Odesile: Adulteration is Killing Distilleries in Nigeria

 The Managing Director, Grand Oak Limited, Fatai Odesile, was a council member of the Advertising Practitioners Council of Nigeria and former President of the Advertising Association of Nigeria. In this interview with Raheem Akingbolu, he spoke on a wide range of issues including the state of the economy, the wine and spirit market and counterfeiting. Excerpts:

 

How will you assess the Nigerian economy in view of its current rating as amongst the 10 most conducive business environments by the World Bank?

Much as I would have been excited about the news, having been to other climes and being able to establish that our environment is not entirely bad; it is difficult to believe those assertions because of the largely unreliability of available data. There are really no reliable data for planning in Nigeria; so, in a number of times, what we hear conflict with what we see.

For a fact, if you have data to support it, I think the economy is not doing too badly; I think that it can be simply considered favourably amongst other climes. It might not be exactly as rosy as it has been painted but from what I have witnessed in other places, we are not doing badly.

The only challenge is that we don’t have data to back it up and many Nigerians will remember the famous decision to invest in Nigeria by Vodacom and MTN. When Vodacom based it on data, it said look their per capital income, their GDP per day is even not up to $100, why would you want to go and take that kind of risk, where will they get money to buy recharge cards and all of that. But MTN thought differently and it got it right.

The result is what we see today. At least, we all see what happened, MTN became successful and the rest is history. So, I think the economy is not as bad as some people think. It may not be as rosy but I think that the claim might not be too misplaced.

What are the growth indices for private sector concerns in this economy?

Let me go with the published report, if you check the Guinness published report of 2017, as well as the Nigerian Breweries published report; you have some appreciable level of over 39%, 14% growth respectively.

Right now, I am speaking purely for the private sector, so from the economic perspective, I think we have seen some respectable growth in the economic performance. To that extent, that is supportive of the proposition that the Nigerian economy is one of the positive economies in Africa as at today.

 

How do these indices and interplays impact on various business sectors?

I think that if the current policies are sustained, we will all see the interplay in every of these areas. I think that it will be very positive on the economy; I think that it will be very positive on the business and on the industry as a whole.

If you look back to June through October 2016, was it really possible to predict the price of an item the following morning? No, because at that time you find out that a dollar to a naira was changing every hour, so if you want to buy dollar for your import items, you could get it at N380 in the morning and by the time its get to the evening, it could be N400.

Those periods did not allow industries to plan. What it also did was to put everything on cash and carry. Companies that were extending credit line before aptly turned round to demand for cash; because most were not sure what the price will be the following day.  It puts a lot of pressure on everybody. As such, all those inconsistencies and the ability not to be able to predict what might happen made the economy dicey. In the overall analysis, to a large extent, all those inconsistencies are reduced now; we can plan better these days because there is some level of stability.

In the economic indices today both manufacturers and consumers can sleep with their two eyes fairly closed. And that is very crucial because one can’t be changing the products’ price in the market everyday and yet we have to sell. Point blank, I want to say that the stability is really helping this economy to move in the right direction.

 

What are the challenges in the sector that you are operating in?

The challenges are numerous, so from the economic point of view, we still need a stronger naira because what you will find is that a lot of the inputs materials that are dependent on sourcing from abroad are still proportionally higher than what we could pass on to the consumers.

 

How are you coping with the challenges?

One of the ways is that we have been looking inwards; we have to now even look more inwards to cut down some inefficiency. Unfortunately and painfully, people are also part of these. It is all about looking at what is it that we can do to cut down time and at the same time identifying multi-skilled people. So, one sure way is to reduce unnecessarily overhead, cut back on wastage.

One other challenge confronting the industry and which is more peculiar to the distilleries in the drink segment is the problem of adulteration. You know, the entry barrier to distillery business is quite low.  The recycled bottle business has become a booming business today and its possible for some people to sit at the corner of their houses, manually apply cork, used label and package fake gin and masquerade it as the original.

That is one major problem that is confronting us and we have been collaborating with NAFDAC on this. Checkmating faking and adulteration is necessary because as brand owner we owe it as a responsibility to protect the consumers.  Indeed, faking is killing businesses and driving marketing budget up.

Based on that, we constantly have to communicate to the consumer to alert him/her, this is the new feature, watch out for the original, go for the original Seaman’s Schnapps and all of that. So, it is a lot of issue confronting the distilleries in particular that may not be as much with other drinks, such as  beer, because of the return bottle scheme.

 

How would you assess consumer attitude in terms of products consumption and patronage?

Today’s consumers are much better informed; they are not carried away by the imported mentality hence there is a lot more focus on Nigerian-made goods. The attitude of today’s consumer is now driven by quality rather than foreign obsession. Today’s consumer wants to know: is this good for me irrespective of where it comes from. I think that we are beginning to see a much more rational consumer, a consumer that is not driven by geographical emotions but are driven by basic realities of time, quality and value. Value proposition is beginning to take the centre stage for most consumers of today rather than origin or colonial bias as we used to have.

 

What areas give you more challenge? Is it market penetration and patronage or meeting consumer needs and lifestyles with your brands?

 

For me, the major area of challenge is the value proposition. It is actually hitting the consumer at the core of his value need, getting the mix right and tailor-making the brand to the consumer. That gives a lot more challenge today because then you have a lot of pressing needs hitting that same consumer. You really need to get to the heart of his needs, determine what he wants, how he wants it, when he wants it rather than shooting in the dark.

