African giant continues expansion
April 17, 2014
by Meyer Sosland
Since its founding in 1960 by George Coumantaros as a private LLC, Flour Mills of Nigeria (FMN) has endeavored to stay at the forefront of Nigeria’s flour milling industry. When the company commenced operations in 1962, its 500-tonne-per-day mill was Nigeria’s first commercial flour mill. With a current capacity of 8,000 tonnes per day, FMN’s flagship facility of 10 integrated mills in Apapa, Lagos, Nigeria constitutes one of the single largest milling operations in the world.
The company was converted to a public limited liability company in 1978, and its shares were subsequently listed on The Nigerian Stock Exchange. Today, FMN is a multi-industry conglomerate with interests that range from cement and fertilizer to pasta and confectionary.
The U.S. Department of Agriculture reports that Nigeria’s annual wheat milling capacity is about 8 million tonnes, although local capacity utilization is about 50%. FMN, by far the market leader, along with Dangote, Honeywell and Northern Nigeria Flour mills (52.6% owned by Flour Mills of Nigeria) control 85% of Nigeria’s flour market share.
“Quality has been the foundation and bedrock of Flour Mills of Nigeria’s 52-year success as demonstrated clearly on all our products — ‘a promise of quality.’ Hence, we continue to pay serious attention to issues pertaining to quality,” Paul Gbededo, managing director of FMN, told World Grain in a recent interview. “We enhance our quality in order to strengthen our ‘Golden Penny’ brand, market performance and retain our leadership position in the industry.”
To reach its current level of flour milling production, FMN has made significant investments, particularly over the first decade of this century. Prior to 2001, FMN’s total milling capacity was in the region of 2,000 tonnes per day. From 2001-02, FMN invested heavily to convert, expand, refurbish and replace its milling units to increase capacity and flexibility of production.
By 2010, virtually all old mills were either refurbished or replaced while new mills were built. All the mills are driven by modern technology i.e. program logically controlled mills (PLC). As a result of that first round of investments, FMN’s milling capacity rose to about 5,750 tonnes per day. The commissioning of the West Mills facility in September 2012 raised FMN’s total milling capacity by 39% to its current level.
Investments in people and quality
Throughout its 54 years of operation, FMN has invested in the latest technology and training for its millers.
“Flour Mills of Nigeria has a strong people-focused policy. The continuous development and welfare of employees is of the main concern. Therefore, FMN has been a major contributor of milling students to the Swiss Milling School and the nabim London City & Guild program over the last 10 years,” Gbededo noted.
To ensure quality products and employees with the most up-to-date knowledge, FMN has used regular in-house and overseas trainings and professional development programs to strengthen its technical know-how and personnel in its Quality Assurance Division. FMN has also established an ultra-modern Quality Control Laboratory.
“In addition, our Flour Operations Division was recently certified with the NIS ISO 9001:2008 Quality Standards. Our Quality Assurance Division carries out rigorous tests of all our inputs. The same is done with our finished products through test baking on a daily basis before they are released into the market,” Gbededo said.
Investing in products
FMN’s flour and bakery segment product line consists of prime flour, confectionary flour, noodle flour and soft biscuit flour, and the newest addition is the Fleur D’Afrique, which is being sold in The Republic of Benin. FMN is currently working on a strategy to extend sales of Fleur D’Afrique to other West African markets. FMN’s best-selling product in this segment is prime flour for bread making.
FMN works through four channels to distribute its flour to its customers.
Dealers and merchandisers;
Direct supply to bakers and bakeries;
Direct supply to industrial users such as biscuit manufacturers;
FMN’s Customer Service Centers all over Nigeria.
FMN invests a great deal of time and energy to determine what its customers need and the consumers want.
“FMN is committed to producing consistently high-quality wheat products that exceed customers’ expectations and as a result, we listen to the customer/consumer and work with them throughout the product development process,” Gbededo said.
With a population of approximately 175 million and a population growth rate of 2.54%, Nigeria is the most populous nation in Africa and the eighth most populous nation in the world. FMN is constantly researching to establish customer/consumer needs and then develops products to satisfy those needs.
