Bidco Africa: East Africa’s Leading Manufacturer of Fast Moving Consumer Goods

Interview with Dr Vimal Shah, Chairman of Bidco Africa

What is your assessment of the sector currently? What are latest trends?

We are in manufacturing, sales and distribution, as well as farming and agriculture. We look at all these sectors as being quite opportunistic. There is a lot of scope for improvement. When we look at our agribusiness, the yields per acre and hectare are still very low. We need to go to more scientific farming where we can be precise with what we are doing irrespective of climate which can always be managed through greenhouses, etc. Ten years ago, the population was 40 million. Today it is 50 million. By 2050 we should be around 60 million. The question is, does that mean opportunity or does that mean doom? We see this as opportunity. People will still consume, clean themselves, bathe themselves, eat. Therefore, consumption will happen. The rapid pace of urbanization and urban centers becoming bigger all the time, population increase means that consumerism will always be. I had a cow when I lived in the rural area and got all my food from the farm. Not anymore. In the city, I need to buy everything. Packaged goods and consumer goods will still be required. Therefore, demand will keep going up. Who will serve that demand and that market? Will it be China, India, America, etc.?

Is the market competitive?

We want to go across all 54 countries in Africa. We want to grab, grow, and sustain number one market share in the African markets by 2030, which is only 11 years from today. Where we are going now is in a sustainable manner.

The markets here in Eastern Africa are not like West Africa where the margins are very big, there is asymmetry, half the people do not know what is happening. Here, it is switched on. There is a lot of IT being used in processes, in systems, enablers for route to market. Mobile phones, mobile payments are in. You can get your money SMS transferred to whoever you want. The speed of change is rapid. It is getting competitive and it will always be competitive. You as a manufacturer or a processor or a farmer need to be in the full value chain to make sure that you are able to get value added. That value add will need to keep on becoming leaner because as competition goes up, as the population goes up, people are learning more, there are more startups and entrepreneurs. The way work is done will be different. The way consumption will be done will be different. It used to be more of a product push in the past, but it is now going towards emotional and excellence in manufacturing. It will also be extremely digital oriented.

What competitive advantages do you offer compared to the other players in the sector? What do you bring to the market that is different, not only in Kenya but the region?

Firstly, we at Bidco operate like we are a startup at every stage. It has been 34 years now. Secondly, we employ world-class practices, from ISO 14000, 9000, 18000, 22000, working with the UN Global Compact, eLean, Kaizen. We adopt all the best practices that you would use in an international setting. What a multinational has we also have here and we employ it on the ground. We are able to do faster decision making because we realize the ball is on the ground and we can change track as soon as we need to. Responsiveness is quite fast for us. We also understand the consumer in Eastern Africa and Africa better. We still do not know West Africa or Southern Africa well and we will keep on looking at what to do there. The way the markets are served is different. We have local people who know what is happening, we know where the resources are, we know what the competitive advantages of doing things are. Ultimately, we have local ground knowledge of the pulse. That is quite important for us because even here, the consumer is changing and they will continue changing. The way Africa is growing and the way we are growing here is going to be leapfrogging. We will not go through the same slow-paced improvement incremental growth, but we will grow exponentially. That is where we have to be prepared. At Bidco, we can change management quickly and rapidly implement ideas. Apart from that, we are now expanding into many more adjacent sectors in the consumer goods area. We are looking at many more hygiene and personal care products, food products, animal feeds, agriprocessing. We work on a system where there is zero waste. We have a full value chain but we have reduced our waste and making our business sustainable is very important for us. It is not just about profits or people or planning; it is all of it together. We put in the systems, the processes, the people, and we have continuous learning. Our people are continuously trained through our training centers in the factories where they learn by doing. We have to change ourselves faster than the pace of change, otherwise we will not be relevant anymore.

How do you approach investment opportunities?

There are plenty of opportunities that we see right now. There is a lot of product that comes in from overseas that is not made here. We see all that as opportunities. Value addition locally is also important. But at the same time, building brands in Africa is important. Not everybody is a brand person where they go to buy expensive global brands. A lot of the global brands we are bringing onboard here to make them work locally at a different category or price level. The market here behaves differently than it would in America or Europe. We have to work at the bottom, middle, and top of the pyramid. We need to have a product available for all parts of the market. In that sense, we ensure that the categories and the products we go into are future relevant, sustainable, and enhance happy, healthy living. We do not touch anything that is not healthy such as alcohol, cigarettes, or meat products. There are many more things that are consumer goods that are consumed on a daily basis. We will not go into cars or hardware or selling machines. That is not our business.

What is your international reach?

We are in manufacturing today in Kenya, Uganda, Tanzania, and Madagascar. We are also in the full agricultural value chain. We farm the products, process them, get them into finished packaged products branded in our own brand names, and sell in those four markets. Apart from these four countries, we export to about 16 countries. We have ground coverage across Africa and sell our products to those markets. Our goal is actually much bigger. We want to go across all 54 countries in Africa. We want to grab, grow, and sustain number one market share in the African markets by 2030, which is only 11 years from today. Where we are going now is in a sustainable manner. Along with that, we need to make sure we do this the right way. We employ global practices and make sure we can operate at world class levels. The uniqueness is that in Africa, we can be world class. It does not have to be something that is made in Japan or America or Europe.

Are you looking to attract technological improvement or partners?

