Corporate Social Responsibility and FMCG Companies in Nigeria

Corporate social responsibility (CSR) has been practised by private businesses since the early days of the Industrial Revolution, taking place at a time when the idea of a welfare state did not yet exist. The first motive was to improve the living standards of the working classes so that they would be more inclined to work more efficiently. Western Europe has moved on a long way since then but the issue remains key in developing countries like Nigeria.

CSR is no longer the sole prerogative of the major oil companies operating in Nigeria. FMCG players have also caught on to this trend as the consumer goods industry has been booming. In turn, many leading players are taking part in ambitious programmes to assist with community development. The packaged food industry alone is worth NGN770 billion (more than US$5 billion) and the country’s 158 million-strong consumer base is a huge source of potential growth, although challenges remain.

Booming growth has stretched the country’s infrastructure

Rapid economic growth and urbanisation are challenging the internal balance in Nigeria, with the national government and local authorities often struggling to keep up with the rapid pace of change. The lack of extensive social care and basic infrastructure is a well-known problem. Moreover, being a member of the middle-class is already an achievement in a country where an estimated 84% of the total population live on just US$2 a day, according to UNESCO (EFA Global Monitoring Report 2011, page 273 Table 1, UNESCO).

In urban centres like Lagos, regular power cuts cost people and businesses time and money, and the same is true for transportation, waste management and access to clean water. This is where private companies come into the picture, with CSR programmes playing a key role. They are able to help where the government has failed and can make a lasting difference to communities.

A boost to brand equity?

CSR programmes can also directly feed into a company’s corporate image and can result in improved brand equity, particularly when a company has a few iconic brands in its portfolio. However, it remains difficult to assess the impact of CSR specifically on overall brand equity as it is generally not tied to a specific product but to the organisation as a whole. That said, it is typically true that the more a company talks about its CSR endeavours, the more it makes itself visible to the community. This can, in turn, eventually benefit retail sales. Consumers are more likely to remember the manufacturer of a particular product if it has funded a local school or helped dig a borehole for the community.

It is fair to say that brand equity and CSR go hand in hand, especially in emerging markets. A company selling goods on a massive scale is increasingly expected to give something back to the community. Not to do so could be used against a company by its “more caring” competitors if they are seen to be more socially responsible.

In Nigeria, CSR represents a way for companies to win the hearts and minds of local communities, as well as to better understand the local culture and its specific needs. Several companies have already found considerable success with this strategy.

Promoting CSR programmes

CSR has certainly become standard practice in Nigeria and several manufacturers of “superbrands” use it as a means of building a strong foundation within the country, portraying themselves as part of the community within which they operate.

For example, PZ Cussons Nigeria Plc, Cadbury Nigeria Plc and Unilever Nigeria Plc are all involved in CSR programmes, promoting their actions through their annual reports and press releases. These companies have a global reach and have practiced CSR at one time or another in their markets around the globe.

PZ Cussons, through its not-for-profit arm PZ Cussons Foundation, takes both a consolidated and long-term approach to doing business in Nigeria. As such, it has added to its targeted CSR actions a more ethically-minded agenda. The foundation’s targets are focused on four areas: potable water, road rehabilitation, education and healthcare.

The company is the second biggest player in Nigerian home care and beauty and personal care with total sales of more than NGN30 billion in 2010 (US$200 million). Its flagship brands are Venus, Joy and Imperial Leather, all of which are considered household names. As a food manufacturer, PZ Cussons claims to be a provider of cheap and nutritious products while its soap and detergents assist in improving hygiene standards in the country. PZ Cussons also strives to make its business model environmentally sustainable by sponsoring responsible palm oil sourcing and supporting the health and safety of its employees. This is a step beyond pure CSR and is in line with what other major FMCG companies are doing in developed markets.

According to PZ Cussons Nigeria Plc, CSR, sustainability and best practice are essential parts of its identity, and the company will continue to work closely with communities and political leaders to improve living standards in the country.