The other challenge is that our people do play to the gallery at times. You have a focus group study; people do tell you what they want you to hear in a focus group. People who rarely consume certain brand in the house will tell you, I have a carton of it, I buy this etc, we realize the need to filter that to really get to who and what he does and when he does it and how he does it.

So, to answer your question, data, and getting into the real heart of value proposition of a consumer in Nigeria is one of the challenges facing a lot of business owners.

 

In recent times, promoters of beer have been educating Nigerians on the health benefits of beer due to the threat that your brands pose to them. Has this not had negative impact on your sales in the last two years?

 

Well, you could not say that most things that are done are not impactful. If we look at it this way: look at the drink business in 2016 or in 2017 and look at the situation in 2015, there is a clear difference.

Today, practically any brewery or any beer manufacturing company that is worth its salt is into distilleries too. If you look at Guinness, the company has been riding largely on spirits for awhile now. So, what does that tell you? Spirit has become an attractive proposition no matter what the current perception may be.

Even from the economic point of view, if I want to host about 5 guys for instance, it pays me to just buy a bottle of Lord’s Dry Gin, put it on the table and four or five of us will enjoy ourselves. So, people are beginning, on their own, to realise the benefits of spirits; I mean, if you look at Diageo, what is the biggest aspect of Diageo business?

Yes, it is always good to campaign the benefits and all of that but the consumer is also very smart and he is aware of the health benefits. For instance, if you take a shot of Whiskey, no sugar and it burns your fat, it keeps you smarter and healthier. Of course, you will take a decision as to what to drink.

So in respect of the safety campaign, we in the Distillery subgroup of MAN have been in consultation with the beer group on how to support the initiative. That is, we are collaborating to run the safety campaigns, ‘don’t drink when you drive’ and all of that. We are doing that as a stakeholder together with the promoters of beer brands to ensure that we enlighten the people and boost the effort of the Road Safety Unit.

If you look at all the creative materials that we produce here to push our numerous brands, you will notice Drink responsibly and Not for anybody below 18 footnote. It is a mandatory campaign that we are also running. In as much as we want to sell, we also want people to be safe.

 

How many brands do you have today in your products portfolio?

Today, we have about 12 brands, mostly household names. These include, Seaman’s Schnapps which has been there for decades, Lord’s Gin is also a premium brand that is today playing along the global brands. We have Regal Dry Gin, 9ja Café Rhum, a fantastic coffee Rhumwhich gives you the true taste of coffee extract.

We also have Apperito, Swagga, which are in various ranges. We have Dark Sailor Rum; Calypso Coconut Liquor that appeals to the youths, Super Crown Schnapps and Bacchus Tonic Wine. Then, we have a non alcoholic drink called St Lauren.

 

The launch of Swagga in Akure a few years ago came with a manufacturing plant but in less than three years, the plant is not functioning. Could this be as a result of the recession or the brand is not doing well in the market?

Let me start by stating that the Akure plant was not just meant for Swagga; it was a multipurpose plant. Having said that, there is an economic of scale which is part of looking inwards through which we were able to establish that  rather than have that plant in Akure, producing what Nigerian Distillery could actually take on, why do we need to fragment resources.  So, we discovered that Lagos facilities can take care of what is being done in Akure. The whole idea of the Akure plant was to actually grow into some other brands that are going to be in partnership with others. So, Swagga is still a growing brand including the Bitters category.

For drinks business, there are very distinct segments, you have the super premium, the premium, mainstream, and low end within the main stream; you have the upper main stream, the lower mainstream, so each of these brands play in the appropriate segment.

 

Which brand is the flagship of the group?

Seaman’s Schnapps is the flagship of the business. If you look at the entire spirits in Nigeria, Seaman’s Schnapps remain the number one brand.

How has it been these two years since you assumed the headship of Grand Oak as Chief Executive Officer?

It has been very interesting. You see it there is a world of difference between a passenger and the driver of a bus. These are two different things; you know some of those things that you will say; how I wish that you could have done it this way, when you sit on that seat and then you have whole the information then you will appreciate those who sat on such seat earlier. I came in at a very turbulent period. Turbulence in both macro and micro; macro we all knew about the global recession and then the recession in Nigeria.

In 2016 when I took over, practically everything was changing in the country; the finance guy would come and say oga, forex is now this and that. Then we could not pass on the increase to the consumers; meanwhile the shareholders were pressing for their returns. Also, the labour union had a 20% salary for junior and 16% for senior and all of that. We had to pay them. Internally, we also had some issues.

So, both internal and external issues all combined to present a tough situation.  Sincerely, the fact that I have been in the system for years and have deep knowledge of the business helped me to sail through.  The fact that we are also very consumer focused and know our ways in Nigeria helped in navigating through the turbulence. But the most important thing is that the staff believed in the leadership. There was a lot of energy that I was able to galvanise from the staff because they believed in the leadership and they said ok, with you in the saddle, we will give you all the support; also the distributors believed in the leadership. We have been working together for years and they had no cause to doubt our capability. That, too, helped a lot.

Can you please assess the marketing communications industry?

In few words, let me say that global modern trends and sophistication of our society have impacted the marketing communications industry very positively.  As a practitioner and a player in this industry, I don’t think you can divorce Marketing Communications from the advance in technology which has helped to sharpen the marketing practice, greatly.