Strong Customer Relationships As Growth Enabler in Nigeria
By Anurag Shukla, CEO, Crown Flour Mill
Nigeria is the largest importer of wheat in Sub-Saharan Africa. It has a growing population of 160 million, more than 50% of which is urbanised. Urbanisation has been moving at a steady clip of 3.8% over the past five years. Nigeria also has a young population with a median age of 18 years. Nigeria’s demographics underpin growth in demand for downstream food products, such as bread, pasta, noodles and biscuits, which in turn support demand for the principal products of the milling industry – bread flour, pasta flour, noodle flour, confectionery flour and semolina.
The Nigerian flour market of approximately 3.2 million MT is worth more than US$2.0 billion and is growing at a healthy pace of 3.5% per annum. Downstream products, such as pasta and noodles, are growing at 6-8%.
Besides being a large and growing market, Nigeria’s milling industry structure is highly consolidated with five key players, creating high barriers to entry. Port access and a nation-wide sales and distribution network are critical success factors in this business.
Both industry and market dynamics made a strong and compelling investment case for entry into wheat milling and subsequent expansion in Nigeria. The milling business has strong synergies with Olam’s Packaged Foods business, where we now enjoy market leadership positions in downstream categories – biscuits and confectionery, beverages, noodles and seasonings.
In January 2010, when we acquired Crown Flour Mill (CFM), it was ranked fourth in the industry with a very low market share and a focus largely on industrial consumers. Over the past six years, CFM has emerged as the second largest miller in Nigeria, with a strong presence across product categories and market segments.
We have achieved this with a relentless focus on improving product quality, manufacturing efficiency and product innovation. Most importantly, we have kept our customers at the very heart of our growth strategy.
Nigeria is a large country with diverse baking habits. To address this market, we develop a technical sales force by attracting the best from the baking industry, who deeply understands the requirements and the concerns of the bakers, both artisanal and industrial. The team works closely with different bakeries doing product trials and listening to consumer feedback. This feedback forms a crucial input into our product formulation strategy. By listening to feedback from bakers in each region, we have been able to tailor-make products that meet their specific requirements.
Our sales team prides itself on the deep and lasting relationships they have built with our channel partners – the dealers and wholesalers of Nigeria – through outreach programmes and celebratory events. For example, we hold dealer forums annually where we honour our channel partners, celebrate their achievements and pledge support in times of need. We have successfully cultivated these relationships to the extent that the team is now part of the dealers’ fraternity. It is these strong customer relationships that allow us to continue to grow in Nigeria.
With the acquisition of Amber Foods, we are now also participating in the fast growing pasta segment. We are currently the second largest pasta player in the country and are confident of further consolidating and growing our position in this segment, bringing to bear the skills that we have acquired in the flour segment. Leveraging our customer relationships in flour, we have achieved 100% capacity utilisation for the newly acquired pasta mill in a matter of a few months.
Navigating recent challenges
Operating in Nigeria is not without its unique challenges. The political and economic challenges faced by the country in the past two years have had significant impact on all businesses in Nigeria. One of the critical issues has been the volatility of the Nigerian naira, which has led to very tight dollar availability for all importers.
However, Olam as a group, given our diversified portfolio of businesses within Nigeria, has thus far been able to mitigate these risks effectively. We have a portfolio of export businesses which are dollar-generating and provide the required dollars to meet some of our wheat import obligations.
Apart from this internal currency ‘hedge’ and ability to generate dollars, we also have access to both local and dollar funding at competitive rates. All this put together has enabled us to navigate the recent volatility extremely well and we had been able to operate at our full capacity and also be able to support the enhanced requirements of the newly acquired assets.
In the foreseeable future, Nigeria is likely to remain as the largest milling operation in Africa for Olam. There is significant scope for consumption growth and on the back of our strong relationship with our consumers and channel partners, we are very confident of our continued success in Nigeria.