Technology is something that we employ all the time. Today, we buy German equipment, Swiss equipment, Swedish equipment, and all these brand names. But at the same time, we employ SAP in all our systems. Everything we talk about now is available online. Sales across the region to production are available in real time online. We use that system to address customer needs. Apart from that, technology is not just digital. It is also processes. We employ processes which are world class. We can bring those processes here, manufacture in Africa, and sell for the markets. We see the huge opportunity coming through in the ACFTA, the African Continental Free Trade Area, whereby the whole African continent will become one trading area with a customs border outside the territories and no tariffs within. Also, wherever we are least cost producers we will go and manufacture in every country in Africa where the resources are available and where can we put the technology to work. We look at technology on process, innovative methods, appropriate methods, water, steam, energy, power. We have technology now that reduces our entire environmental footprint. We make sure that our water usage and power usage is optimized and that is also technology. We also have solar and LED now. Our lighting is LED across the board. Anywhere where we can conserve energy and produce more for less, we will.

Are you looking to open shares?

We are open to many things, but right now, we are not looking at listing. Listing will slow down our progress. If you are in a growth phase, you do not go and list because then it slows you down by declarations and all the top management is doing is working for the markets and perceptions. In Africa, there are so many media people who create very different perceptions about Africa. Some make it out to be very bright or very poor and there are a lot of mixed feelings. A lot of the multinationals really do not have the knowhow to enter Africa because they do not want to pay attention to 54 countries. There are a lot of fragmented supply chains. We are best placed to make sure this gets reorganized in Africa. Wherever there is a challenge, we see that as an opportunity. If there are no roads, that is an opportunity. For example, Africa bypassed plastic money. Instead of cards, we went straight to M-PESA. With no roads, we could go straight to drones. There is a lot more that would improve in Africa using technology as an enabler and a tool to really enhance our consumer markets.

What is one of your success stories?

We have a lot of firsts at Bidco. We are uniquely placed to do a lot of new things. We have also gone to the full value chain. One product was palm oil plantations in East Africa. Nobody had ever done it. They were all skeptical and thought it was not possible and that it would only be able to be done in Indonesia or Malaysia. We did an economic study and today we have the largest plantation in Eastern Africa in Uganda processing a complete value chain and we are expanding. These things are development projects. This plantation is a 13-year project. The first five or six years, you might get nothing out of the plantation. The banks will not support you and financial institutions will not support you. We did it through our own equity and our own perseverance and conviction and today it is a model for full value chain agribusiness. We have removed all hydrocarbons. We do not burn any fuel oils and our carbon footprint has lowered. We generate our own power from biomass. There are various things we have done in terms of being first in the market, then you see everyone else joining in. The biggest thing we would look at is inspirational leadership. We start something and inspire other people and they start to copy us. When you start a new product or a new market, you will get copied. There is nothing wrong with that. You just have to make sure that you keep up and become better and better.

What is your new venture and what does it bring to the market and to the company?

Our new venture now is in ready to drink products such as CSDs, juices, water, energy drinks, and also noodles. We see the food business as a growing market which will continue to grow. There are so many occasions (breakfast, lunch, dinner) where something is going into a person’s mouth and we want to be a part of that. That is where we see a lot more scope in staples, convenience foods, packaged goods, and doing it much better on the ground here rather than everything being imported. The avenues that have opened up for us now are much bigger. We also see the market size increasing with the ACFTA opening. We see Africa as a hub where we can achieve economies of scale and scope. Our new industrial park has the capability to put up another 10 to 20 industries in the same park because we have done all the infrastructure so we can plug and play. That is how we are operating going forward. We ran some very good partnerships with animal feeds with an American company. We worked with a Danish company as a partner in juices. We have many more offers coming in to partner for one or three things. We are now converting ourselves from just being a manufacturer that is product based to being a marketing company. As a marketing company, we can do so much more across Africa.

What is your vision for the medium term, two to three years’ time? What do you want to achieve?

We as a group are planters. We are not harvesters. We are here to stay. We were born and brought up here in Africa and we will die here. We want to have much more long-term play. The biggest issue going forward is creating a new way of growth in Africa. There are a lot of small companies and operators who are very good, but they either lack succession, management capabilities, capital, or vision. We would like to bring all of them together to form one large incorporate across Africa and really be able to help them. A lot of family owned and managed businesses need or want to transform into corporatization but they never get to that point because it is too costly for them. We would like to make that possible. If that works, we can bring them onboard, make it professional, and offer them the benefits of the entire organization. In that manner, we see capital coming in in a new way which is long-term, at least 10 to 15 years, and then we see a lot more companies coming together to make a larger ship. In Africa, we can do more throughout the entire supply chain of many more fast-moving consumer goods. With Africa now liberating itself, there is so much more reform happening in government and politics, everybody is going towards the same idea of fewer barriers to obstruct us. That is a serious opportunity for us. We see international capital coming in. It is all about creating better, solid partnerships now, but being very clear on our code of ethics. We do not pay bribes or money to people. We are very clear on the way we operate. We are ethical, above board, real time online. With that, we have a human capital that is second to none in Africa.

Do you have anything to add in conclusion?

I have spoken to many investors overseas and when they see Africa, they do not see the numbers stacking up. They see the African continental GDP is equivalent to one of these western countries. That is true. But Africa today has 1.2 billion people and we will be at 2.5 billion in 2050. When you see those factors, there is a real opportunity to get in right now. I see all these as opportunities where we can make bigger things happen. It is not about where we are today, it is about where we are going. Africa is open for business and this is where the opportunity lies. Not everybody is going to be able to see this because a lot of the global CEOs are three year or four year term CEOs. We have a longer term view and Africa is in it for the long term. If somebody wants to come to Africa, they need to be a long term player, not a short term player. In the short term, you will not be able to harvest, but in the long term you will get multiples you have never seen before.

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