How backward integration drives PZ Wilmar

Backward integration occurs when a manufacturer acquires its raw materials suppliers or sets up its own facilities to ensure a more reliable or cost-effective supply of inputs, online-based Business Dictionary explains.

Backward Integration Policy (BIP) has been in practice in Nigeria since 2002, as a deliberate Federal Government plan to boost the cement industry. As of today, the policy has been extended to sugar and other agro-allied sub-sectors. The BIP has shot up cement capacity to over 40 million metric tons and placed the country on the verge of ending sugar import from Brazil by 2017.

One company in the agro-allied industry that has successfully implemented the BIP is PZ Wilmar, maker of Mamador and Devon Kings vegetable oil and first oil palm processing, packaging and distribution company in the country to get the ISO 22000:2005 certification.

Its backward integration programme is anchored on capacity to have acquired a total of 26,500 hectares of land for growing palm oil in Cross River State. In other words, rather than rely on farmers for palm oil supply, the firm grows its own oil palm and mills it in Cross River, transports it to its refinery in Lagos, where it is refined and packaged into what is known as Mamador and Devon Kings vegetable oil.

“Together we have 26,500 estates,” Santosh Pillai, managing director, West Africa, PZ Wilmar, said, during the award of the ISO 22000:2005 by Bureau Veritas, world leader in testing, inspection and certification in Lagos last week.

“Our intention is to go 50,000 hectares. If there is more land available, this joint venture will continue to grow more and more,” Pillai said.

According to him, one biggest objective of the company is to bring back Nigeria’s glory in oil palm.

“If you know the history of Nigeria, you will understand that it was the world leader in oil palm in the 60s and 70s, but Malaysia and Indonesia took the know-how from Nigeria and then over the last 30 to 40 years, they became world leaders,” he said.

“The intention of PZ Wilmar is to bring back the glory of Nigeria in oil palm. Our greatest objective is to grow more oil palm and make Nigeria world leader in it,” he said further.

With the company’s products, Nigerians now have access to world-class quality edible oil, the managing director said, saying the firm is not only in the business of creating a fully integrated oil palm industry but is also in the venture to create a high quality brand. He urged the government to give all players in the industry a level-playing ground to succeed, instead of giving one firm a preferential treatment.

One other interesting backward integration approach by the company is that it manufactures plastic gallons of various sizes used in packaging palm oil, rather than outsource it or rely on any external plastic manufacturer to do so on its behalf.

A tour round the PZ Wilmar plant in Lagos showed four different tanks for processing raw material, semi-finished product, bi-product and then finished product. In the refinery is found the packing plant with a hygiene area, where anybody who wishes to go in must follow some set-out hygiene procedure such as washing of hands, removal of shoes and eye glasses, among others. There is also the effluent treatment plant where wastes are kept.

PZ Wilmar Limited is a joint venture between PZ Cussons and Wilmar of Singapore. The joint venture is expected to bring foreign direct investment of $650 million and generate 54,000 direct and indirect jobs. Already, the firm has invested close to $78 million in the country, while its refinery has 1000 capacity per day and over 300,000 per year. This saves the country a foreign exchange of $300 million each year, as the company produces Mamador and Devon Kings locally rather than import them.

The firm has attained 85 percent capacity utilisation and contributes N5.5 billion duty on imported Crude Palm Oil (CPO), Real Sector Watch has found.

The firm was awarded ISO 22000:2005 international standards certificate for food safety management system last week.

Nana Damoah, head, technical, PZ Wilmar, said the firm achieved this feat as a result of its food quality control, quality assurance and food safety measures.

ODINAKA ANUDU