Uniyal: Consumers Will Get More Value if Manufacturing Challenges are Surmounted

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Managing Director, Euro Global Foods and Distilleries Limited, Mr. Manish Uniyal speaks on the nation’s economy and the efforts being made by his company to add more value to consumers’ demand.  Raheem Akingbolu brings the excerpts:

What is your assessment of the first quarter performance of the Nigerian Economy vis-à-vis the economic recession; would you say progress has been made?

The Nigerian economy, which was severely hit in 2016 by the drop in the crude oil price and crude oil production, is beginning to show some signs of positive outlook and recovery. The economy, which officially entered into a recession in Q2 2016 following the release of the Gross Domestic Product (GDP) figures showing two consecutive quarters of GDP contraction, is showing strong signs of recovery.

The recovery seems to be coming on the back of the recent increase in crude oil price, the increase in crude oil production in Nigeria and the Central Bank of Nigeria’s (CBN) continued supply of foreign exchange to both retail and corporate users. The Purchasing Managers’ Index (PMI) report of the CBN shows that both the Composite PMI and the Production level in the manufacturing sector improved in March 2017.

Although the Composite PMI in March 2017 at 47.7 points was below the 50 point level (which suggests a decline in activities), it was an improvement from the month of February 2017 figure of 44.6 points.

The Index for the production level in the manufacturing sector at 50.8 points is however higher than the 50 point level (which suggests an improvement).

The monthly rates of increase in both the Composite PMI and the Production level were the second highest in two years and the highest since January 2017.

Analysts’ consensus is that the inflation rate will continue to trend downward in 2017. This means that the purchasing power of Nigerians should improve and stimulate demand for both consumer and industrial goods.

The country recorded its highest level of external reserves in 16 months, US$30.30billion, on March 31, 2017.

The average external reserves in the month of March 2017 stood at US$30.2billion. The increase in the crude oil price in the international market and the increase in crude oil production in Nigeria contributed to the accretion in the external reserves.

On account of the increase in external reserves, the CBN has been able to maintain an improved supply of foreign exchange through authorised dealers (the banks) to end-users.

The expectation is that the current improvement in the macroeconomic environment and the efforts of various stakeholders to promote made-in-Nigeria goods should stimulate economic activity in the short to medium-term.

In the midst of this hurdles, what would you say are some of the key challenges confronting the manufacturing sector?

 

Key players in the industry had expected to see an improvement in the manufacturing sector, but that hope was dashed as economic indices showed that not much improvement was recorded in the real sector of the economy. Expectedly, major economic challenges in the sector were yet to improve despite positive steps taken by the Federal Government and its economic team to reposition the industry.

Apart from the forex challenge, the manufacturing sector also faced high lending rate, high cost of power generation and declining household consumption, which resulted in real income depletion due to surge in aggregate price index.

Beside major challenges, the sector also faced with lack of properly-trained workers. A factory is only as good as the people that run the factory. There is a lack of properly trained employees that have the management skills to manage a team and technical skills to operate machinery and build products with their hands.

Of course, there are also infrastructural issues. I can’t talk about the issues facing all businesses in this region without talking about infrastructural challenges. The main issue that hinders manufacturers is the access to uninterrupted power supply.

 

The World Bank and International Monetary Fund have predicted that Nigeria economy will recover from recession and grow by 1.7 percent, are there indications you can point to support that claim?

In our perspective and with the numbers that we have seen coming from the World Bank and the International Monetary Fund (IMF), Nigeria’s economy has recorded about one per cent real growth. “That is a bit lower than government’s expectation which is about 2.2 per cent growth for 2017

 

 

 Like they say in every problems there are opportunities, so what are the opportunities for growth in this moment for manufacturers like you?

Yes there are genuine opportunities as Government has embarked on an economic recovery plan and slowly shifted emphasis towards made in Nigeria. Difficulties in availability of dollars has also made importation difficult for some of the FMCG goods and hence local production is gaining momentum though this is sometimes scuttled due to lack of technical know and capability gaps.

