Interview
With a remarkable 50-year corporate presence in Nigeria, FrieslandCampina WAMCO remains steadfast in its commitment to empowering local farmers and communities, revolutionising the dairy sector one step at a time. Vanessa Obioha recently spoke with the Managing Director, Ben Langat, under whose leadership the company has emerged a trailblazer in the dairy industry
You declared N324.7 billion in revenue at your 50th annual general meeting, which marked 21% growth over your 2021 figures. To what will you attribute this success?
If there was one year where businesses that are not strong could have slipped, made huge losses, or shut down, it was 2022. It was an extremely slippery year. We try as much as possible to protect our business by ensuring that we get margins that enable us to reinvest. So when costs go up, we do what is called Revenue Growth Management; a combination of many things beyond pricing. When you do Revenue Growth Management, you look at affordability – what the people can afford. There are many ways to deal with that. Sometimes it is about the price, sometimes it’s about the grammage or pack sizes. The disposable income of a lot of Nigerians has not gone up but prices have gone up. As a nutrition company making nutritious products for consumers, which is better: to let consumers consume a little at a certain price or to miss it completely because they cannot afford it? So what we do is to make product offerings that our consumers can afford. Sometimes we do downsizing, other times direct price increases and even value engineering to see how to substitute raw and packaging materials for cheaper sources so that against all odds, Nigerians still get the vital dairy nutrition we all need. Thus we are then able to manage our costs, maintain a good margin and re-invest in our brands.
How much of a Nigerian company is FrieslandCampina WAMCO, especially now that you have marked 50 years of corporate existence?
FrieslandCampina WAMCO is truly a Nigerian business. First of all, WAMCO, which is an acronym for West African Milk Company was registered in 1973 as a corporate entity. Then it became Friesland Foods WAMCO Nigeria PLC in 2005 and FrieslandCampina WAMCO Nigeria PLC in 2009. Today, we are Nigeria’s favourite dairy nutrition company. Our flagship brand, Peak Milk, has been in the Nigerian market, nourishing our teeming consumers since 1954. It first came into Nigeria through an import model and I think so far, almost every Nigerian I have interacted with has been nourished by Peak Milk at some stage of their lives. So FrieslandCampina WAMCO is Nigeria’s foremost dairy company and Peak is Nigeria’s foremost milk brand.
Next is Three Crowns Milk, another iconic brand that has been here for more than 30 years; also nourishing Nigerians all through this period and we are very proud of that heritage. Furthermore, we are also very proud that we are the first company that truly went into local dairy development, as far back as 1984. We are truly Nigerian. When the country gained independence in 1960, Peak was already here; nourishing Nigerians with quality dairy nutrition. Our brands are localized and we are truly a part of Nigeria’s history.
Given your history in local dairy development, to what extent have you developed local content for your products?
From a milk production point of view, Nigeria has a hot, humid environment which typically is very good for beef cattle and that is why you see a lot of the Fulani cows doing very well. To grow high milk-yielding cows, you have to put in extra effort and this is what we have been doing for many years. For over 12 years, FrieslandCampina WAMCO has continued to invest in the Nigerian dairy sector as it has been sourcing raw milk locally for manufacturing. We are also the highest off-taker of fresh milk produced locally from 5 states in Nigeria. Right now we are running several factories – the Evaporated milk factory, Powder factory, Yoghurt factory, and the mobile Yoghurt factory. The Yoghurt factories are running on local milk, so we can say we have brands that are 100% Nigerian in our portfolio. However, to be able to meet the total dairy nutrition demands in a country as large as Nigeria, the local milk currently available is still very much inadequate. So, in my opinion, the model that the country will run will still have a reasonable mix of importation of some of the raw materials, while local content is developed over some time.
What is the percentage of local content in your dairy products?
We are proud to say that some of our products are 100% locally sourced and very well priced like NuNu Yoghurt which comes in sachets that mothers can easily add to their children’s school lunch boxes. However, in terms of the dairy nutrition needs of the country, local milk sourcing is still at a very low level. It’s such a big task that we have ahead of us as a nation. That notwithstanding, at FrieslandCampina WAMCO, we want to prove that it is doable, as we source about five million litres of milk per annum locally today. We are the highest so far as no other organization has reached that number. However, we’re talking about a country that requires more than 100 million litres of milk, so when you do the calculations, you would see that the percentages are still low. There is still a long way to go. Countries like Kenya and South Africa started local dairy development way back and they have continued on that journey. Nigeria kind of left this topic for a long time and that is why we are still in this phase of backward integration.
How has the Dairy Development initiative improved the earning power and lifestyle of local farmers?
It’s a day and night comparison. For example, we collect about 40,000 litres of milk in a day during peak periods. Multiply that by N300 as that is the price we pay the local farmers per litre. That is the amount of money that goes into those communities every day. So when you go to those communities today, you will see a big change. Fashola, in Oyo, I believe, was not a major trading centre. I am always pleased whenever I visit the town. Today you see nicer homes being developed, schools being developed around and children looking healthy going to school. You see some trading because they have some cash. Our presence in Fashola ensures they have a ready market for their milk and it does not go to waste. The local farmers usually give their testimonials in a manner that makes us feel very proud of what we do.
In terms of employment, what are some of the impacts on your host communities?
