African Business Editor Anver Versi is in conversation with Venkatramani Srivathsan, Managing Director, Africa & Middle East, Olam International Ltd.
What are Olam’s current operations in Africa?
We currently have operations in 25 African countries, and these extend right across the value chain from seed to shelf. We have upstream palm and rubber plantations in Gabon, rice farms in Nigeria and coffee in Tanzania and Zambia.
We continue to source products including cashew, cotton, cocoa and sesame from our network of approximately 3m smallholders. At the mid-stream level processing level our operations include wheat mills in Ghana and Nigeria, with two more coming on line in Senegal and Cameroon, as well as cocoa, cashew and palm oil processing plants in various countries.
Finally, we have our downstream Packaged Foods Business, selling consumer staples such as Tasty Tom Tomato Paste and Cherie Noodles. We continue to invest in our smallholder producer networks, supporting farmers through field schools, interest-free micro-finance, inputs such as fertiliser and seedlings, and social investments such as health centres and schools.
By collaborating with the NGO sector we have been able to advance social and environmental best practice. For example, this is our sixth year of leveraging our extensive networks and partnerships with GIZ (Gesellschaft für Internationale Zusammenarbeit GmbH) and EngenderHealth to support programmes for the prevention and treatment of HIV/AIDS across Africa.
‘We continue to source products including cashew, cotton, cocoa and sesame from our network of approximately 3m smallholders’
How much have you invested in Africa to date?
Our commitment to the African region runs deep: Olam started sourcing our first product – cashews – from the farm gate in Nigeria 25 years ago. Since then, Olam has invested $1.26bn in support of our operations across the continent.
How do these investments fit in with your global strategy?
Our global strategy can be best understood as a series of interrelated steps of adjacent product, geographic and value chain expansion, with each step building on prior initiatives without losing focus of our core supply-chain trading business.
This has led to our strategy of selectively integrating into high value upstream and mid/downstream segments of the value chain – and nowhere is this more apparent than in Africa.
Which are the major growth markets for agribusiness in Africa?
We see opportunity in local value addition in African supply chains, and we have developed 25 tier one processing plants in the region including units for cashew, rice, cocoa and sesame among others. Processing crops in-country has a number of advantages – not only does it provide employment, reduce transport costs and emissions, but it gives farmers confidence that there is a ready buyer for their harvest, knowing we will commit to a fair price.
Africa is also increasingly a destination market, and not just an export market. Olam has invested in processing units for imports such as tomatoes and wheat to support growth in our packaged foods business. Africa is set to become the region with the fastest-growing consumer market, with McKinsey predicting an imminent boom in African consumer spending of $1.4 trillion by 2020, of which approximately 46% will be on food and consumer goods.
Naturally Olam is keen to be part of the expansion in this sector. We are already the second-largest producer of branded tomato paste in West Africa, selling through three brand names: Tasty Tom, De Rica and Festin.
How big is the packaged foods market in Africa? What are your most popular brands?
Our portfolio currently counts six key brands that are marketed to more than 10 South and West African markets, and we now have leading positions in most of the categories that we participate in. This has been achieved through a strong distribution set-up that reaches to the smallest towns and villages in each of our target markets.
We are concurrently making significant investments in brand building and in developing deep insight into African consumers’ needs and wants. This, we believe, will be a source of enduring and powerful competitive advantage for us. Our popular products include tomato paste, pasta, biscuits, edible oil, instant noodles and beverages.
What are the major challenges for investing in Africa?
Olam’s deep experience in emerging markets and our long heritage in Africa means that we are able to adapt our operations in challenging and often unstable environments, and can successfully mitigate the associated risks.