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Managing Value Chains And Opportunities For SMEs In The Manufacturing Sector

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INTERVIEW (Mr. Paul Gbededo)

Managing Value Chains And Opportunities For SMEs In The Manufacturing Sector

The Fidelity SME Forum is a weekly radio programme organized by Fidelity Bank Plc., to educate, inform, advise and inspire budding entrepreneurs in Nigeria with knowledge and expertise that will enable them build sustainable and successful businesses. The interactive radio programme features Subject Matter Experts and Model Entrepreneurs as guests on a weekly basis to share their insights and unique success stories. In this interview, Mr. Paul Gbededo, GMD/CEO, Flour Mills of Nigeria Plc, shared his thoughts on the ‘Managing Value Chains and Opportunities for SMEs in the Manufacturing Sector’.

Flour Mills connotes a lot of things for Nigeria because the company has been around for quite a long time. Can you tell us briefly about your history and how you have evolved in the marketplace?

Flour Mills has been here for generations. It is one of the few companies in the country that has been around pre-independence. We’re just fortunate to be part of that group of special companies. We were incorporated a day before Nigeria’s independence. Right from the onset, our vision was very clear to us. We want to be the company of quality. Whatever we produce is a promise of quality.  Consistent and affordable, our products are backed by exceptional customer service. Yes, we’ve been here for so long, but we remain consumer-focused. It is not just what we want them to have, but what they want from us. We are focused on that. Over decades, we continue to innovate to ensure that we provide consumers with quality and affordable products and services.

Flour Mills is also involved in almost every aspect of the food-processing industry, how has that evolution occurred?

When you mention Flour Mills, people think the company is solely focused on wheat milling.  We have gone beyond that and that is because we have diversified.  Even within the food space, we do not just grind the wheat to produce flour for the other industries, we have also pushed into the downstream segment – pasta and noodles production, amongst others. We are the biggest pasta producing company in the whole of Africa. We will continue to pay particular attention to the downstream segment in order to create value and meet the ever-increasing demands of Nigerian consumers.

Apart from the food business, we also moved into the agro-allied space.  Today, we can say that we have become the biggest agro-allied business in the country. We have attained this feat not just by our involvement in agriculture. We also participate actively in agro-processing, aggregation of agricultural produce and of course distribution of agric products across the length and breadth of the country. So, we are creating value by participating in the upstream and downstream segments. That has also provided immense opportunities for job creation and value addition in the country.

How can SMEs apply the same growth trajectory in their businesses and what tips would you give SMEs who want to start small and diversify?

Anyone going into the small and medium scale industry needs to have a strong conviction to succeed.  You need to believe in Nigeria; you need to focus on delivering quality products. In all honesty, we have come to realize that Nigerians love quality.  No matter who you are; the scale of operations, you need to believe in total quality. You need to create value and exercise discipline in all your dealings. You must have a vision and strive to follow through with your vision.

It should be clear and definitive. Also, you need to continually improve your skills. Having the right people in place to grow your business is critical. Of course, you have to have the right attitude. That will help you to grow in whatever business you choose to engage in, especially for the SMEs.

Looking at the entire spectrum of businesses under Flour Mills of Nigeria, how have you engaged with SMEs as supplier, contractors and distributors?

Of course, they are all critical stakeholders. You have the entire value chain here.  If you look at manufacturing, you need to look at your raw materials, you need to think of production, you need to look at marketing and distribution.  That is the value chain of manufacturing.  Along this chain, there are immense opportunities for SMEs and we will continue to deal with them because they are very important.

We have a phrase in the company that says “The customer is king”. Without customers, we cannot exist as a business. We need their support. So, if you look at just the inbound logistics, you need to think about the planning, sourcing, procurement and storage as well as the logistics around that. Today, we have SMEs supplying such services to us. Even in the area of processing and conversion, small businesses supply spare parts and so on to our factories. We also think about marketing and distribution; the entire supply chain.

They are always there. Without them, we cannot survive and that is where we create value for SMEs and they add value to us as well. That is where we engage with them, they are part of us and they are partners and they continue to supply us with their services that help us to continue to grow while they are also growing their businesses.

You company is committed to sourcing locally and you were far ahead of other companies in Nigeria in realizing that the currency crunch would come one day. How have you worked with local suppliers to meet the standards that you need for your business?

Our focus is to grow local content.  We need to continue to grow local content and we recognized this many year ago.  Think about the farm that we have in Kagboje, somewhere in Niger state. It is a 10,000 hectare of land that we have been cultivating corn and soya bean for over a decade now. Today, we have become the biggest mechanized corn farm in the country. We produce corn from that farm which we convert by setting up a feed mill.

We are the biggest feed mill in sub-Saharan Africa (SSA).  We have a feed mill in Oyo state and another one in Cross River state. We produce 700,000 metric tons of feed mill annually.  So, we need corn locally and that is an input into this feed mills. We have also continued to see how we can increase our local content even in our wheat milling.  We partner with government to ensure that we have a composite bread flour and that will continue to develop up till today.

That has helped us in a way because we had to acquire a company called Thai Farms that produces high quality cassava flour. So, we continue to grow that local content and it has helped us today because over 25 percent of our total revenue in the group comes from the agro-allied space.

For SMEs that want to become suppliers, contractors and distributors of Flour Mills, what would you ask them to do or show you before you accept them?

When we started the milling in Apapa over 5 decades ago, it was a question of produce the flour, bag it and wait for customers to come and pick it at the gates.  We have now moved beyond that.  We have opened our arms to distributors, dealers and even to consumers to come directly and be part of the success story of Flour Mills of Nigeria.  Today, it is very easy to become a dealer. Just walk into our office.

It depends on what level you want; micro, small scale or medium sized level.  It depends on where you want to operate. We can develop tailor-made programmes to suit your business.  Of course, we will want you to become a cash customer. But, we provide some soft credit lines sometimes, by giving you some products. In about half a month or a full month, you can pay and then roll over your business, depending on where you want to operate.

Of course, you know that we have both the business-to-business products and also the Fast Moving Consumer Goods (FMCG) products.  It depends on where you want to operate. This will inform our engagements with you. So, we have those dealers and we continue to expand our clientele base.

Like I said earlier, we had few dealers in the beginning. Today, we have a very broad clientele base and we will continue to increase that as we move on, especially as we explore the FMCG space. We need more and more people to really distribute our products across the length and breadth of the country.

How are you handling the challenges with the foreign exchange restrictions and the currency challenges particularly as it relates to some of your imported products?

We are focused on growing our local content. It is the rationale behind our decision to explore the agro-allied space. We will continue to innovate in that regard. It is work in progress; a long term investment and strategy for our company. We will continue to import, especially those items that we are unable to produce locally. Our core business is milling of flour but wheat is not readily available yet in the country.

We are working with the government, local farmers and relevant stakeholders to grow wheat locally and reduce the dependence on import. By so doing, we can reduce our dependence on foreign exchange. As a nation, there are critical questions we need to answer to forge ahead. How do we build the required structures to ensure that Nigeria is self-sufficient in food production? How do we help Nigeria reduce its dependence on other countries?

That should be the focus of the government, private sector and the general public. We need to focus on these issues to ensure that this foreign exchange crisis being experienced today does not repeat itself in the future. I think that government and its citizens need to focus on these issues. What do we need to be doing today? What about infrastructure? What about the policies? What about the funding? What about capacity building?  We need to continue to work in these areas; build capacity, not just human capacity or process capacity, but also input capacity.

magnoliaManaging Value Chains And Opportunities For SMEs In The Manufacturing Sector

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