We are doing all the right things if you look at it from the employment perspective. Among the 12,000 farmers we work with, there are about 1500 Fulani women, who have been at home not fully engaged. Today, they are productive and have an occupation for which they are being paid regularly and their families are much more prosperous than before – the farmers, their wives, and children. In some cases, their mud huts have been rebuilt into brick houses and their children now go to school, which they could not afford before. We have 29 milk collection centres (MCCs) in the country. These are physical locations with an average of five people who are directly employed. The farmers producing the milk are different from the riders who deliver the milk to these MCCs. Then we have the extension officers and milk truck drivers. If you go on the routes to Oyo, Abeokuta, or Ibadan and stand somewhere along the road, you would see quite a few of our milk trucks carrying raw milk from the MCCs. That said, there are tens of thousands of people who are engaged in all of these activities both directly and indirectly.
Are there other backward integration initiatives you have embarked on?
Talking about our backward integration, we are now in eight states in Nigeria; we work with over 12,000 farmers of which about 1,500 are women; we work with 23 dairy cooperatives; we collect more than 40,000 litres of milk daily at peak periods and we have best-in-class raw milk quality, one of the best in Africa. We have 29 milk collection centres and locations where we do dairy development. We have the Maya demonstration farm in Oyo state which is near completion and is going to be open soon. We also have another large farm, about 300 hectares which we are developing in Fashola, Oyo state. We recently just signed another MoU for a big farm in the north, Jos to be precise which interestingly is where we started our dairy development in the 80s and now we are going back there. The farm sits on 172 hectares. These are all locations where we carry out or will carry out best-in-class dairy development.
In addition, we are introducing crossbreeds into this market with a cow called Girolando from Brazil. As I stated earlier, the reason dairy has not been successful in Nigeria in the past is partly because of the hot and humid environment, unlike places like the Netherlands or Denmark for instance. So if you bring a cow from such climes to Nigeria, the cow will struggle to survive. In Brazil, they were able to successfully crossbreed a local cow with Holstein Friesian until they produced the breed called Girolando which is very hardy, with a big body size and high milk production. So armed with this knowledge, under the Value4Dairy Consortium, we are working with Urus, the world’s largest cattle genetic company to improve the milk yield in our local cows through crossbreeding. In 2022, 1400 Girolando semen straws were produced and 610 artificial inseminations were achieved. 30 crossbreed Girolando calves have been birthed to date, the first of its kind in Nigeria. Now this is different because we do not have to worry about the cows. After all, the weather in Brazil and Nigeria are quite similar; hot, humid, and tropical. We are rolling out this programme across the 12,000 farmers we work with. The crossbreed Girolando cows are also what we will have on our farms.
In terms of volume, the yield of a Fulani cow that has not been crossbred is about one to two litres per day. The Girolando cows can do an average of 20 litres per day. We have to continue crossbreeding to improve the productivity of more cows in the country. This is a real game-changer I am happy to share.
With sustainability becoming increasingly important in the dairy sector, what steps are being taken to improve local sourcing of milk while promoting animal welfare, protecting the environment and promoting conservation within Nigeria?
The cattle population in Nigeria is about 20.7 million and they are well scattered across the country, which means that from a density point of view, it is not a major threat to the environment. The cattle numbers are not as high as what is seen in other countries like The Netherlands which are small yet have lots of animals. Having said that, our dairy development initiative is currently ongoing in Oyo, Osun, Ogun, Ondo, Kwara, and in the north. In these locations, we are working with about 12,000 farmers. Most of them are pastoralists who have cows that roam about. This means that in terms of carbon footprints, there are no major issues. The issues to focus on are resources like water, afforestation, grass and pasture use, and the like. To this end, we train and support these farmers; to help them grow trees within their communities, which form part of our dairy development sites. When these farmers deliver milk during the rainy season, we plan to give them seedlings from our farm in Fashola where we do pasture development in collaboration with Barenbrug, one of the world’s leading hybrid pasture seed production companies. We also help them with pasture development and show them how to use the pasture for cattle grazing in sustainable ways that do not encourage soil erosion or any form of deforestation. All this is coming at a time when the world has moved so high up on the sustainability agenda and thus there is already a lot of knowledge on what to do.
Of the challenges that beset your industry, which poses the greatest threat to your operations and how are you dealing with it?
We have two very big challenges from a manufacturing point of view. The first is the Forex shortage. Any manufacturer in Nigeria even with the best backward integration strategies will need substantial foreign exchange. We don’t produce the required machinery locally nor do we produce all raw materials locally; so there will always be something that needs to be imported. The low amount of Forex available in the market is enough to shut down many businesses as we are already seeing. When a country is having such a huge Forex shortage, the price would be paid somewhere along the line. Eventually, businesses shut down, impacting employment. Forex supply is extremely important. You can only develop local industries if you have enough Forex to bring in technology and equipment and then generate the profitability to be able to run your training schools and build technical capabilities until you have the industry.
So one is an enabler for the other. I believe Forex is a big issue, not just for FrieslandCampina WAMCO, but for every other big company.
For us specifically, the second threat is insecurity within our dairy development host communities. In 2021, we had a big issue when there was insecurity around the Southwest and some of our milk collection centres were vandalized as a result of clashes between the pastoralists and local people. We had to shut down some of our milk collection centres. Our milk collection in the 1st quarter of 2023 is 42% above last year’s figure for the same period because there is better security this year. So you can see that when it comes to expanding our milk collection, security alone can have a big impact. So Forex and insecurity are the biggest challenges we face, however, we have others like poor infrastructure, poor electricity supply, and bad roads amongst others.
What are your expectations of the new government?
I expect that they would consult FrieslandCampina WAMCO on dairy development topics because we are a subject matter expert on local milk sourcing and knowledge transfer. They can engage us on some of these topics leveraging forums like MAN – Manufacturers Association of Nigeria, NECA -Nigeria Employers’ Consultative Association as well as the Food and Beverage Associations, AFBTE, etc. We are there as industry leaders. Let them consult us before taking sharp policy decisions.
