Diversified food producer doubles down on its wheat and pasta business with major investments announcements.
One of Nigeria’s richest businessmen, Abdul Samad Rabia, the Executive Chairman of the BUA Group, the diversified foods and infrastructure conglomerate is rejigging the company’s food industry strategy by boosting its flour milling and pasta business capacity, after having divested the major part of the business in 2015 to Olam International.
The company’s Amber Foods Limited, through its 100% owned subsidiary Quintessential Foods Nigeria Limited, a miller and pasta producer was acquired by Olam for US$275 million, as the commodity trader turned food processor sought to up its game in West Africa’s packaged foods sector – where it currently holds a leading position as the region’s largest and most diversified wheat milling operator, with plants in Nigeria, Ghana, Cameroon and Senegal – and has also added the animal feed business line in Nigeria, as well.
The assets, which were acquired by Olam, included two wheat mills and a pasta manufacturing facility in Lagos, a non-operating mill in Kano in the North of Nigeria, and a wheat mill and a pasta manufacturing plant under construction in Port Harcourt in the Southeast of Nigeria.
The BUA Group was at the time one of the top five wheat millers in the country, with wheat milling and pasta manufacturing capacities of 3,760 and 700 metric tonnes per day (TPD) respectively, making Olam a key player in the two segments, with its total wheat milling capacity in the country increasing from 2,380 TPD to 6,140 TPD.
It currently operates installed flour milling capacity of 1,600 tonnes per day and five lines of pasta of 720 tonnes per day, with the new investments taking its total capacity past the level of 2015, before the sale of past of the business to Olam.
BUA Food, the subsidiary of BUA Group, has diverse investments in the agricultural value chain in sugar, rice, edible oils, flour milling and pasta.
The comeback game
With an eye into the vast potential for more growth in the grains industry in Nigeria, the BUA Group has recently signed two mouth-watering deals with major suppliers of wheat milling and past processing equipment that will undoubtedly, change the face of the grains industry in the country.
The first was the deal signed with a Turkish milling equipment supplier to build state-of-the-art two wheat flourmills in the country. With a total milling capacity of 2,400 tonnes per day, the plants expected to be completed in 2021, bringing BUA’s total installed flour milling capacity to 4,000 tonnes per day.
Speaking during the signing ceremony, Abdul Samad Rabiu, Executive Chairman, BUA Group said, “We are excited about this partnership with Milleral to develop our new state-of-the-art flour milling plants in Nigeria with a total milling capacity of 2,400 tonnes per day, bringing BUA’s total installed capacity to 4,000 tonnes per day, upon completion in 2021. This will further deepen our involvement in the foods processing sector as well as help enhance food security in Nigeria and the West African region.”
Shortly thereafter, the Group signed a deal with Italian pasta processing equipment supplier Fava to its double production capacity. The new plant will have a total processing capacity of 720 tonnes per day of pasta across 5 lines.
Scheduled to be completed in 2021, the Group says the new investment will complement it’s already existing 720 tonnes per day pasta processing plant in Port Harcourt, Nigeria, bringing its total installed pasta processing capacity to 1,440 tonnes per day across 10 lines.
The Chairman expressed his excitement for the development, saying it would expand the market share of the company and will see BUA Group become the second largest pasta producer in Nigeria, where the company faces stiff competition in the market segment, including from Dangote (producer of Dangote Pasta), Flour Mills of Nigeria (makers of Golden Penny), Olam International (makers of Crown Premium Pasta), amongst others.
“As the region’s population continues to rise, our continued investments across the agriculture and foods processing value chain will be crucial in helping to enhance food security in Nigeria and the region. Through this and other projects in the pipeline, we expect to become the leading player in the flour milling/pasta processing industry within a very short period,” said Abdul.
BUA Group’s investments in agriculture value chain are spread across various industries from flour, pasta to sugar plantations and refining, rice, edible oils and providing technical assistance.
The firm’s sugar business, which refines imported and local sugar, has a capacity of 2,000 metric tonnes per day or 1.4 million tonnes per annum, one of the largest in Africa. The company has invested north of US$ 300 million in the backward integration program to boost Nigeria’s capacity to grow and process its own sugar. In the edible oils business, the company’s two refineries and fractionation plants, BUA Oil Mills in Lagos and Nigeria Oil Mills in Kano have a total capacity of 700 tonnes per day. The company is a significant rice processor and grower in the country.
Nigeria’s vast grains industry potential
BUA Group’s strategy to boost its investments in Nigeria’s grain processing sector joins a sector with strong growth opportunities, as the country’s huge and increasing population seeks to consume processed food products, and as convenience becomes a major driver for urbanized and young population.
Africa’s largest oil and gas exporter, Nigeria’s population accounts for nearly half of West Africa’s population, with 50.3% of the country’s population of 203.4 million (2018 figures) living in urban areas, according to the CIA.
With urbanization rate that is growing at a rate of 4.23% annually, the country has seen a rapid rise in processed grains consumption due to population growth of about 2.54% per annum. West Africa, with 45% of the population living in cities in 2015, is the most urbanized part of Sub-Saharan Africa and Nigeria in particular is one of the most rapidly urbanizing countries in the Continent, according to the UN.
A study by Syngenta Foundation for Sustainable Agriculture and Michigan State University divulges that in addition to population and income growth, changes in lifestyles associated with globalization and rapid urbanization are drivers of changing food demand in West Africa and Nigeria. A growing urban middle class is also boosting the demand for more convenient, processed and prepared foods that are easy to prepare and consume. This consumer class is also on the look out for product attributes such as consistent quality, health and food safety.
The changes in consumer consumption habits have brought to the fore increasing demand for wheat products (bread, pasta, etc.) that are practically ready-to-eat, while rice is much quicker to prepare than traditional West African starchy staples (e.g. millet, sorghum, yams and cassava), especially when the time and process of preliminary preparation is taken into account, notes the study.
The USDA forecasted Nigeria’s wheat consumption in MY 2019/20 at 5.26 million metric tons (MT), with 70% of the flour used in bread making and the rest used in the processing of pasta, noodles and other wheat flour- based products.
Competition and investments in the grains milling sector are increasing in tandem with rising consumer demand, in a sector that has seen massive consolidation, creating four main wheat milling giants, including Flour Mills of Nigeria (FMN) – Nigeria’s largest and the world’s second largest flour miller, Olam Nigeria/Crown Flour Mills, Honeywell Flour Mills Plc and BUA Group. Honeywell Flour Mills Plc’s new plant at Sagamu in Ogun State is one of the latest investments by the giants.
The consumption of pasta and noodles has grown substantially in Nigeria, with pasta making up 15% of total wheat flour usage, from nearly nothing in 1999, and with it increased investments by four major giants, as each takes aim at the growing demand. Flour Mills of Nigeria, the pioneer in local pasta production, has upped its capacity to 350,000 MT per annum today according to USDA figures, while DUFIL, Nigeria’s noodle giant, has through acquisitions become even bigger in the country over the last 10 years. Government policy, especially its 2003 imposition of a 100% tariff on imported pasta and biscuits, has been lauded for turning the tide, boosting local processing of these products.
From the foresaid, BUA Group’s plans to boost its investments in the wheat and pasta milling is bound to upset the current balance in the sector, but the Group will also be facing off with strong competitors for a share of the growing cake that will eventually make the ultimate winner, the consumer, receive more choice and hopefully, better prices and quality in the country and beyond