Group Managing Director and Chief Executive Officer of Flour Mills of Nigeria Plc, Paul Gbededo, in this radio interview monitored by Olaseni Durojaiye, shares insight on managing value chains and opportunities for SMEs in the manufacturing sector
Flour Mills has been around for quite a long time, can you take us through how the company has 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 were incorporated a day before Nigeria’s independence in 1960 and are fortunate to be part of that group of special companies.
Flour Mills became a publicly traded company in 1978 when its shares were listed on the Nigerian Stock Exchange. It has evolved from an installed capacity of 600 metric tons per day in Apapa, Lagos state to over 8,000 metric tons making it one of the largest single site mills in the world.
We have grown to be one of Nigeria’s largest and most diversified food and agro-allied businesses with a nationwide footprint. Right from the onset, our vision was very clear to us. We want to always be the company of quality. Whatever we produce is a promise of quality. Our flagship brand, Golden Penny, remains one of Nigeria’s best known and preferred brands amongst bakers, confectioneries and consumers.
Consistent and affordable, our products are backed by exceptional customer service. Yes, we’ve been here for 55 years, 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. The last several years has seen the Company invest over N25billion in milling infrastructure to maintain its competitive advantage in the marketplace. We have grown over the decades in the production of consumer goods to becoming one of the key players in the Nigerian market.
Your company is involved with almost every aspect of the food-processing industry, how did 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. In 2013, we decided to rebrand ourselves as FMN Plc. which moved the focus from just being a flour milling company to a food and agro-allied business.
We do not just grind the wheat to produce flour for the other industries; we have also expanded into the downstream segment – pasta and noodles production, breakfast cereals, snacks and ball foods. 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 agricultural inputs 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 that want to start small and diversify?
Anyone intending to set up a small or medium scale enterprise must have a strong conviction to succeed. You need to believe in Nigeria; you need to focus on delivering quality products and services. In all honesty, we have come to realise that Nigerians love quality. No matter who you are; the scale of your 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. It will help you to grow in whatever business you choose to engage in, especially as an SME. At FMN, our values are coined as PIILOT which stand for Performance, Integrity, Initiative, Leadership, Ownership and Teamwork. SMEs can adopt these values which have worked for us.
Looking at the entire spectrum of businesses under Flour Mills of Nigeria, how have you engaged with SMEs as suppliers, contractors and distributors?
Of course, they are all critical stakeholders. FMN working with SMEs is an interdependent relationship. 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.
There is a well-known phrase 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 rendering such services to us.
Even in the area of processing and conversion, small businesses supply spare parts and so on to our factories. A critical area of our value chain is packaging where we have being doing a lot to retooling and capacity building initiatives for the SMEs that provide this service for us. We are talking about wrappers, sacks, cartons accessories.
In the areas of marketing and distribution; the entire supply chain, SMEs are effectively involved. We are also keen on backward integration; this has made us engage a vast number of SMEs especially in the sourcing of locally produced raw materials. Without them, we cannot survive and that is where we create value for SMEs and they add value to us as well. They are part of us because they supply us with their services that help us to continue to grow while they are also growing their businesses.
Your company is committed to sourcing locally, 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 recognised this many years ago. Think about the farm that we have in Kaboji, in Niger state. It is a 10,000 hectares of land on which we have been cultivating maize and soya bean for over a decade now. Today, we have become the biggest mechanised maize farm in the country that feed our two feed mills in Ibadan and Calabar, the biggest in Sub-Saharan Africa producing700, 000 metric tonnes of feed mill annually.
We have also continued to discover new ways of increasing our local content even in our wheat milling. We partnered with government to ensure that we have a composite bread flour which we have continually developed 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. We also have an oil palm plantation in Edo state which supports the Company’s edible oil refineries at ROM Oil Mills, a subsidiary company of FMN.
We have continued 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. Growing local content means more local spending which involves the use of our Naira. In this period of currency crunch, our company is also playing a role in strengthening the value of the Naira.
For SMEs that want to become suppliers, contractors or distributors of Flour Mills, what is expected of them?
When we started the milling in Apapa over five decades ago, we would 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, 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. 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. For suppliers and contractors, the key thing is conformity with our standards, quality specifications, cost and adherence to deadlines. These are the benchmarks for participating in our in-bound and outbound operations.
How are you handling the foreign exchange restrictions and challenges particularly in relation to some of your import needs?
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 her 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. 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.