Food, beverage firms grow output, look more inwardly for inputs

Food, beverage and tobacco sector raised its output in the second half of 2015 (H2 2015) and sourced more raw materials inwardly, a latest report of the Manufacturers Association of Nigeria (MAN) shows.

The sector’s output in H2 2015 was N273 billion as against N110.14 billion in the corresponding period of 2014 (H1 2014).

The H2 2015 figure represents an increase when compared with N264.32 billion recorded in the first half of 2015.

Similarly, the sector sourced 73.36 percent of its inputs locally in H2 2015 as against 69.75 percent in H2 2014 and 64.73 percent in H1 2015.

“Food, beverage and tobacco edged up to 73.36 percent in the  second half of 2015 from 69.75 percent recorded in the corresponding period of 2014;  thus indicating 3.61 percentage point increase over the period.  It also increased by 8.63 percentage point when compared with 64.73 percent recorded in the preceding half.   Local raw-materials utilisation in the sector averaged 69.05 percent in 2015 as against 66.08 percent of 2014; thus indicating 2.97 percentage point increase over the period,” MAN says in its report.

Food, beverage and tobacco sector comprises manufacturers of starch, soft drinks, beer, flour, tea, coffee, dairy products and fruit juice. It also encompasses companies producing tobacco, biscuits and bakery products, animal feeds, sugar, distillery and spirits, among others.

The food, beverage and tobacco sector is often regarded as the largest manufacturing. segment. It includes companies such as Flour Mills of Nigeria, Honeywell, Dangote Flour, Dansa, PZ Wilmar, Leventis Foods, Dufil, Nigerian Breweries, Coca-Cola, and Guinness, among others.

Real Sector Watch learnt that brewers who used to import barley have now resorted to the use of maize from local farmers.

“We now have brewery companies coming to our farms to buy our maize. Immediately it is ready for harvest, a lot of companies come to negotiate prices with us,” said Abiodun Olorundenro, chief executive officer, Green Vine Farms.

“Before now, we, farmers, take our produce to factories that use them as raw materials to sell to them, with most not buying from us and the few that eventually buy from us price far below our production cost. But this is no more the case,” Olorundenro said.

Yale Foods is sourcing cassava from local farmers now to produce its cassava bread.

So many companies have gone into backward integration to ensure they get larger percentage of local raw materials locally. Such companies include PZ Wilmar, Flour Mills, and Erisco Foods Limited, among others.

Players in the sector have been forced to look inwardly owing to foreign exchange crunch that has made importation of inputs difficult and, in some cases, impossible.

Many manufacturers say they only get between two and ten percent of the FX in the exchange market.

“We only get two percent of our FX needs,” Babatunde Oke, chairman, AG Leventis, which produces bread and sausages, told Real Sector Watch.

Eric Umeofia, president, Erisco Foods Limited, told Real Sector Watch that scarcity of foreign exchange was threatening the operations of his 450,000-capacity tomato factory.

ODINAKA ANUDU