30 Mar 11 Kraft bullish on sub-Saharan African business growth
Africa is largely untapped territory and its growth potential is phenomenal, according to Johan van Zyl, manufacturing director of Kraft Foods Sub-Saharan Africa (left).
“If you want to drive organic growth, which is the lifeblood of any company, you have to take assessments around risks and learn how to mitigate around those risks,” he said.
“One has to have a very different mind-set to extract the latent potential that is within the African continent but, make no mistake, the multinationals, particularly in the fast-moving consumer goods (FMCG) industry, are eyeing Africa,” Van Zyl added.
At a media briefing, Kraft Foods SA said it had invested in a skills programme in its sub-Saharan African operations as it positioned itself to double its revenue in five years.
A pilot programme has already been initiated at the company’s Cadbury Botswana sugar-free gum manufacturing plant in Gaborone. Investment worth R160-million – aimed at increasing volumes and transforming the plant into a world-class African operation – has been ploughed into the former family-owned business.
“We’re marrying the hardware and software – that is, the physical assets with the people and skills – to create a sustainable operation,” said Van Zyl, adding that the Botswana plant had increased its competency level from 9% to 52% over a period of nine months, while at the same time output on the existing technology platform increased by 40%.
The Botswana model, which typifies the growth potential that Kraft Foods projects in the sub-Sahara network of operations, is to be rolled out at other plants where significant investment is being made in transformation programmes.
They include SA’s Port Elizabeth chocolate manufacturing plant, site of a R750-million investment in capacity and capability technology, and Cadbury Nigeria where a new Bournvita manufacturing facility is being built at a cost of R350-million at Ikeja near Lagos.
Kraft Foods SA is part of US-listed Kraft Foods, which is the largest biscuit and confectionery company in the world, raking in revenue of $49.2-billion in 2010. The company’s iconic brands include Cadbury, Jacobs, Kraft, Nabisco, Oreo, and Philadelphia, among others.
According to a report by management consultancy firm McKinsey & Company, Africa’s consumer spending is forecast to rise to $1.4-trillion by 2020, making it a target for international bidders seeking growth opportunities outside of developed countries.
Africa’s consumer-facing sectors – consumer goods, telecoms and banking, among others, present the largest opportunity and are already growing two to three times faster than those in countries belonging to the Organisation for Economic Co-operation and Development (OECD).
Kraft Foods SA said it had great confidence in Africa and was committed to creating locally led sustainable operations that comply with the global company’s rigorous safety and manufacturing practices.
The company operates across nine countries in north Africa, as well as Namibia, Swaziland, Kenya, Lagos, Ghana and Nigeria, where it has a cocoa bean facility that processes cocoa beans for cocoa butter, cocoa liquor and cocoa powder for exporting.
The candy maker also produces its own utilities in Lagos, where its facility has its very own power plant.
“We produce our own electricity – roughly four megawatts. We pump our water from a borehole and we produce our own glucose and maltose – then only do we start to make sweets. It’s a low-complexity, high-volume business with brilliant growth potential,” he said.
But Van Zyl warned that doing business in Nigeria “was not for sissies”. “It certainly has its challenges. And in order to keep supply chains going in high-risk environments requires a specific skill set. With political unrest, the biggest issue is how to maintain business continuity in an unstable situation,” he noted.
The search for higher yields and stunted growth in developed economies on the back of the recession has global players turning their attention to the next big thing, and the often-quoted one billion African consumers ripe for the picking is being seen as the next hot ticket.
“Everyone knows that if you want to do well in Africa, you need to be in west Africa. As a company we’ve made big bets in west Africa and will continue to do so. The reality is that Africa is the next big play for multinationals. If you look at Nestle and Diageo, they run hugely profitable and large businesses in Nigeria,” said Van Zyl.