As shrinking consumer wallets, on account of fragile economic growth, force more Nigerians to buy less of their usual consumption basket, Honeywell Flour Mills Plc is counting on affordability and quality of its products to sustain growth.
To serve the last mile while also delivering value to its shareholders, Honeywell Flour Mills is banking on innovation and expertise in research and development to introduce tailor-made products that suit consumers’ taste, nutritional needs as well as pocket size.
One of such products is the recently launched Spaghetti Mini, a high-quality single-serve product that offers convenience to consumers at an affordable price point, the first of its kind in terms of packaging in Nigeria’s pasta category.
“The product is an outcome of our extensive research to identify consumer needs in order to serve them in the most relevant and personalized way,” Lanre Jaiyeola, MD, Honeywell Flour Mills Plc., said in an interview response.
While ‘sachetisation’ or the single-serve product concept is not new in Nigeria, the shrinking income level and rising poverty in the country has triggered a new level of ‘sachet economy’ in Africa’s most populous nation.
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With the high cost of living in Africa’s top crude producing nation and a declining per capita income that has been trending downwards since 2015, Nigeria’s poor population are getting poorer in real terms, and the middle class are getting thin out. The major reason manufacturing companies are rolling out unit products.
Analysis of the NBS selected food price watch report for May showed that there was a significant price increase for products like yam and rice, some of Nigeria’s most commonly consumed staple foods. The average price of 1kg of yam tuber increased year on year by 13.96 percent and rice was up 16 percent. The trend has been the same in the last two years.
The price increase, according to analysts, has changed consumers’ pattern as they seek alternatives in spaghetti and wheat flour, some of the signature products of Honeywell Flour Mills.
To meet the needs of consumers that have been affected by a challenging economy following the slow economic growth that has remained lower than population growth since 2015, Honeywell Flour Mills said it’s leveraging innovative unit products that consumers can afford without drying their wallets.
As a customer-centric organisation, Honeywell Flour Mills said, “We will always look for innovative ways to satisfy our consumers optimally – by producing good quality, nutritious and affordable food products, while also supporting the food security agenda of the government.”
Sachet products or single-serve as they are fondly called in the FMCG industry are products that can be used or consumed at once or for a single meal. It is common in low-income countries with high poverty rates.
‘Sachetisation’ is mostly a win-win for both consumers and the manufacturing companies. The single-serve product enables consumers with low purchasing power the ability to afford their everyday household essentials that would have ordinarily been out of their reach and the companies, on the other hand, increase their sales.
“We will remain committed to ensuring the supply of high quality and affordable nutritious staple food products to all Nigerians, growing our market share and delivering value to our shareholders,” Honeywell Flour Mills said.
According to the company, the future of its business would be shaped by continued investment in innovative product development, advanced technology infrastructure and operational efficiency.
The company’s business strategy to reach the last mile through its innovative products was evident in its 2020 performance as Honeywell Flour Mills retained its title as Nigeria’s leading foods manufacturer.
Despite the global economic impact of the COVID-19 pandemic, Honeywell Flour Mills Plc recorded N109.5 billion in revenue for the 2021 financial year, a 36 percent increase from N80.4 billion recorded in 2020 and the highest ever in the company’s 23-year history.
Advanced technology infrastructure and operational efficiency is another factor projected to drive the company’s growth this year. This is evidenced by the efficient utilisation of its world-class factory in Sagamu, Ogun State which boasts an annual Pasta production capacity of 138,600 Metric Tonnes and contributed over N9 billion to the company’s overall revenue in the 2021 financial year, its second year of operations.
The revenue record last year placed Honeywell Flour Mills in an elite company of FMCGs in Nigeria to have hit the N100 billion mark. The lockdown of the major cities across the country and the restriction of movement that impacted the livelihood of millions of Nigerians meant that FMCGs like Honeywell Flour Mills were responsible for keeping the economy moving while serving people with affordable staple food.
Given the increase in production activities, challenges with forex and COVID-induced disruptions in global trade which affected the sourcing of raw and packaging materials, the cost of sales grew by 41 percent to N93.9 billion from N66.5 billion in the previous financial year.
However, the company’s Operating Profit grew faster than revenue at 39 percent, from N5.4 billion in 2020 to N7.6 billion in 2021.
This was attributable to improved efficiencies and cost optimisation strategies which saw selling and distribution expenses decreased by 8 percent to N5.5 billion, while general and administrative expenses only slightly increased by 4 percent from N2.4 billion in 2020 to N2.5 billion in 2021, despite double-digit inflation during the period.
Consequently, Profit After Tax (PAT) increased by 73 percent, growing from N650 million in 2020 to N1.1 billion in the period under review.
“We will continue to focus on our competitive advantage and improve our product offerings in order to deliver value to all stakeholders,” Jaiyeola said.
According to the MD, Honeywell Flour Mills has also identified strategic opportunities for the development and commercialization of modern formats of indigenous carbohydrates. He said the company, which is keen on backward integration, has already commenced the development of one of the products identified and believes it will significantly broaden its business base and serve as a source to generate forex through export to diaspora consumers.