“Product ideas are analyzed to establish the attractiveness of the opportunity,” Gbededo said. “Concepts/recipes are developed working with in-house Research & Development and external partners/suppliers. Concepts are then tested with customers/consumers, fine-tuned and relevant business cases and profitability analysis done and, if positive, then product is launched.”
A number of trends in the Nigerian market and lifestyle changes for the population are creating opportunities for FMN.
“Recent changes in lifestyles, increasing urbanization and number of working wives has created opportunities for quick-to-prepare meals and on-the-go snacks,” Gbededo said. “The average urban worker spends about two hours in traffic daily and research has shown that 49% snack during this period, thus accounting for the growing demand for on-the-go meals.”
In addition to the impact that work/life changes among Nigeria’s growing population is having on their consumption habits, a growing middle class and health consciousness is also driving product demands.
“A rapidly growing population, a growing middle class and change in taste have influenced the demand trend for wheat and wheat-based products,” Gbededo said. “In addition, many people are conscious of the health implications of high concentrates of carbohydrates, hence the rapid sales in our whole wheat meal product — Goldenvita.
“FMN is working hard to grow the market, through baking demonstrations to show the quality and consistency of our products. We are developing and intensifying our drive to promote increased awareness and consumption of wheat-based products, especially Semovita and Goldenvita.”
He also noted that the Nigerian government is pushing for increased local content in flour products. To that extent FMN is exploring the introduction of cassava and local cereal/grain products and a few will be launched over the next 18 months.
Very early on in the company’s existence, FMN made ancillary investments in businesses that were associated with and supportive of the company’s primary flour milling business segment. Infrastructure, logistics, power generation along with animal feed and edible oils are just a few of the areas FMN has expanded into over the years.
In the infrastructure and logistics areas, FMN incorporated the Golden Shipping Company and Southern Star Shipping Company Nigeria Ltd., to provide logistic support to incoming vessels and ensure timely discharge and clearance of cargoes.
Also, in response to growing logistics and transport demands, FMN established a Fleet Operations Department, which later metamorphosed into Golden Transport Co. Ltd (GTC) in April 2007.
“Transport logistics is a critical factor to our success. In Nigeria, because of the poor state of infrastructure, FMN’s investment in its haulage outfit has arisen out of the need to monitor its distribution network and ensure that same is effective and efficient,” Gbededo said. “The company cannot over depend on third party transport services that have displayed low quality of services and reliability.”
Golden Transport has built a fleet of around 500 trucks. Each truck has a capacity of 30 tonnes. “Every year, our trucks carry up to 900,000 tonnes of FMN’s products,” Gbededo said.
The company’s support businesses also include Bagco, a woven polypropylene sack manufacturing plant that was incorporated in February 1964 to meet the packaging needs of FMN, and Apapa Bulk Terminal Limited (ABTL).
“The cases of Bagco and ABTL (our in/out bound logistics through the ports) best represent the success of our strategy to support our businesses by direct control of critical sectors of our value chain and creating synergies across the group,” Gbededo said.
To ensure a reliable supply, FMN has also made significant investments in electrical power generation and improved its power supply infrastructure.
“As a result of huge investments in power generation, we now have the capacity that guarantees uninterrupted power supply to all our operations,” Gbededo said. “This has led to less downtime in operations, which used to be caused by frequent power outages.”
The last major initiative to improve FMN’s power infrastructure was between 2006 and 2009. “Prior to 2006, the company’s diesel generators could only produce about 12 megawatts of electricity per day. With the installation of four additional megawatt caterpillar diesel generators and two additional Genbacher gas generators, we are able to produce about 60 megawatts per day on both the gas and diesel generators combined,” Gbededo said. “This has led to a more stable power supply and less downtime as a result of power outages.”
Additional revenue streams
FMN’s diversification strategy has also included additional areas in the food sector. In order to broaden its revenue base and strengthen profitability, FMN has invested in the production of animal feed and more recently edible oils.
