There is hardly a shortage of stories on companies that have been on the receiving end of Nigeria’s sluggish economy, but the success stories of others who have thrived in the midst of several landmines manage to slip away quite frequently.
One of such companies is Singapore-based Tolaram Group, the company that has turned instant noodles into a staple of the Nigerian diet. In what could be termed a leap of faith, and realizing an opportunity to create noodles market in the country, Tolaram started importing indomie noodles into the country in 1988.
To better appreciate the bold step, in 1988, the country had witnessed six coups in her 28years of independence. The high political risk and volatile operating environment were enough reasons to make the case for investing in the country less compelling.
Undeterred by the myriad of challenges, two brothers and executives from Singapore, Haresh and Sajesh Aswani who had been selling textile moved into action from an initial importation of two containers of Indomie noddles to a muti-million-dollar foods company that now has a wide Range of investment in the country ranging from consumer goods, industrial, energy and infrastructure, digital and financial services.
Nigeria is currently among the largest consumers of instant noodles, according to figures from the World Instant Noodles Association, with 1.92million servings as of May 2020, the country occupies 11th position in the global demand for noodles ranking.
In 1995, the company entered a joint venture with Salim Group, the Indonesian company behind Indomie and began the manufacturing of Indomie in the country.
Although it has not been a smooth ride as growth came slowly, it took 13 years for revenues to reach $10m in Nigeria, before sales began doubling annually by the mid-2000s. Inconsistencies in government policies, the currency devaluation, ban on importation crude palm oil into the country, shortage of Foreign exchange to import some of its raw materials means the company would have to device a strategy to weather the storm.
“When you do business here you have to mitigate your risk, so you hedge, number one, and two, you try and get as much local financing as possible,” Aswani in an earlier interview granted to a media outlet “Sometimes it’s at a high cost but if something goes wrong, it’s worth it.” he added.
Dufil Prima, the Noodles-making arm of the company is no stranger to the debt capital market having issued an aggregate of N21 billion in commercial paper between 2016-2017 and a bond issue due to mature in 2022. In March this year, it announced the opening of series 1,2 and 3 commercial paper program under its revised N30billion program.
A commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically to meet short term liabilities.
Tolaram has grown to almost $1 billion in turnover, with Nigeria accounting for $900m of the group’s annual sales. It has also built and operates 13 manufacturing plants in Nigeria, and runs a 1,000+ plus truck logistics company
Indomie is now in every corner market stall across Nigeria, and in most kitchen cupboards. The chicken flavored is the most common in most Nigerian homes with children and students alike take instant noodles as breakfast, as snacks, and lunch at school.
Over the years, it has also faced intense competition, beating giants in the consumer goods space to their game.
The list includes food maker-giants Nestlé’s Maggi noodles brand, Honeywell, Chikki, Supreme Noodles, among others and now controls about three-quarters of Nigeria’s $600m noodle market. In 2017, Dangote Noodles Limited, a unit of Nigerian company Dangote Flour Mills sold two of its production lines to Dufil Prima Limited makers of Indomie Noodles for N3.7billion
“One of the key factors for us to decide to go [into] other products was after we beat Nestlé at their game, we realised we can take on multinationals and win,” Aswani said.
Not resting on its oars, Tolaram has in recent years entered a series of joint ventures: a milk business with Denmark’s Arla Foods, cereal and snacks with Kellogg’s and, dental care products with Colgate-Palmolive.
Tolaram promoters of the Lekki Port LFTZ Enterprise Limited (LPLEL), through a special purpose vehicle for the construction of Lekki Deep Sea Port at the Lagos Free Trade Zone, last year announced the signing of a $629 million facility agreements with the China Development Bank (CDB) for the construction of a port which is to be Sub-Saharan Africa’s deepest port and Nigeria’s first deep sea port.
The new port will be financed with facility from the China Development Bank, and $470m in equity from the state-owned China Harbour Engineering Company, which has a 52.5 per cent stake and will build it. Tolaram owns 22.5 per cent, the Nigerian Ports Authority has 5 per cent and Lagos state 20 per cent. It also mulls plans to enter the digital banking space leveraging its wide Africa distribution network.
Amid several challenges, players in the agribusiness value chain have continued to smile to the bank as household spending on food continues to surge.
Figures from the 2019 consumption expenditure pattern report show that the total household expenditure on food and non-food for 2019 was N40.27 trillion. Of this total, 56.65percent at N22.7trillion of total household expenditure in 2019 was spent on food with the balance of about 43.35percent at N17.4trillion was spent on non- food items
According to a report by the World Economic Forum WEF, Nigeria tops the list of nine countries in the world that spend over 40percent of household income on food. Four of them are in Africa: Nigeria 56.4percent; Kenya 46.7percent; Cameroon 45.6percent; and Algeria 42.5percent. Four are in Asia: Kazakhstan 43.0percent; Philippines 41.9percent; Pakistan 40.9percent; and Azerbaijan 40.1percent. Guatemala is the only South American country to appear in the list and spends 40.6percent of its household income on food.
On the other hand, only eight countries in the world spend less than 10percent of their household income on food. Four of these are in Europe: the UK is third at 8.2percent, followed by Switzerland at 8.7percent; Ireland spends 9.6percent and Austria 9.9percent.
The remaining four countries are spread across the globe. The US spends the least at 6.4percent, Singapore spends the second lowest amount at 6.7percent. Canada spends 9.1percent on food, while Australia spends 9.8percent
By implication, in richer countries, food spending has become a small part of the weekly household spend perhaps diminishing but the reverse is the case for poor countries where it accounts for huge percentage of household spending.
In a recent interview he advised potential investors eyeing Nigeria to look at Nigeria as a long-term country.
“Do not look at Nigeria as a short-term country. You must have a focused commitment. You must have a strong stomach to do business in Nigeria and most importantly you have to be patient. It’s not a country the makes decisions very fast. We are still settling down and the government is still settling down but I think that in time it will find its footing. The great thing is that Nigeria has embraced democracy and it is a big step for the country. Nigeria is still like a growing child and it still needs time to mature” he said.
