‘We have de-risked the business side that made tomato processors fail in Nigeria’
How did you come about the idea for tomato production and processing in Nigeria?
I used to work at Aminu Kano Teaching Hospital and we would drive from Abuja, which is where I lived. I noticed around January and February in 2009 while we were driving to one of these small hospitals around Kano, that as I looked around everywhere was red because it was covered in Tomatoes; The Road, next to the road, the Rocks next to the road. Everywhere I looked I could see tomatoes and dried onions on the side of the road, it was just this amazing sight, and I was so surprised I asked the driver, what’s going on? Why is this happening? And he said well, there’s an oversupply so the farmers can’t sell the tomatoes. The price was not favourable (at that time of the year) so they are trying to dry the tomatoes and maybe sell them in the rainy season.
Did you start the business with production of tomatoes or were you processing to solve the problems of those guys you noticed in 2009?
I left Nigeria in 2012 to go to Harvard Business School and in my second year at business school, I was talking to some of my friends who are Nigerians about the idea I have had for a tomato Factory. One of them told me “go look up tomato processing in Nigeria on Google because Dangote is doing what you’re saying”. And I said, “What! No way”. So I went on Google and I suddenly saw all these articles and I was like, wow, this could actually be a real business. If the richest man in Africa thinks there’s an opportunity, maybe I should do my homework too.
During the last semester of business school, I really was just trying to put together a business plan to understand tomato processing and if the operational and financial feasibility make sense.
I went to visit different processing facilities, for instance in California then had phone calls with processors in Italy. I also talked to a few guys who process in China. Every single person I talked to told me “Mira the most difficult part of this business is the farming. The processing is actually not as difficult as the farming”.
That was why I decided to start with farming first. I was told if one could farm the right yield, the right quality, the right type of tomato, and the right price then you can add a factory to that business and it will make sense. But you should start with farming, and that is how I started with farming.
The first step was how to farm commercially, the right quality tomatoes at the right price points. Once we achieved that we decided to teach small holder farmers how to farm the right type of tomatoes and achieve the right price points. Now that we have also achieved that, the next step that we are finally taking is to actually put the processing facility in place.
When we started farming I didn’t have a lot of money. I found a very generous farmer who had a feed mill in Nasarawa State who told me I could farm on his land. I had a three-hectare plot of land and in the first year, we only farmed one hectare. It was a very small project at first because that was what I could afford. We did one hectare and now we have grown significantly, but that was how we started.
We now have a 500-Hectare allocation. We have about 40 hectares under irrigation for tomato farming and we are installing another 80 hectares of land this year. By August, we will have 120 hectares of tomato farmland under irrigation.
An interesting thing about tomatoes in other countries is that before farmers even start producing, they know whom they are growing for. Whether they are growing for the fresh market or for a factory, they know in advance. In Nigeria because there are so few factories most farmers are trying to grow for the fresh market. However, most consumers with higher purchasing power are not close to the production belts that tend to be in the north. Because tomatoes are so perishable, you run into challenges because by the time they for instance move from Kaduna to Lagos or from Katsina to Port Harcourt, you end up with damages because it is such a long journey by road.
We are coming in as a processor so we can actually take fruits that are bruised fruits, that do not look, or even small. The only thing that we really care about is the colour of the fruit and the sugar content of the fruit, and to a certain extent how mouldy it is. Even if it’s broken, we can still process it because we’re going to cook it!.
How have you prepared to be able to succeed where others have seemingly failed with tomato processing?
One of the important things is that our farming team has learned over the years. Tomatoes are much harder to grow than maize or rice or soy. They are very technical. They are very prone to disease and all kinds of problems. Because they are grown in the dry season, they have a requirement for irrigation. We are very fortunate to have a team that includes an agronomist from the US who has farmed Tomatoes very productively on farms that sell to processors. We also have local agronomists who understand Nigerian conditions and what kinds of materials and resources are available in Nigeria.
For three years, a lot of it was figuring out how do we map out the best practices from California and make them appropriate for Nigeria. You cannot just take exactly what you did in California, copy, and paste in Nigeria. You have to figure out which things you take over and which Nigerian things you add in so it took us three years to try and figure out what our protocol should be.
The first three years was really doing that for ourselves and then the following three years was; how do we now take what we have learned on a commercial farm and break it down for a smallholder farmer. This is because smallholder farmers also need to learn and change a lot of their farm practices. They need to understand how to use a different type of seedling and irrigate in a different way. We had to learn how to become teachers because we had been doing it ourselves and now needed to teach a lot of people who think they know it all already. Being farmers for 20 to 30 years, there was the perception; “What can we teach them?”
What is the planned capacity of your processing facility?
The capacity is going to be 84 tonnes a day of raw tomato and about 2,000 tons of finished product per annum.
When will this factory start producing?
We are expecting to come start production by this time next year. The groundbreaking was to signify the commencement of the Civil Works. We are placing the order for our equipment very soon within this week. We will start to put up the physical factory, bring in the equipment and assemble it so that we can Commission in January of next year then do our product and launch it in the second quarter.
