MARKET DEVELOPMENT
Nigeria: We\'ll Start Palm Oil Production Next Month - Indomie CEO
Nigeria: We\'ll Start Palm Oil Production Next Month - Indomie CEO
02/07/2013 (AllAfrica.com) - Mr Deepak Singhal is the Managing Director/CEO, Dufil Prima Foods Plc, producers of Indomie instant noodles. In this interview with our correspondent in Lagos, he speaks about doing business in Nigeria, the indomie market and industry issues. Excerpts:
What is the Indomie noodles story in Nigeria?
We started by importing Indomie in 1988. Then we built our first factory in 1996 in Otta, Ogun State. In 2003, we built another factory in Port Harcourt and we have been expanding the Otta facility.
We started the process of backward integration with the different products we're using as inputs. We first started with the seasoning, we were importing it before but now we manufacture in Otta. In 2009, we started the flexible packaging. Last year, we started another factory in Kachia, Kaduna [State], a world class and one of the biggest noodle factories in the world. We also stared a flour mill in Port Harcourt and we're now into pasta - Power Pasta.
We're also building a modern palm oil factory in Lagos. Our palm oil business is a $30 million investment and production should start by July this year. We do around 200 tons of noodles a year, which is about $200 million or N56 billion per year.
What influenced your decision to go into noodle production?
We've been in food production for a long time now. It was a big product in Indonesia and we thought that we could make it successful in Nigeria because there was a need for it. Over the years, it has grown to be a household name because we have Nigerianalize the taste; easy to cook, easy to eat, nutritious and healthy.
You introduced the brand at a time when instant noodle wasn't known in Nigeria. How did you make Nigerians accept it?
It was very difficult. We started in 1988 and it was only in the last couple of years that we could say we're successful. Now, there is a whole industry around the noodle business in the country. Apart from us, there're other 15 to 17 players in noodle manufacturing with more than 30,000 people directly employed in the industry and more than 200,000 distributors employed.
Then imagine the amount of people that are involved in supplying these companies: like the flour milling companies, the refineries, the palm oil plantations, the packaging companies and the carton manufacturers. If you put everything together, it's a huge industry. Currently, Indomie has about 70 percent of the market share.
Based on your experience, how would you rate the country's noodle market?
It should be around 260 to 280 thousand tonnes per annum - that is the consumption. But the capacity in the country today is more than 350,000 to 400,000 tonnes. So, there is no lack of capacity in the country. Investment in the noodle industry only should be more than $300 million. We [Dufil Prima Foods] produce around 200,000 tonnes per annum. All our businesses put together, we generate around $400 million per annum.
How much of your production materials is sourced locally and how are you imparting on the local economy?
More than 90 percent. Actually, 95 percent of the product in volume is locally sourced. We have eight factories and we have more than 3,000 people directly employed in the company.
Apart from that, we have the distribution chain and the logistics team, which again employs another 2,000 to 3,000 people. That is only our company. There are other noodle companies that have come around because of us. And other associated companies which supply stuff to this noodle companies. So, all of them put together, we have generated a lot of employment in Nigeria. That is impactful.
Are you worried about competition?
Competition is always good for any economy and we welcome the competition as long as there is a level playing field. I think everybody has a right to the market and consumers make the ultimate choice. Basically, the market is still growing. We created a whole industry that never existed. If you go 20 to 25 years back, there was no noodle in the country. So, we have created an industry and it has been growing.
Several companies lament that it's tough doing business in Nigeria. How has your experience been?
It's tough! All manufacturers will tell you it's tough. You take care of your own generators, you generate your own electricity, and the ancillary industries are not available. So, you have to plan and do everything yourself as a company. But we have done it over the years, we've gained experience and we're enjoying it now.
Has the operational environment improved?
Infrastructure wise, of course, nobody can deny that Nigeria is growing compared to what it was. At the same time, I don't think that anyone is happy with the current rate of growth. So, there's a lot to be done in terms of infrastructure. Airports have improved and all that, but road networks have to improved still. The government is trying on power and the railways, improving the logistics, but there's still a long way to go. As a manufacturer, it is not easy.
What inspired the Indomie Independence Day Award, inaugurated six years ago?
It's a unique project to reward brave children of Nigeria. No one rewards them. It's also a way to encourage and reward their acts of bravery and to encourage others to do similar acts of bravery. We thought it was the right thing to do, celebrate our children, who are the future of this country.
Is your company affected by the security challenge in the country?
Our operations in the North have been stagnant for some time because of security issues. We just built a factory in the north, but certain areas in the north, especially north-east are not safe. So, we don't have our representatives there; we pulled back. It has hindered our growth.
