A challenging business environment with a great degree of uncertainty, labour unrest and an unreliable power supply: that is one way of looking at Nigeria. But any company that has been able to operate successfully in the country for more than 40 years has clearly been able to overcome the challenges and take advantage of the long-term strategic opportunities.
Nestlé has a well-documented history in some of the more difficult markets of Africa, Latin America and Asia. Francois-Xavier Perroud, head of corporate communications at Nestlé SA, says: “We’re in 80 countries worldwide. Uncertainty and risks are factors you have to deal with and accept if you want to participate in markets in developing countries.”
Nestlé’s history in Nigeria dates back to 1961 when it first established a simple trading presence in the country. In 1978, Nestlé Nigeria was listed on the local stock exchange and in 1981 it opened a factory in Agbara, Ogun State. Today, Nestlé SA owns 62% of equity in the company and a large number of Nigerian shareholders also have a stake in it.
The Nestlé brand in Nigeria includes baby food, beverages (such as Milo) and confectionery, which are mainly produced in its factory using locally sourced raw materials such as sorghum and maize. In addition to these domestically manufactured foods, the company sells coffee that is imported from the Ivory Coast. “This is a profitable operation with sales of N28.5bn ($215.7m) for the full year 2004,” says Mr Perroud.
Inadequate infrastructure, clogged supply routes and unreliable power supply are challenges to the manufacture, supply and marketing of Nestlé’s products. Add to that the fact that Nestlé also faces a crowded market in Nigeria. “This is a competitive market with many companies selling comparable products to ours, so it’s a market that keeps you on your toes,” says Mr Perroud.
Employment figures for Nestlé Nigeria have been fairly stable since the factory opened, with about 1000 people (virtually all local) currently employed. Nestlé reports that there are no problems associated with finding workers with the right skills. “Workers’ skills are improving,” reports Mr Perroud. “There are relatively few jobs in industry available and employment with a responsible international company of course attracts talented Nigerians.”
However, labour unrest and strikes are a fact of life. “You must get used to them. Regardless of whether the striking workers are transport workers or public workers, they will have an impact on your business,” says Mr Perroud.
Nigeria presents many challenges but there are some sound reasons for doing business in the country. “Nigeria is an agrarian country with a good supply of raw materials and huge potential, thanks to its oil revenue. Added to this, the government is becoming more aware of a need to get the economy going,” says Mr Perroud.
A different route
Various types of incentives and investment support are available to businesses investing in the country but this is not a route favoured by Nestlé in this market. “Our decision to invest in Nigeria comes from a long-term strategic view, not from short-term incentives or investment support,” says Mr Perroud. “We want to build a sound business that can accommodate any changes in the market.”
For Nestlé, doing business in Nigeria is similar to operating in many other parts of the world. “The lessons we’ve learned in Nigeria can be learnt in virtually any developing country,” says Mr Perroud. “You should respect local customs and cultures, be ready to deal with a difficult trading environment and be flexible to cope with the day-to-day challenges.”