FMN sells bran to customers in the Nigerian market and to additional export markets as well. “FMN produces daily an average of 1,200 tonnes of bran. Approximately 30% is exported as pellets and 70% is packed into 50-kg bags and sold into the local market,” Gbededo said.
FMN is forecasting significant growth in Nigeria’s animal feed market, and it is making investments to meet that demand.
“To meet these needs, our subsidiary — Premier Feed Mills Ltd. in Ibadan, Nigeria — runs a 350,000-tonne-per-annum mill for livestock feed production, and it also recently introduced an aqua feed mill with a capacity of 24,000 tonnes per annum,” Gbededo said. “A new animal feed plant in Calabar, Nigeria with the capacity to produce 350,000 tonnes per annum will be commissioned before the middle of 2014.”
He noted that the Calabar facility is being established to meet the growing needs for animal feeds in that region of Nigeria.
“We are also currently developing oil palm by producing oil from a 3,000-hectare plantation in Edo state, Nigeria,” Gbededo said. “In 2012, FMN purchased ROM Oil Mills, which is a 100-tonne-per-day multi-oil refinery and a 100-tonne-per-day solvent extraction plant in Ibadan, Nigeria. It is also equipped with a 100- tonne-per-day mechanical palm kernel crushing and extraction facility.”
In developing its cassava value chain, FMN is cultivating cassava on a 10,000- hectare farm in Shao, Kwara State and also on a farm in Kaboji, Niger State. “These farms provide raw materials to the biggest cassava processing plant in Nigeria, Thai Farm International, where FMN has a 90% holding,” Gbededo said. “Thai farm produces high quality cassava flour for inclusion into wheat flour. This strategy aligns with Nigerian Government’s agricultural transformation agenda.”
West Mills expansion
FMN’s “West Mills” expansion came about after the company determined that it needed to grow its existing business to meet market demands. Gbededo noted that specific consideration was given to the production of patent flours on all mills, with dedicated standalone packing and loading facilities.
The $55-million West Mills expansion, which was commissioned in September of 2012, consists of a bread flour mill with a 750-tonne-per-24-hour capacity, a soft flour mill with a 1,000-tonne-per-24-hour capacity and a past flour mill with a 450-tonne-per-24-hour capacity.
“With the recent commissioning of our truly world class milling facility known as ‘West Mills,’ which houses three mills with a collective wheat grinding capacity of 2,200 tonnes per 24 hours, our total milling capacity increased to over 8,000 tonnes. This makes our Apapa milling site the largest in Africa and the second largest flour milling site in the world,” Gbededo said. “The new complex can mill and mix a wide range of flour to a high level of efficiency, which provides the manufacturing flexibility to meet the demands of a fast-changing consumer environment.
“Our production processes have improved tremendously with quality flour-based products and increased volume of output. The use of Sortex technology has also helped in greatly improving our semolina quality.”
The West Mills expansion features the latest technology and equipment from Uzwil, Switzerland-based Bühler. The durum semolina wheat cleaning system incorporates the latest color sorting technology (Sortex). The facility has a 36,000-tonne storage capacity with the possibility to add another 15,000 tonnes, if necessary. All of the company’s grain is stored in steel silos.
“We target in the region of between 75% and 77% extraction rate, depending on the wheat type and flour produced, quality not quantity is our main focus,” Gbededo said.
FMN worked closely with Bühler to design a modern facility that addresses the concerns a modern facility must address.
“Our latest investment in ‘West Mills’ is indeed environmentally friendly, with sophisticated technology that provides hygienic conditions for production. We ensured that the facility was equipped with systems that allow for reduced carbon emission by continuously recycling the waste from the process until same is released into the atmosphere as clean gas,” Gbededo said. “West Mills is spacious, well lit, and relatively cool with low noise levels and has sophisticated dust monitoring systems.”
The West Mills facility was designed with expansion in mind. FMN has already begun expanding the building to integrate a small household packing facility and install additional milling lines in the near future.