Now that the railway is coming back, are you considering using it to distribute your goods?
Yes, we're already talking to the Nigerian Railways to see how we can partner to move our raw materials to our factories and to transport our finished goods to parts of the country that have train services.
What is the Indomie noodles story in Nigeria?
We started by importing Indomie in 1988. Then we built our first factory in 1996 in Otta, Ogun State. In 2003, we built another factory in Port Harcourt and we have been expanding the Otta facility.
We started the process of backward integration with the different products we're using as inputs. We first started with the seasoning, we were importing it before but now we manufacture in Otta. In 2009, we started the flexible packaging. Last year, we started another factory in Kachia, Kaduna [State], a world class and one of the biggest noodle factories in the world. We also stared a flour mill in Port Harcourt and we're now into pasta - Power Pasta.
We're also building a modern palm oil factory in Lagos. Our palm oil business is a $30 million investment and production should start by July this year. We do around 200 tons of noodles a year, which is about $200 million or N56 billion per year.
What influenced your decision to go into noodle production?
We've been in food production for a long time now. It was a big product in Indonesia and we thought that we could make it successful in Nigeria because there was a need for it. Over the years, it has grown to be a household name because we have Nigerianalize the taste; easy to cook, easy to eat, nutritious and healthy.
You introduced the brand at a time when instant noodle wasn't known in Nigeria. How did you make Nigerians accept it?
It was very difficult. We started in 1988 and it was only in the last couple of years that we could say we're successful. Now, there is a whole industry around the noodle business in the country. Apart from us, there're other 15 to 17 players in noodle manufacturing with more than 30,000 people directly employed in the industry and more than 200,000 distributors employed.
Then imagine the amount of people that are involved in supplying these companies: like the flour milling companies, the refineries, the palm oil plantations, the packaging companies and the carton manufacturers. If you put everything together, it's a huge industry. Currently, Indomie has about 70 percent of the market share.
Based on your experience, how would you rate the country's noodle market?
It should be around 260 to 280 thousand tonnes per annum - that is the consumption. But the capacity in the country today is more than 350,000 to 400,000 tonnes. So, there is no lack of capacity in the country. Investment in the noodle industry only should be more than $300 million. We [Dufil Prima Foods] produce around 200,000 tonnes per annum. All our businesses put together, we generate around $400 million per annum.
How much of your production materials is sourced locally and how are you imparting on the local economy?
More than 90 percent. Actually, 95 percent of the product in volume is locally sourced. We have eight factories and we have more than 3,000 people directly employed in the company.
Apart from that, we have the distribution chain and the logistics team, which again employs another 2,000 to 3,000 people. That is only our company. There are other noodle companies that have come around because of us. And other associated companies which supply stuff to this noodle companies. So, all of them put together, we have generated a lot of employment in Nigeria. That is impactful.
Are you worried about competition?
Competition is always good for any economy and we welcome the competition as long as there is a level playing field. I think everybody has a right to the market and consumers make the ultimate choice. Basically, the market is still growing. We created a whole industry that never existed. If you go 20 to 25 years back, there was no noodle in the country. So, we have created an industry and it has been growing.
Several companies lament that it's tough doing business in Nigeria. How has your experience been?
It's tough! All manufacturers will tell you it's tough. You take care of your own generators, you generate your own electricity, and the ancillary industries are not available. So, you have to plan and do everything yourself as a company. But we have done it over the years, we've gained experience and we're enjoying it now.
Has the operational environment improved?
Infrastructure wise, of course, nobody can deny that Nigeria is growing compared to what it was. At the same time, I don't think that anyone is happy with the current rate of growth. So, there's a lot to be done in terms of infrastructure. Airports have improved and all that, but road networks have to improved still. The government is trying on power and the railways, improving the logistics, but there's still a long way to go. As a manufacturer, it is not easy.
What inspired the Indomie Independence Day Award, inaugurated six years ago?
It's a unique project to reward brave children of Nigeria. No one rewards them. It's also a way to encourage and reward their acts of bravery and to encourage others to do similar acts of bravery. We thought it was the right thing to do, celebrate our children, who are the future of this country.
Is your company affected by the security challenge in the country?
Our operations in the North have been stagnant for some time because of security issues. We just built a factory in the north, but certain areas in the north, especially north-east are not safe. So, we don't have our representatives there; we pulled back. It has hindered our growth.
Now that the railway is coming back, are you considering using it to distribute your goods?
Yes, we're already talking to the Nigerian Railways to see how we can partner to move our raw materials to our factories and to transport our finished goods to parts of the country that have train services.