We have been selling it primarily to the fresh market so far. This year we are talking with a few different processors to see if we can sell to them. We have been selling at mile 12, major markets in Kaduna, Ibadan, Onitsha, Port Harcourt. We sell Tomatoes by the truckload, and we get a lot of people who request tomatoes from us, but we’re like “listen if you want to buy 10 kilograms we have got ten tons for you”.
Farm yields are generally low across Nigeria, but what has been the experience on your farm?
How were you able to go from 8 to 36 tonnes per hectare?
It has taken us five years to achieve this but essentially, with tomatoes there are no silver bullets to getting a higher yield. There is not just one thing that you change and magically your yield will increase. It is a combination of many things. There is irrigation, which is really important. You need to have enough water for your plants.
There is also fertilizer. Just like people, plants need to have nutrients in order to grow. They need to have food in order to grow. The genetic variety, which is the type of plants that you’re growing also matters. There is also use of pesticide, land preparation etc and generally, what we found is that you cannot just do it in one season.
The two most important things about tomato suitable for paste are how much sugar is in the tomato, and the colour of tomato. Typical varieties that local farmers use tend to produce tomato with low sugar content.
This makes them less desirable for processing because it means you need many more tomatoes to get the same amount of paste. They call paste concentrate because it is concentrating the sugar. If you have less sugar to start with, you have to concentrate much more to get the same amount of paste.
Does size also matter?
It matters more for the fresh market but for processing not quite. Processing could use a small sized tomato that is denser and has more sugar in it. When you cut the tomato open, you see a lot of flesh instead of a lot of water coming out of the fruit, and that is really important for us. Size does not really matter because you are going to end up cooking it anyway, what matters is the weight.
Tomato is a dry season crop, but during the rainy season, of course, we need to keep making money on the land and we also want to keep engaging our Farmers. So in the rainy season, we grow soy and maize. It is also not good for the land to plant the same thing repeatedly every year, otherwise the land gets used up. We started a practice of finding alternatives we could grow every three years.
This year we are growing wheat, dry season soy, spices in May, and we are also growing sunflower. In the past, we have grown cabbage, eggplant, pepper, garden egg, and sweet potato. We do a lot of things with our lands but the main crop remains tomato. For us, full utilisation of the land all year round is very important. Also, understanding what we can grow on our soil is something we use to our advantage.
Nigeria is extremely relationship based, and understanding this is very important to be able to do business successfully. I found that to be the case when I worked in America as well. We have also found that doing something when you have promised to do it goes a long way in building credibility.
There are a lot of people who promise things and then don’t follow through. We do not like to make big announcements because we do not want to say something unless we are sure we are going to do it, and I think that has worked in our favour.
Also in doing business in Nigeria, there is a lot of red tape sometimes. It is especially hard for farming where a lot of support services do not exist. For instance, when we have tractor breakdown, the dealer does not have spare parts in their inventory, so it takes forever to get it fixed. When any of our special equipment breaks down, it is hard to get it back up and running. There is also the lack of infrastructure, and I think every business owner faces that challenge. It is really hard to work without power, really hard to work without (good mobile) network coverage. Those kinds of situations are challenging, but you just have to learn how to be resourceful and to work around them.
You have to live here first and understand what you want to do. I think it is really hard to be successful if you just parachute in and not have any clear knowledge or context of the country. Even though I was working for a non-profit, the fact that I lived and worked in Nigeria for four years before I started this company helped me so much. At least for me, it was learning by doing and I think it’s especially hard in Nigeria to come in if you haven’t worked for somebody else here before and had some experience, or you hire local people with good experience because there has to be local knowledge.
We are very excited to start working with the CBN now that we are going into processing and have equipment coming in. Now that we are finally putting in equipment, we believe it is now the right time to start partnering with the CBN and accessing some of the available facilities. We are really excited about the support they are giving to the sector, and while some of the facilities were previously not appropriate for us, now that they are, we are confident that we will be working with the CBN.
Are there other sources you’re exploring in terms of credit access, perhaps, even Private Equity?
We are in the process of closing our Series A equity raise. Our expansion plan will be financed by a combination of equity and debt, and hopefully within the next month we will be able to make an announcement about some capital raising we are currently working on.
What really gives us the confidence is the six years of farming that we have on our back. We did not look to make multi-million dollar investments in equipment until we had confidence that we would be able to provide the raw material from our own network of farmers. Now that we have that network of farmers, and have achieved success on our commercial farms, we have confidence that we can achieve success with the processing.
The challenge that the inactive processors face is a raw material challenge. They do not have enough tomato or also cannot get it at the right price. We have de-risked that side of the business and I think that’s the difference.
In five years, we will be souring 150,000 tonnes of tomatoes for our factory and will be able to use that to make 10 percent of Nigeria’s tomato paste. We will also be an 80-million-dollar company in terms of revenue, which is still very small compared to some of the larger companies out there but for us that would be a huge achievement.