“Opportunity for milk business in Nigeria is huge”

Q:How do you see your new assignment as chief executive of FrieslandCampinaWAMCO?

A:I have a mandate to run a company that has been in business in Nigeria for 40 years. And like I said to my team, it is not a one-man show; we really have to make it a success. I think the team is well geared up now to ensure that we even deliver better results than we have ever done. Of course you know the period we are in right now in Nigeria is a challenging one. But having said that, the team I work with is a very strong team, very dedicated. We are all committed to pushing the company forward.

How is FrieslandCampinaWAMCO coping with Nigeria’s harsh business environment?

The harsh business environment is not peculiar to FrieslandCampinaWAMCO. All companies operating in Nigeria operate under the same environment. In any case, I do not want to see it as harsh. I see it as an opportunity. I will tell you why. If you look at the poverty level in Nigeria, which is put at 50 percent of the population or less than $2 a day, people tend to think that there is no market here. But this is wrong. The big opportunity in that market has not yet been tapped in terms of the proposition that we can make to address that level of consumers. Companies in general have not made enough effort. That is an area which we are working on now to tap into opportunities that are available. That is one.

Two, we sell a product, milk, which is a most complete food – most complete food in the sense that knowledge about milk is still very limited even for myself. 

Until a few years ago, I never knew the enormous potentials that milk possessed. You can have other foods in any kind of format, but milk is the most complete food that if we can make Nigerians take one glass of it per day, the potential of growth, of healthy living we will be able to achieve will be enormous.

What is the present status of your dairy development programme which you started in 2010?

All the milk collection centres we have built are operational. The yield that we get from those centres is on the increase. At the moment as at April we have collected the highest we have ever collected – 7000 litres per day. But that is still a small drop compared to the volume of milk that we process. We process 500 million litres per day. So if we look at the volume, it is still very small. But it is a long yielding process – it is not a process that you start and you get the result immediately. You have to be patient; you have to invest in it, which is what we are doing today. We are not making profit from it yet, because we believe in the potentials of Nigeria. It is a gradual process and we believe we will get there.

Why are we still way back in dairy milk production?

The breed of our cows, the weather condition, the availability of good pasture, availability of water, good roads (which are all on the low side), are the things that are making it very difficult for us to be self sufficient in dairy milk production now. Cow farming is a big time business. If you go to where our parent company is situated, you will find out that you have to take care of the entire value chain – from grass to glass, right from the field where the cow is treated, to how you milk the cow, to how you process the milk, and eventually how you package it as a finished product that the consumers will buy.

The downstream as far as we have seen in this country is full of potentials for harnessing the opportunities that are available. Once we are able to up the downstream sector with the upstream, the upstream is already there, the market is there. The challenge is just for us to tie up the downstream sector with the upstream.

How do you react to importation of milk?

There are two legs of importation, there is the raw material importation, and there is the finished products importation. The finished products importation attracts 20 percent duty. It is an open market. It is not restricted. You can bring imported milk if you want to bring. So people bring in imported milk and pay the 20 percent duty that it attracts by law. So you have a lot of it in the market.

How do we make milk available to the 50 percent poor, those earning less than $2 a day?

The importance of price point comes to play here because if you see the big pack we have now in the market, the prices are at the level that they should be but they are not easily affordable for this group of people that we have spoken about – the poor. This involves a huge research and development for which our company has not yet developed – to develop a proposition that will carry the same kind of nutrient, the same kind of vitamins, the minerals that you have in the big packs, and cascade it back into small packs. Don’t forget that the smaller the pack, the lower the margin line for the manufacturer. That is the game balance that we have to manage.

The second leg is on the distribution. There are 20,000 villages in Nigeria and very brightly, if you want to go from village to village to run your distribution, you need to face the hurdles that come with it. At the moment, we are studying two countries, we are looking at Asia – some countries in Asia – particularly, and we are looking at India that has been able to establish a good model for their rural area. We are trying to see how we can adapt that here. They have a very good system of microfinance banking. We want to see how we can overcome that challenge of microfinance and see how we can take the product to the rural area.

What steps have you taken to support those involved in milk collection?

Initially when we started our dairy development programme, we were making boreholes – water is very important for dairy production. These were boreholes powered with generator sets. But over the years, we have found out that the generator sets could not be maintained by the host communities. We change to solar power. At the moment, we have 36 boreholes that are powered by solar. We are now connecting the boreholes to those communities. So wherever we have a milk collection centre, we put a borehole powered by solar to move milk from point of production to points of collection.

The dairy development programme is generating employment for the host community. So you find now people going into transportation. You find all kinds of transportation models – okada adapted to carry load, tricycles – all a product of the ingenuity of the indigenes of the host community. We want to provide them milk collection tanks because we do not want them to use any kind of tanks. We have invested in special containers for milk collection. They are now making money and we now see that their living standard has improved. Those living in mud houses are have now plastered their houses.

Forty years on, what is the business outlook in the milk industry in the years ahead?

Forty years, I agree with you, is a long time, but the opportunity of the current business has improved even if you take current business that you run. The opportunities are still there. I give you an example: Per capita consumption of milk in Nigeria is 8 kilogrammes. If I go to the extreme, Holland is 320 kilogrammes. Even if we are able to develop the milk consumption awareness, to just half of what it is in Holland, there is a huge opportunity. And that is what we are encouraging with our one glass of milk per day campaign.

Don’t you think people are not consuming as much as they should consume because the price is too high for them?

I do not think the price is responsible. If you compare the amount of money we spend on recharge cards with cost of a can of milk, you will find that it is not expensive. I think the issue is that of priority. And as long as our awareness level is low, it is not going to happen. That is why we have taken the initiative to invest in raising the awareness level of Nigerians so that they can know the relevance of milk in their life.

We have seen engineers succeed as CEOs. What is that thing in them that make them succeed?

I will not fully agree with you. We also have engineers who have not succeeded. Apart from the engineering knowledge, it has to do with the person that is involved. I think it depends on the passion or commitment you put into the job that makes you succeed. If I succeed tomorrow, I will not ascribe it to my being an engineer.

 

SIAKA MOMOH