Paul Odunaiya is the managing director of Wemy Industries, a company that manufactures well-known diapers such as Dr Brown’s and Nightingale. In this interview with Odinaka Anudu, Industry Editor, Odunaiya explains why his firm experienced a dip few years ago, assuring that it is back and has come to stay.
You were out of the market for almost three years. What really happened?
Three years ago, we had a massive setback because of recession. We had a lot of plans and we were in the process of securing a facility from the Bank of Industry (BOI). However, we were on the brink of closing down. So, we were basically on life support, trying to survive as a business. By the grace of God and the relationships with international suppliers who gave us goods on credit, we got going. But we started building back-up. The BOI loan we applied for was approved, but not without challenges.
There is a massive testimony behind our return to the market. The money we got then could only be deployed in 2018 because of all the financial debts and devaluation of currency, which affected our business and other businesses. Also, BOI has been very supportive. The bank also enabled us to access other intervention funds. We approached them and explained to them that we are an indigenous company and they supported us. Because of the downturn of the economy, we laid off over 200 workers. But thankfully, the hard work has begun to bear fruits. We were able to deploy the funds such that a lot of machines are arriving now. So, we are back in the market for our baby diaper segment. The intervention funds also helped us in dealing with some of our debts as a business and also gain additional working capital. That has been a plus for us. We have been able to deploy that into our business. The impact of the BOI intervention fund and the investment we got from BOI will come to light this year. We have started seeing some impact on our baby diaper sales. Remember, we are the pioneer manufacturer of baby diaper in Nigeria and Africa. We started it in 1979. The future of Wemy Industries is better today than it was in 2015. We have brought in our adult diaper machine already and very soon we will be the pioneer manufacturer of adult diaper in Nigeria and West Africa. Not to forget, we are also the pioneer and market leaders of baby wipes in Nigeria. Other people have taken the mantle in the diaper business but we are coming back, because it was during the recession that one of our competitors entered the market. Dr Brown’s is back. There is a massive demand. Our old customers are coming back.
Generally, the industry seems to be struggling. What is happening?
It is a combination of many factors. From a business point of view, devaluation is not necessarily a bad thing. Controlled devaluation is what we need. But if you have one price today and another price tomorrow, you will not be able to plan properly. It is bad for business. Price instability is crippling businesses.
Influx of substandard products is also an issue. Currently, I am discussing with Ministry of Industry, Trade and Investment to come up with a diaper policy that will increase tariffs to 55 percent so they don’t allow foreign companies to dump seconds or substandard diapers on the Nigerian market. You see them in nylons and colourless bags and they give these to our babies. We then go ahead to sell and use them on our babies. Because many of these diapers are not of good quality; they could cause rashes and infections. Some might even leak and soil the baby. These substandard diapers are packed in white bails and sold to Nigerian merchants at ridiculously low prices, hence their large volumes in the market. What we need is to stop this kind of products from coming into this market. I think that is what the ministry is working with us to achieve. It is a hygiene product and we won’t allow that. If they won’t allow their babies to use seconds, why should our babies use them? With what they do, rather than use two or three diapers in a day on your child, you now use seven or eight.
So, what are your plans now?
Well, what affected us was that we were trading and manufacturing at that time. But as of today, we are 100 percent manufacturing. The other plan is to hedge our business against some of these factors. We plan to expand our business to enable us to produce at lower costs and also to add businesses into our portfolio that will allow us to export and earn foreign exchange (FX). We import 80 percent of our inputs today. So, part of our plan to hedge against devaluation is to export and earn FX. That is why we have set up the adult diaper machine. Most West African countries import adult diapers. So, we will provide import substitution for them by manufacturing them in this plant.
We intend to export to ECOWAS countries. We have also tried to expand our local inputs in terms of packaging. On some product lines, we source 60 to 70 percent locally; on some lines, it is 10 percent. But most of our packaging materials are all done locally. We anticipate that within five to 10 years, with the advent of Dangote plant, we will expand our backward integration.
Hygiene business is a universal business and it allows us to go to other countries. Women will always have babies. There will always be ‘incontinents’. We also have people from the US who say they would like to buy from us in Nigeria because the advantage of a devalued currency is that it is cheap for them. There is an opportunity to sell to other countries. There is an opportunity that does not show itself until you start investing in something.
If we have a good market for diapers as you have just said, why are some manufacturers shutting down?
My thinking is that it is the high cost of operations. There is a profit motive in being in Nigeria. The companies are here because they are making money. If they don’t make money, they will leave. I suspect they may not be meeting their projections due to increased competition and overhead costs. Some of them employ a lot of expatriates and they have very expensive machines.
When I met you in 2015, you were optimistic. Are you still that optimistic now?
I have felt the heat and fire. I think we had the worst recession in 25 years. However, if you don’t go through that fire, it won’t prepare you. It trains you. If you are always experiencing success, without experiencing failure, you won’t know how to deal with difficult situations. I think our ambitions are still the same. We will be a listed business, but we are a lot more careful now than before. But I think going through that has made us an efficient company. We don’t allow any inefficiency, any waste now. We manage what we have.
We have started employing more people. Within the last two to three months, we have employed over 100 people. I can tell you that with the intervention fund, our business will grow bigger than it was. We are now 120 to 130 workers. We were 400 before the recession. We are likely to get to 300 this time. We are looking for engineers. There are unemployed engineers and we have found a lot of them and employed a lot of graduates. We have to be a bit more careful in investing in people. We can’t just import expatriates and pay them heavily. We believe in training our people because it is a lot cheaper. We are making it attractive for them.
Is any investor talking to you at the moment?
A private equity was talking to us but recession affected all those business dealings. There will likely be an announcement soon if everything goes well. We don’t need as much money as we needed before. Too much money or too little money could be dangerous.
But it is a big market. Wemy Industries is a goldmine of the business. I want Nigerians to know that we are the representatives of Nigeria in this business. That is why we want to be listed. When we are listed, everybody can buy and say ‘this is my business’. It’s high time we had our own.
Are you getting any incentive from the government?
We have the capacity to satisfy the market. But we want tariffs increased. Once tariffs are increased, we will invest more and employ more. Instead of having 300 staff, we will import a machine and employ 1,000. In China, I know of a company that is listed which employs about 20,000 workers because they are producing for their market and also exporting. The more we invest in this business, the more we engage technicians, engineers and graduates.
Can you satisfy demand if government decides to restrict importation of diapers?
Let me first address the market issue. Northern Nigeria and Niger have the highest birth rate in the world. But the challenge is the purchasing power of our people. So, you must make products that have low price points. We still have a low penetration rate. In villages, they still use cloth nappies.
Now to the question. Our installed capacity is about 700,000 units of diapers a day, but we are doing just 30 percent of that for now. It is not that we can’t do more. We don’t have enough engineers and workers. Once we sort out issues, we will do close to 90 percent of that. The industry can satisfy the market without doubt.
How can government do to improve the industry?
We need a diaper policy. Nigeria should not encourage the influx of substandard products into the country. There is multiplicity of agencies duplicating their functions. Government needs to address this and also issues around the Customs.
