Ben Langat, managing director of FrieslandCampina WAMCO, in this interview with Josephine Okojie, spoke on the company’s 50 years of corporate existence and the state of Nigeria’s dairy industry.
How much of a Nigerian company is FrieslandCampina WAMCO, especially now that you have marked 50 years of corporate existence?
FrieslandCampina WAMCO is truly a Nigerian business. First of all, WAMCO, which is an acronym for West African Milk Company was registered in 1973 as a corporate entity. Then it became Friesland Foods WAMCO Nigeria PLC in 2005 and FrieslandCampina WAMCO Nigeria Plc in 2009. Today, we are Nigeria’s favourite dairy nutrition company. Our flagship brand, Peak Milk, has been in the Nigerian market, nourishing our teeming consumers since 1954.
It first came into Nigeria through an import model and I think so far, almost every Nigerian I have interacted with has been nourished by Peak Milk at some stage of their lives. So, FrieslandCampina WAMCO is Nigeria’s foremost dairy company and Peak is Nigeria’s foremost milk brand. Next is Three Crowns Milk, another iconic brand that has been here for more than 30 years; also nourishing Nigerians all through this period and we are very proud of that heritage. Furthermore, we are proud to be the first company that went into local dairy development in 1984.
To what extent have you developed local content for your products?
From a milk production point of view, Nigeria has a hot, humid environment which typically is very good for beef cattle and that is why you see a lot of the Fulani cows doing very well.
To grow high milk-yielding cows, you have to put in extra effort and this is what we have been doing for many years. For over 12 years, FrieslandCampina WAMCO has continued to invest in the Nigerian dairy sector as it has been sourcing raw milk locally for manufacturing.
We are also the highest off-taker of fresh milk produced locally from five states in Nigeria. Right now we are running several factories – the evaporated milk factory, powder factory, yoghurt factory and mobile yoghurt factory.
The yoghurt factories are running on local milk, so we can say we have brands that are 100 percent Nigerian in our portfolio. However, to be able to meet the total dairy nutrition demands in Nigeria, the local milk currently available is still very much inadequate. So, in my opinion, the model that the country will run will still have a reasonable mix of importation of some of the raw materials, while local content is developed over a period.
What sustainability steps are being taken to improve local sourcing of milk while promoting animal welfare, protecting the environment, and promoting conservation within Nigeria?
The cattle population in Nigeria is about 20.7 million and they are well scattered across the country, which means that from a density point of view, it is not a major threat to the environment. The cattle numbers are not as high as what is seen in other countries like the Netherlands which are small yet have lots of animals. Having said that, our dairy development initiative is currently ongoing in Oyo, Osun, Ogun, Ondo, and Kwara States and also in the north.
In these locations, we are working with about 12,000 farmers. Most of them are pastoralists who have cows that roam about. This means that in terms of carbon footprints, there are no major issues. The issues to focus on are resources like water, afforestation, grass and pasture use, and the like. To this end, we train and support these farmers; to help them grow trees within their communities, which form part of our dairy development sites. We also help them with pasture development and show them how to use the pasture for cattle grazing in sustainable ways that do not encourage soil erosion or any form of deforestation. All this is coming at a time when the world has moved so high up on the sustainability agenda and thus there is already a lot of knowledge on what to do.
How do you deal with forex rationing and scarcity for the purchase of raw materials and equipment and what is the percentage of local content in your products?
We are proud to say that some of our products are 100 percent locally sourced and very well priced like NuNu Yoghurt which comes in sachets that mothers can easily add to their children’s school lunch boxes.
However, in terms of the dairy nutrition needs of the country, local milk sourcing is still at a very low level. It’s such a big task that we have ahead of us as a nation. That notwithstanding, at FrieslandCampina WAMCO, we want to prove that it is doable, as we source about five million litres of milk per annum locally today. We are the highest so far as no other organisation has reached that number.
Nevertheless, we’re talking about a country that requires more than 100 million litres of milk, so when you do the calculations, you would see that the percentages are still low. There is still a long way to go. Countries like Kenya and South Africa started local dairy development way back and they have continued on that journey. Nigeria kind of left this topic for a long time and that is why we are still in this phase of backward integration.
What impact do your dairy activities have on employment in your host communities?
We are doing the right things, if you look at it from the employment perspective. Among the 12,000 farmers we work with, there are about 1500 Fulani women, who have been at home not fully engaged.
Today, they are productive and have an occupation for which they are being paid regularly and their families are much more prosperous than before – the farmers, their wives, and children.
In some cases, their mud huts have been rebuilt into brick houses and their children now go to school, which they could not afford before. We have 29 milk collection centres (MCCs) in the country.
These are physical locations with an average of five people who are directly employed. The farmers producing the milk are different from the riders who deliver the milk to these MCCs. Then we have the extension officers and milk truck drivers.
Of the challenges that beset your industry, which poses the greatest threat to your operations and how are you dealing with it?
We have two very big challenges from a manufacturing point of view. The first is the forex shortage. Any manufacturer in Nigeria even with the best backward integration strategies will need substantial foreign exchange. We don’t produce the required machinery locally nor do we produce all raw materials locally; so there will always be something that needs to be imported.
The low amount of forex available in the market is enough to shut down many businesses as we are already seeing. When a country is having such a huge forex shortage, the price would be paid somewhere along the line. Eventually, businesses shut down, impacting employment. Forex supply is extremely important. You can only develop local industries if you have enough forex to bring in technology and equipment and then generate the profitability to be able to run your training schools and build technical capabilities until you have the industry. For us specifically, the second threat is insecurity within our dairy development host communities.
How then have you dealt with the paucity of Forex and threats of insecurity?
We have had to restrict our forex needs as much as we can and also source it by any means legal. We sometimes source from commercial banks in addition to whatever the Central Bank can make available. Also, some of our service providers can source forex and supply us with products in naira. This invariably means that the cost of raw materials will go up and ultimately affect the retail prices of our products.
On insecurity, we have regular conversations with relevant Government security agencies. We will never risk the lives of our people.
Where we have security challenges around areas where we operate, we pull out for the time being. For instance, a large farm was given to us in the north, the Bobi Reserve, by the Niger State government for dairy development. However, after two years, we were faced with the issue of banditry and had to withdraw from the location in order not to risk the lives of our people.
You declared N324.7 billion in revenue at your 50th AGM, which marked 21% growth compared to 2021 figures. How were you able to achieve it and even became more visible in the market?
If there was one year where businesses that are not strong could have slipped, made huge losses, or shut down, it was 2022. It was an extremely slippery year. Some businesses shut down, but I don’t want to mention them. We try as much as possible to protect our business by ensuring that we get margins that enable us to reinvest. So when costs go up, we do what is called Revenue Growth Management; a combination of many things beyond pricing.
Now that there is a new government, what is your expectation?
I expect that they would consult FrieslandCampina WAMCO on dairy development topics because we are a subject matter expert on local milk sourcing and knowledge transfer. They can engage us on some of these topics leveraging forums like MAN – Manufacturers Association of Nigeria, NECA -Nigeria Employers’ Consultative Association as well as the Food and Beverage Associations, and AFBTE among others. We are there as industry leaders. Let them consult us before taking sharp policy decisions.