‘Understanding price/quality dynamic determines profit or loss for processors’

FoodPro Limited is strategically embracing industry best practices in the production for local consumption and export. In this interview with BusinessDay, AYODELE OLAJIGA, co-founder and Chief Executive Officer, explains how the company hopes to revolutionise operations in the Agriculture chain of African market.

What is your assessment of the food processing industry in Nigeria and what are the challenges players in the cashew processing business face?

In light of the focus to diversify the Nigerian economy a lot more attention has been directed to the agricultural and food-processing industry. Although the industry has a long way to go, we have seen significant growth and increase in players within the industry. We are also seeing more and more companies like FoodPro who are embracing industry best practices in the production for local consumption and export.

The cashew processing industry specifically is still in its infancy and therefore has a lot of challenges, as one would expect. Key industry challenges are: Lack of access to appropriately structured funding; Value chain inefficiencies impacting quality and pricing of raw materials and Limited pool of skilled labour given the current narrow product base in the country

Firms that successfully address these challenges will contribute to increasing Nigeria’s food and cashew processing output as a strategic vehicle for economic growth and job creation.

These challenges can be overcome with Government and industry stakeholders focusing on improving the policy environment and sustaining government support for the industry.

As a business we have enjoyed significant support from the government agencies we interface with, especially the Nigerian Export Promotion Council that has consistently worked with us on exploring opportunities to export our products to different markets outside Nigeria. Furthermore, the Vice President Yemi Osinbajo’s commissioned our factory on the 21st of November 2017, which also demonstrated the commitment of the Government to see companies like ours strive.

We are beginning to benefit from the effort we put into building the core of our business, ensuring that the aforementioned challenges were addressed.

Government have been exploring several ways of encouraging investment, how has that encouraged investment in the sector you play in?

This administration has a key focus on ensuring that the business landscape is friendly the economic growth and diversification plan, as well as the ease of doing business roadmap are key vehicles in encouraging both local and international investment.

I don’t think there is a silver bullet for attracting investment into Nigeria; it’s ultimately about the Risk Reward factor for investors. Hence I think that if we sustain the focus on improving the ‘ease of doing business’ which automatically improves the Risk Reward factor then it’s only a matter of time before investment will flow at a rate that is very positive for economic growth.

Agencies like the Bank of Industry, who support infrastructure projects like the recently concluded expansion of our factory, play a key role in ensuring that local manufacturers are able to scale. I believe that further intervention funds and continued focus on strengthening the economy is also key to encouraging further investment in the sector.

I am also of the view that investment is always led by domestic participants, foreign investors will struggle to participate in an economy where domestic players are unwilling to deploy their own capital.

FoodPro Limited November commissioned a 5,000 tonnes per year cashew factory. What impact would this make to the manufacturing sector?

The impact of our expanded factory is three fold:

We are creating economic growth by providing an increased number of jobs in our host communities. It is notable that we employ over 400 staffs of which over 95% are women. We directly impact several thousand more Nigerians across our supply and distribution chains.

We are able to increase our export capacity and take quality Nigerian products to the world, which fosters a positive image of Nigerian made products and thus increases demand.

We are still in our infancy but are focused on continuing to scale whilst maintaining quality to contribute in our little way to the manufacturing sector’s overall contribution to Nigeria’s economy.

How much do you think the cashew nut value chain can contribute to the Nigeria economy?

Unfortunately, cashew’s contribution to Nigeria’s economy has historically been limited as there has been limited domestic value-add in the form of wholesale and retail processing. To truly harness the sector’s potential, there needs to be an increased focus on deepening domestic processing capacity to enjoy significant economic contribution, similar to the experience of large processing countries in Asia.

I think that the value chain can add significant value to the economy through increased contribution to the GDP and furthermore help reduce unemployment through direct and indirect jobs.

As an export commodity it also has the capacity to be a source of increased foreign exchange earnings for the country.

The value chain currently focuses mainly of trading, however I believe that if we pursue an increased primary production and domestic processing strategy we will ultimately have enough raw materials to support both a large domestic processing industry and a vibrant raw material trading sector.

What have been the toughest hurdles you have had to overcome to bring Food Pro to the point where it is currently?

We have been through various challenges; however the toughest has to be the losses as a result of the tough FX environment that prevailed in 2016 and 2017. We operated in an environment where the sellers of raw materials want to reference a runway parallel market rate, yet the conversion of repatriated funds is done at an official rate that is significantly far away from that black market rate.  The window recently created by the CBN has stabilised the rates and we hope this continues so that we can avoid the chaos we saw this year in the future. Ultimately, Nigeria has to move to a market driven currency regime so that businesses can plan without thinking about the exchange rate.

Unlike some other businesses we have been lucky to survive this trying period, however we are still feeling the effect in our operations.

What are some of the costliest mistakes that business people in the sector you play in make?

It’s difficult to say what the costliest mistake is overall, I will say that the number one objective is to build a good team and ensure that the team is focused on analysis and numbers in decision making. Once you have a good grasp of the numbers it is easier to make solid business decisions.

As a processor, it’s important to buy the first crop, but the question that is key is at what price? Understanding price/quality dynamic is one of the most important things in our sector as it can mean the difference between profit and loss. Disciplined analysis is essential in balancing the price/quality equation.

What do you hope to achieve in the next five years as FoodPro Limited?

Our objective over the next 5 years is to become just as big as the Asian processors, while establishing a foothold in the world of branded snacks in various markets.

I am looking forward to 2018 with big expectations. As a business we want to have a fun and productive year. Our 2016 and 2017 were interrupted by the FX crisis, which meant we couldn’t operate effectively. In 2018 we won’t have any of these issues.