Flour millers in aggressive push for capacity expansion, market share

Flour millers in the country are investing heavily in capacity expansion, just as they also strive to outdo each other in the market through innovation.

Demography, shifting consumption culture, growth of the middle-class and urbanisation have been key drivers of Nigeria’s flour milling industry, say analysts.

Flour Mills of Nigeria (FMN) plc leads the pack, having already announced plans to invest $1 billion between three and five years to expand into the West African sub-region.

In November 2014, the firm unveiled Golden Penny Multi-purpose flour, a bread and baking flour which is a combination of wheat flour and 10 percent high quality cassava flour.

During the event, Paul Gbededo, group managing director, FMN plc, said the company has significantly invested in some food and agro-allied value chains to align with government’s Agricultural Transformation Agenda (ATA), create group synergies, support and protect supply chains of its core food business while also ensuring long term sustainability.

He said that the firm has acquired Thai Farms in Ogun State for the cultivation and production of cassava tubers.

Thai Farms has the capacity to process 300 metric tones (MT) of cassava flour per day to produce 75 MT of high quality cassava flour, Real Sector Watch has gathered.

“We also have 10,000 hectares of farmland at our Kaboji Farms, Niger State and 5,000 hectares in Shao, Kwara State, among others, for the cultivation of cassava to supplement Thai Farms. Cassava and other value chain crops provide critical raw materials for our food business,” Gbededo said.

General Electric’s report on FMN in November 2014 says the firm exports over $1 billion worth of products to the United States alone.

Beyond flour milling, the firm has an ultra-modern 70,000 MT integrated Eastern Feed Mills in Calabar, Cross River State.

John G. Coumantaros, chairman, Flour Mills plc, disclosed that the mill is the largest in sub-Saharan Africa, with capacity to create 1,000 direct and indirect jobs.

On its part, Honeywell Flour Mills( HFM) recently unveiled  a milling plant in Lagos , built at a the cost of N10 billion.   Its automated warehouse has a capacity to hold about 100,000 bags of 50kg flour. The flour milling giant has also invested nearly N1 billion in modifying its plants to add high quality cassava flour to the composite flour it currently produces, Real Sector Watch has learnt.

It likewise has wheat storage capacity of about 42,500 MT, with a monthly usage of about 40,000 metric MT.

The state-of-art facility has upgraded Honeywell’s production capacity by 63 percent.  The firm further plans to build a 66-hectare Flour-gate Estate in Ogun State which will house new factories for the production flour and pasta, a recent statement by the company said.

Speaking recently with journalists, Lanre Jaiyeola, managing director/CEO, HFM, disclosed that the firm has exhausted capacity for some current products and will continue to build more capacity to consolidate its position as a big industry player in all the sectors it participates.

“We play in five categories. Our flagship brand is Honeywell Superfine Flour, which is number two in the market with about 20 percent to 22 percent of the market share. Honeywell Semolina has 40 percent share; Honeywell Wheat Meal, 60 percent; Honeywell Noodles, 12 percent, and Honeywell Pasta, 14 percent,” he said.

He said the company ramped up capacity in 2013 by adding 1000 metric tons flour mills in two tranches of 500 metric tons each, stating that the expansion has made it possible for the company to produce more Honeywell Superfine Flour and Honeywell Wheat Meal.

In May 2014, Tiger Brands, South Africa’s largest food company, pledged to write off about half of its investment in Dangote Flour Mills  ( Dang Flour)less than two years after buying a 63.5 percent  majority stake in the Nigeria-based producer for about $190-million.

The South Africa-based Tiger Brands took a $82 million write-down on Dangote Flour Mills as it struggles with tough competition and weak margins. It has not been smooth for Tiger Brands as it has had impairments and losses ever since then. Insecurity in the Northern Nigeria has also contributed to the unimpressive performance.

Northern Nigeria Flour Mills plc (NNFM) is 52.6 percent owned by Flour Mills of Nigeria plc. The company has three manufacturing units with a combined capacity of approximately 1,200 metric tons per day at Kano State. FMN’s innovation, use of latest technology and training for its millers have been a fillip for NNFM. However, like Dang Flour, NNFM has also been hampered by insecurity in the Northern Nigeria.

“The company is unable to push its products to countries like Chad,” said Abiola Rasaq of the Research and Strategy Unit of Associated Discount House Limited, in a recent note to BusinessDay.

Another player in the industry is BUA Flour Mills Limited. Since its incorporation in 2005, BUA has established plants in Lagos and Kano.

There is also BUA Pasta, a new subsidiary of the BUA Group.

BUA’s plant consists of 5000 tons wheat silo currently and produces semolina at a capacity of 360 metric tons (MT)/day. The plant, located in Apapa area of Lagos, also produces pasta at a capacity of 240 MT/day.

January 20, 2015; http://businessdayonline.com/2015/01/flour-millers-in-aggressive-push-for-capacity-expansion-market-share/#.VL3kaS7Fy94

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