core reasons why Unilever is exiting this personal care category. Those are nonsensical excuses when you consider that Ariel is also a foreign product (from P&G), and Germany-based Nivea has no production plant in Nigeria, which means they are also operating within the same market dynamics.

Innovate or exit!

Unilever Nigeria Plc is being compelled to buy dollars above the market rate because rationing of foreign-exchange by the West African nation’s central bank has caused a shortage of the U.S. currency.

The local unit of Unilever Plc bought the greenback from money changers and lenders at between 440 to 450 naira on an average in the first-half of the year, Adesola Sotande-Peters, finance director at the company, said at an investor conference call in Lagos. That compares with 411.54 naira to a dollar at 4.01 p.m. in Lagos on Thursday.

Nigeria, Africa’s biggest crude producer, has been rationing dollars as the pandemic-induced slowdown, and a slump in oil prices put pressure on reserves. That’s increasing costs for some companies, while others such as Bua Cement Plc are cutting imports. Reserves have dropped about 5% this year to $33.6 billion as of Aug. 10.

Last month, the Central Bank of Nigeria halted the sale of foreign exchange to money changers, sucking out $5.72 billion of annual supply.

Unilever hasn’t seen an increase in dollar supply since the central bank’s latest policy, Sotande-Peters said. “We are still waiting to see how liquid banks will be” to meet a lot of customers’ demand, she said.

The maker of Close-Up toothpaste and Lux soap in Nigeria needs foreign exchange to import petrochemicals, a raw material for many of its products, according to the finance director.

In order to ameliorate the impact of the dollar shortage on operations, Unilever is increasing local sourcing of raw materials to enable it be “forex neutral in the very near future,” Carl Cruz, managing director said at the same conference call.

Comment on Feed

Comment 1: This was also how Cowbell used sachetization to push Peak milk to coma until they woke up although the market had gone far when they woke up. Big Cola divided the Coca-Cola market through direct sales and free chilling of drinks at strategic locations, Indomie is practically competing with itself in the market by having different product designs and flavours just to distract the customers from comparing other products in the market, Flutterwave is doing same. They have many payment gateways in the market that are doing the same thing. Innovation is key for any business that must survive in this era.

Comment 2: I must agree it is what a market like Nigeria demands, people can’t store for long and don’t have extended cash. In short they spend on what they need. The semo packages have resulted to something like this too. If companies understood localisation and not generalization, they would have know that is how garri Is still in business (we measure in units, cups).

Comment 3: Prof Ndubuisi Ekekwe
1. I have observed that a major challenge with Multinationals is their globalization standardisation strategy at the expense of localisation. For many of them, they find it hard to adapt their product offering to conform to the local market. “Sachetization” is not a global strategy but it suits our local market.
KFC also had this issue of clash between globalization and localisation of product offering.

1. I think the real competitors of Unilever Nigeria are the underdogs like So Klean, Waw, Diva, e.t.c. Even Ariel will likely go the way of Omo soon.

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