Looking at the company’s performance over the past five years, it seems that it has managed to hold its ground against its main competitors while investing consistently in CSR activities. In both beauty and personal care and home care, PZ Cussons saw its retail value share rise by four and five percentage points, respectively, between 2005 and 2010. Its hair care brand Venus was one of the biggest winners as its sales doubled over this five-year period. The same goes for the detergent brand Elephant, which posted a solid retail value sales increase of 150%.

It is too early yet to draw an explicit and clear link between CSR and the retail performance of one brand in particular as many other factors have to be considered – route to market, price and packaging to name but a few. However, PZ Cussons remains true to its pledge of giving back to the community and improving ethical standards in the industry. Moreover, the company’s top executives are convinced that CSR is the way forward and will secure the company’s leadership position over less socially sensitive rivals.

Likewise, CSR programmes have proved favourable for the Nigerian Dangote Group of Companies, a Nigerian publicly listed company. It is a huge organisation, turning over NGN450 billion annually (US$3 billion). The company is also a leading player in packaged food, with total sales of nearly NGN40 billion in 2010. Its dried pasta brand Dangote ranks among the top 10 packaged food brands in the country.

Dangote is also one of the fastest growing brands in Nigeria and boosted the company’s overall ranking in packaged food from eighth in 2006 to third in 2010. The company’s success stems from its modern production facilities as much as the connections between its top management and local authorities and government officials. The company has been very active in promoting itself, its corporate identity and direction, and this has surely seduced retailers and consumers alike.

Dangote has created its own charitable organisation called the Dangote Foundation which is very active in terms of PR and marketing efforts. In March 2011, the company invited to its headquarters the top media executives and publishers in Nigeria in order to “acquaint the media with the ongoing expansion plans of Dangote Group”.

More ambitious was the launch in early 2011 of a NGN5 billion (US$33 million) fund for job creation, in partnership with the Bank of Industry. This initiative is meant to help create employment in small and medium enterprises across the country. The fund will be increased further to NGN10 billion at a later stage. The company hopes this fund will create around one million jobs in Nigeria.

CSR becoming a core requirement

CSR is still in its infancy in Nigeria and remains fairly limited to large organisations and multinational corporations. Local players have more pressing issues to tackle if they want to survive, let alone expand their market position.

In Nigeria, business and politics also go hand in hand, more so than in Western European countries. As such, successful companies and entrepreneurs have to nurture their relationships with government officials in a country where red tape can be both overwhelming and disruptive. In turn, many companies operating in the country are tempted to seek the endorsement of local political or religious figures, or even the state governor, although this would rarely take the form of a CSR programme.

Nevertheless, as Dangote Group and PZ Cussons Nigeria Plc have shown, there are many ways to leverage CSR in an emerging market like Nigeria, from basic good governance rules to PR campaigns. For the moment, it seems that FMCG companies have taken a more active role in engaging with the community, in addition to developing ties with the political elite. Going forward, CSR will continue to shape future initiatives as companies need political support if they want to prosper and become better known among African consumers, investors or suppliers.

More established companies will use their financial muscle to launch larger scale CSR programmes which are likely to benefit their day-to-day business. Among such projects, road building/repair and other basic infrastructural improvement should be a top priority as better roads mean an improved supply chain and better access to consumers.

FMCG companies will certainly play a huge part in the modernisation of Nigeria’s dire transportation system. It has an impact on everyone’s life and any improvements made can easily be leveraged for PR and marketing purposes. As traffic congestion and power cuts are among the most pressing challenges facing 21st century Nigeria, any company actively trying to tackle these issues will likely garner respect and sympathy from consumers, who will then more than likely opt for that company’s products over those of a competitor.

As consumers become more educated about companies and the products they make, they will likely become more critical about these companies’ business strategies and how these strategies impact the public sphere. Thus, it is expected that CSR will form a growing part of corporate strategies in the future and will be instrumental in a brand’s retail performance and ultimate success in the Nigerian FMCG marketplace.