Agribusiness: Manufacturers Expand Local Input Sourcing

Nigerian farmers are enjoying the fruit of their labour as manufacturers increasingly source more raw materials from them, thereby reducing a huge import bill.

Nigerian Breweries (NB) is already substituting barley for sorghum sourced locally from an agriculture-based firm called Psaltery Nigeria Limited.

Jordi Borrut Bel, managing director of NB, said at the pre-AGM meeting held recently in Lagos that the brewer would raise local inputs from 50 to 60 percent.

More than 250,000 farmers spread across several agronomic zones in the North are directly or indirectly involved in planting sorghum for the country’s biggest brewer, BusinessDay gathered.
“We optimise the cassava value chain in the country by providing industrial quality cassava starch to extract maltose syrup for use in NB’s brewing process,” said Oluyemisi Iranloye, MD/CEO of Psaltery, at a recent visit.

Iranloye added that the firm has created a supply chain involving up to 5,000 farm families, which included more than 2,000 registered and unregistered out grower farm families, marketers, transporters and retail input suppliers.

Nestlé Nigeria is sourcing 80 percent of its maize, sorghum, millet, soya, cassava starch, cocoa powder, palm olein from more than 41, 600 local farmers and processors scattered across the country.

Nestlé Cereals Plan project has over 30,000 farmers who supply 100 percent of the grain requirement for Golden Morn Maize.

Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, the food and beverage giant has engaged up to 10,671 farmers.

“The Industry has huge needs and we must help farmers improve their yields to meet them. To achieve real success with connecting farmers to industry, a 360 degree approach which will include the aggregators, processors, and logistics suppliers must be considered within this value chain,” said Mauricio Alarcon, CEO of Nestlé Nigeria Plc.

Nestle Nigeria’s revenue climbed 10.3 percent to N67.5 billion in the first quarter of 2018, while after tax profits for the period increased by 3.0 percent to N8.6 billion.

 

Nestlé’s share price marginally declined 1.81 percent to N1, 570 in Wednesday trading, according to Bloomberg data.

Nestle is the largest listed Fast-Moving Consumer Goods (FMCG) with a market capitalisation of N1.2 trillion.

Local input sourcing increased significantly to 60.72 percent in the first half of 2017, from 46.3 percent recorded in the corresponding half of 2016, data from the Manufacturers Association of Nigeria (MAN) show.

The raw materials inventory of the Purchasing Managers Index (PMI) was at 59.5 points, as the index grew at a faster rate.

Dairy maker FrieslandCampina WAMCO is sourcing some of its raw milk from farmers in communities in Oyo State.

As of 2017, over 70 farming communities, including 962 women, supply raw milk to FrieslandCampina WAMCO on a daily basis, BusinessDay found.

“The capacity the company has there is even more than what I can supply. Things have dramatically changed for us dairy farmers,” Mayosore Olatunde Rafiu, CEO of Genius Integrated Farms, one of the milk suppliers in Iseyin, told BusinessDay.

The country’s second biggest brewer Guinness Nigeria Plc says that it is ramping up local use of maize and sorghum sourced from farmers from 43 percent to 87 percent over the next two years.

“Our patronage has increased tremendously from manufacturing companies. Some of the crops we farm like dry maize were being imported into the country before the foreign exchange crisis. But with the shortage of forex, importers and manufacturers could not bring in dry maize to sell and make profit, so they are now buying from us at large quantity,” Abiodun Olorundenro, chief executive officer, Green Vine Farms, said in an earlier interview with BusinessDay.

Azeeco International a cocoa farmer supplies cocoa to Cadbury, Olam, and Bolawole international, BusinessDay found.

Major manufacturers such as De-United Foods and Chikason Group source palm oil from manufacturers, including Presco and Okomu.

Dangote Farms, Savannah Farm and Ikara Processing Plants had off-taker arrangement with tomato farmers. But Dangote tomato plant is currently not in operation owing to high cost of tomato seeds.

 

Source: BusinessDay