‘Investors need to be at peace with high cost of doing business in Nigeria’
The high cost of doing business in Nigeria has often proven to be one of the biggest disincentives for investors. But GODWIN HARRISON, country manager of Beiersdorf, producer of Nivea products, says investors here for the long haul need to be at peace with the higher cost that Nigeria’s operating environment imposes on businesses. TEMITAYO AYETOTO brings this insight and more of how the firm has run its largest manufacturing arm in Lagos Nigeria.
Can you walk us through your path to this seat and how far you have come?
I studied geology- believe it or not, but the closest I’ve come to oil is the oil that we use for Nivea’s lotion. I started my career with Procter & Gamble. It’s the only other company that I’ve worked for, but I was blessed to have had a rather diverse experience with them. I started in Sales in Northern Nigeria and shortly after, moved to Lagos to work on sales strategy. I then spent some time doing Global project management in India, and after that, took up another global role with Gillette in the United States. I moved from the US to South Africa to head up the Wal-Mart customer account. In 2015, I left Procter & Gamble and joined Beiersdorf to begin this exciting adventure, coming back home to Nigeria to start the local affiliate for Nivea.
Comparing what you left with what holds sway now, how is the terrain like?
Nigeria is a country with huge opportunity, huge potential and it is part of the reason why I decided to come back home. It’s a country that just needs to have a few things running right for that massive potential to be unleashed. We seem to have progressed in some areas, and fallen behind in other respects. It’s not been easy since we set up Beiersdorf Nigeria, but we’ve been successful so far thanks to consumers who have been loyal to the brand, as well as a great team. We have about 60 full-time employees now, 150 part-time employees, and they’ve done an amazing job at building the Nivea brand and driving loyalty, which has seen us through some challenging times.
Covid-19 has happened, and we’ve seen the disruption impacted on the economy and the personal cost to many. How has this affected your business in particular? Are you leveraging the experience of 2016 recession to cope? Otherwise, what coping mechanisms have you adopted?
Nigeria, like most other countries around the world, has suffered a major economic hit because of the Covid-19 pandemic. Practically every company in Nigeria has felt the disruption. For Beiersdorf, we had a pretty significant impact on our business particularly at the onset of the lockdown but we have recovered quite well. One of the learnings we got from the past recession is that Nigeria is extremely resilient, the economy is resilient and it bounces back sooner than you might think. The key learning for me coming out of the 2016 recession was the need to be agile, yet not make any rash decisions. You need to focus on what is most important to deliver value to your consumers and always keep the longer term view in mind.
Did you achieve the same level of efficiency with the reduced staff strength?
We did not let go of any of our staff, but had enhanced measures to ensure safety. We have a full complement of staff working at the factory with processes to ensure utmost safety. For the folks in the commercial operations, we instituted flexible work measures giving our colleagues the freedom to work either from home or the office, and provided them with enablers to ensure performance. I would say that we’ve had some of our best months after COVID-19 and the efficiency that we’re seeing now is pretty high, maybe partly driven by the fact that some people are more efficient working from home. Most importantly, the challenge of the new normal has forced us to think differently about the business, think differently about the kind of campaigns that we run, and how we connect with consumers on a much deeper level so that we are delivering value to them like never before. Nigerian consumers have rewarded us in the past couple of months with some of the best sales that we’ve ever had.
What’s your assessment of the Nigerian business environment? Do you see your investments protected here?
The operating environment is a very challenging one. Most companies deal with overheads that make the cost of operations here one of the highest in the world. My philosophy is that at end of the day, you need to be at peace with the fact that your cost of doing business is going to be higher, and think of ways that you can tip the value equation in your favor. You do this by offering even more value to your customers, knowing that they are going to have to pay a little extra.
One of the biggest challenges that we faced is foreign exchange. Even though we are a local manufacturer, there is still a lot of components of our production which have to be imported and getting foreign exchange to do that has been extremely challenging.
The other major challenge is the port. I liken the port to the heart of a human being, with the roads that lead and exit the port akin to arteries and veins. Clogged arteries lead to a heart attack, and that’s exactly the situation we face if we do not decongest the roads leading to the port. We will have an economic heart attack.
We spend less to transport a 40-foot container from Germany to Lagos, than we do moving it from Apapa Port to Mushin. It costs about N700, 000 to ship one 40-foot container from Hamburg port in Germany to Apapa, and over N1.2million to move that same container from Apapa to my warehouse in Mushin, which is a distance of less than 20 kilometers. It takes well over two weeks to clear a container and these bottlenecks impact our exports not just imports. These are costs which a business has to bear that ordinarily it shouldn’t. This is simply unsustainable and requires the declaration of a state of emergency.
Regulatory issues also result in costly delays to product launches, which at the end of the day, leads to lost revenue and consumer dissatisfaction.
These are all challenges that I believe can be resolved, but will need an aggressive plan and commitment from all stakeholders to overcome.
How have you stayed afloat during these turbulent times for businesses and how will you advise other businesses to handle COVID-19 induced recession?
One thing we will never do is to compromise on the quality of our product, and this principle stems from a deep understanding of the consumer and what they want. The reason why consumers vote for us with their money is that they have a certain expectation of what they will get when they pick up a Nivea product, and we must live up to that expectation even if it means charging a small premium. To ensure we are competitive and can weather the turbulent business climate, we also focus on driving out non-value adding costs and improving efficiency.
What informed the N115 million donation to the Lagos Food Bank Initiative?
Our donation to the Lagos Food Bank is part of the strategic purpose of our ‘Care Beyond Skin’ program to support some of the most vulnerable persons in Nigeria. The food crisis is real with estimates of one out of four people around the world considered to be food insecure.
We partnered with the food bank because we know the unique capabilities that food banks have to marshal resources from the government as well as the private sector to get food and much-needed nutrition to people who are really in need.
We are going to support them over the next 12 months and re-access them further on what they need.
The first factory was set up here three years ago with N9b invested. How have you faired till now and why was it necessary for to set up a local production unit?
Yes, in 2016, we set up the local affiliate in Nigeria. By 2017, we had the first phase of the manufacturing line up and running. In 2019, we commissioned the last phase, which included high-speed lines and full compounding capabilities, meaning that about 90 percent of the products we sell are locally produced. The factory also helps us perform a critical role in securing the supply chain for Nigeria.
How has been Nivea’s experience with the distribution and supply chain, considering how challenging Nigeria’s terrain can be?
I’m Nigerian. I cut my teeth in sales in Nigeria and the starting point is having an understanding of the market. Understanding what your strengths are and what your weaknesses are. It’s key to understand what is available by way of distributors, what the trade landscape is, and then design a route to market that enables you to play up your strengths and neutralize your weaknesses.
What we did was to ensure that we had a focused strategy, not trying to do too much simultaneously, and then as we grew, invested more in expanding our distribution and marketing reach.