For us the difficulties in importation has started providing business opportunities in some of the markets and product segments

 

 

It seems like Euroglobal has done pretty well despite the challenges, we have seen expansion in some of your operations, especially in the food, beverage and even the agro allied segments, so what can you say have been your strategy for growth?

Our strategy for growth is very simple. One, market expansion into untapped territories in Nigeria, we have restructured and expanded our sales team by continuous recruitment drive to cover new areas. Again, we have consistently worked on product expansion and innovation. We launched four products last year and plan to launch three new this year. We also leverage on the surplus capacities we have and workout more and more on local components. Then we take synergy from the backward integration with our group companies.    Our lean structure enables us to move with alacrity and adapt changing business environment. The board of directors and top management is proactive in providing support enabling us to move fast.

How have you been able to position your company to key into the post-recession possibilities, by taking advantage of the growth opportunities likely to present itself?

If you see many companies and some in similar sector and in competition to us   have had to do downsize or shut down their operation during last year’s recession. They were forced to down size their workforce in order to control cost and navigate through tough environment,

We have had no such issues as we have always been following a principle of lean structure and efficient processes to run our business. On the contrary we have been expanding into new areas and were on a recruitment drive even last year. We are quite confident as the effect of downsizing will be not there and we are nicely positioned to take early advantage of expected economic recovery

 

 

What are the ways by which you have been able to engage your customers, especially in this challenging period of rising inflation and declining disposable income?

 

Most of the inflation in Nigeria is due to cost push in view devaluation of Naira and over dependency on Imports. We had embarked on the philosophy of maximizing local content in our products and passing on the cost advantage to our customers. If you see our price increase has been quite less in comparison to competition. We have also leveraged on the synergy we have with back ward integration. Most of our group companies supply us Raw and packing material to the extent that our imports are now barely 15 to 20 % for the raw material

Secondly we have come out with innovative products and unique packaging. This has provided value for money proposition for customers. Take for example we were unique in introduction of Golden Choco in slim can in Malt drink category. One of our flagship brands; Power bitters has unique blend and packaging, which cannot be compared to any other brand.

 

Euro monitor has said that Nigeria is the 4th largest soft drink market in the world, and Euroglobal is a frontline player in that category, with a number of premium brands, what are your strategies for remaining competitive and improving on your market share?

 

Our strategy to remain competitive works around 3 key principles

First maximise local content and leverage on the back ward integration with our group companies for our Raw and Packing material requirement. This will counterbalance some of the negative effects of severe cost push due to Naira devaluation. Second is work on a thin and lean/efficient organisational structure. We have one of the most efficient and lean structures greatly reducing overheads. Third is to expand into new untapped territories in Nigeria by expanding workforce wherever required

 Your biscuit arm has also been very innovative and competitive, especially in recent times, are there plans to ensure sustainable growth and profitability?

 

Yes they have been doing exceptionally well and they have been adding new products in their portfolio. They have forayed into wafers and thin crackers and quality of these is exceptionally good. They are also leveraging on the benefits of back ward integration and depend on group companies for their raw material/packing material needs

Are we likely to see a new line of product any time soon from Euroglobal to tap into the enormous opportunities in the food and beverage segment?

Like I mentioned above we are extensively working on three new products and these are going to be rolled out soon .

 

No doubt consumers love your product, but the challenges have always been availability. Some of them want the company to do better in the area of distribution. What is your take on that and are there plans to improve distribution?

 

 

Yes this has been one area we are investing a lot of time and energy to improve. As mentioned earlier we have been on a recruitment spree to increase our footprint in untapped areas and spread to new territories that were created last year and further have been created this year. Further we have restructured our entire sales vertical with creation of key focus area so that market penetration in existing area improves. Also in order to improve visibility of brands we have now formed a separate vertical for marketing function as earlier sales and marketing were intertwined into one.

What are your growth projection plans?

We have had an average CAGR 35 % in last two years. We believe we can grow much faster than that in 2017 and the same has been put into the targets of the team.