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Poor road network hinders products distribution – WAMCO MD

By BusinessNews Staff on May 23, 2014

The Managing Director, FrieslandCampina WAMCO Nigeria Plc, Mr. Peter Eshikena, spoke with journalists in Lagos about the impact of insecurity and poor infrastructure on the country’s businesses and his company’s plans to encourage local dairy production, among others. Simon Ejembi was there

What was the operating environment like last year?

Well, 2013 was not different from the previous two years based on what we saw in the market last year. Although the economic indices have been in the upward direction, there is a big gap between what we see as Gross Domestic Product growth and the stability of the naira. There is a big gap between that and disposable income.

In my view, I think that the partial removal of the fuel subsidy in 2012 still has an impact on the disposable income of the Nigerian consumers.That has not gone away yet. Although inflation has been kept at a point where it is not increasing astronomically, salaries are not increasing and, therefore, disposable income remains an issue; that is one (problem). In terms of infrastructural development, we have a large number of issues when it comes to the roads. The government is doing a lot, but a lot more needs to be done to improve on the status of our roads. This is directly why supply chains are very long; you have trucks breaking down and you cannot send goods to your distributors on time. You (also) have issues around power supply, and while the efforts of the government in going private with power are really laudable, there is still a long way to go for us to recover from power issues. In a nut shell, the state of the country’s infrastructure is still far from a level where we can say we are now having a positive impact (from infrastructure) on the economy. Until these are addressed, we will continue to have this pressure on the market.

With a turnover of over N120bn and a profit before tax of almost N20bn, can one say that FrieslandCampina WAMCO Nigeria is not doing very well?

Despite the problems (in the operating environment), we have not remained stagnant – even though we are the market leader. In fact, when you are the market leader , that is when you should be on your toes. So, we’ve grown our business by focusing on our core strength areas and leveraging on the strength of our brands. We have very strong brands – Peak, Three Crowns and Friso These are household names when it comes to Nigeria. So, that has helped us a lot. Besides that, we have a committed workforce that is ready to be with the company whatever happens. That has also helped us. In addition to that, we have a strong heritage from our parent company in Holland, and they have been very supportive in terms of innovation and R&D (research and development). These are the elements that have helped us get to where we are.

Can’t you domesticate production? You are talking about relying on Holland for the supply of milk…

We don’t rely on Holland for the supply of milk; I mentioned two elements – innovation and R&D. Those are the areas where we get support from them (the parent company). If you come to the fact that there is no sufficient milk in Nigeria, that point still remains. And it wasn’t until 2010 when WAMCO took the leadership, looking inwards into the country to see what the potential of fresh milk available in Nigeria are that we knew, along with the government, that we don’t have enough milk in Nigeria. That was the point when we embarked on the Dairy Development Programme. It is a very expensive project because of the low yield of milk (in Nigeria). So, you put all the cost behind your activities. But the per litre price is still very expensive compared to what we import. However, because we believe that this is the way to go, we decided to start small and build it (the facility needed for the scheme). So, at the moment we are building it. Like I said at the AGM, we just started a bulking centre in Iseyin, we are focusing on Oyo State for now.

What about your partnership with Shonga Farms?

Yes, we are in Shonga; we started with Shonga actually and then we expanded to Oyo. We launched the scheme in Iseyin last week. That was the inauguration of a milk bulking centre. A bulking centre is where all the milk that is collected is bulked into one. From there, our trucks will collect it and bring it to Lagos for adding to our evap. We then process the fresh milk from the evap.

How has the Federal Government’s Agricultural reform affected the programme?

The government is taking dairy development very seriously. Like I said, it is not a terrain that we are used to; the government is not used to it. We are used to it in other countries, but in Nigeria we are not used to it. So, you can call it a teething process that we are going through, together with the government.

How has the security situation in the country affected your operations, particularly in the North East?

The previous year showed a really frightening development, especially in the North East. Business in that area has been completely paralysed. As I speak, transporters who are supposed to carry products to the distributors in the markets in the North East are no longer willing to go there because the risk levels are too high. So, we have had to relocate our salesmen from Maiduguri to Gombe, which is safer. But in recent times , Gombe itself has been bombarded as well. So, it is yet to be seen how the situation will develop, but I think with the effort of the government and the international community,we should be able to address it.

Some of your competitors have said their foray into the value segment of the market via the packaging of milk in sachets for as low as N10 has boosted their revenue. What has your experience been in that segment?

We have the same provision. We have Peak powder, IMP we call it, 20 grammes. That is the provision we have to address that segment that you are talking about. That is actually the one that is driving the powder market today.

How would you say your appointment as the first indigenous MD of the company has impacted on it?

I don’t think it has to do with the nationality of the head of the company. It has to do more with the elements I mentioned earlier; the elements of the strength of our brands, the connection we have built over 60 years with the Nigerian consumers. If you want to mention milks in Nigeria, you mention Peak. So, it is now a generic name; it is a heritage we have built over the years. So, the race or nationality of the MD doesn’t have any impact.

What would you say has been your biggest challenge and how have you tackled it?

I will step back a little bit. If you go back several years, water was and is still a challenge. So, what we did was to have our own boreholes. Power was and is still a problem, so what we did was to have our own internal generation of energy. These two elements have succeeded in making it very difficult for some companies to operate. But what we always do and that is why we succeed in the market is to look at the risks and at the same time look at how to mitigate the risk; that, we have done very well for many years.

In what way have your dairy development programme impacted your corporate social responsibility programmes?

We have strong CSR programmes. We have 41 boreholes -all solar-powered. Initially we were using generators but because of the power situation ,we had to turn to solar. That has transformed 41 communities, which hitherto were putting bowls on their heads to go to streams to fetch water. That is just one part of it; we have adopted many schools and provided them with learning materials – books, computers, etc. We have university endowment programmes. And now we are connecting our CSR activities to our new development because, if you look at it in totality, (you will see that) when you develop an area in terms of new structures, you also develop the economy of that area. So, our DDP scheme is connecting very well with our CSR activities.

Several companies have lamented that Nigerian higher institutions of learning are not turning out graduates that are competent to work in top companies. As you move to boost local dairy production, what has your experience been in sourcing new talent?

I think that is a statement that I don’t subscribe to. There are very good talents in this country; it only takes you to look for them. We have a strong recruitment process now and I can tell you that from the first recruitment of this year, we already have very good Nigerians working with us in all our departments. I mentioned ‘Modern Trade’ in the hall (at the AGM); we have staffed that department fully with Nigerians, although we have an expat as the head.

[Punch]

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