Food Industry in Ghana: Multipro to Become the Biggest FMCG Company in Ghana?

Interview with Mahesh Shah, CEO at Multipro

What is your assessment of the sector in Ghana? What are the latest trends? Is the market competitive?

The food industry in Ghana is a 4-billion-dollar segment. FMCG includes food, personal care, health, etc. Approximately 45-50% of that is food, around 2 billion dollars. There are big players in a number of categories of the food sector. We play in three to four categories. Our big-ticket item is dry pasta, with the sub segment of noodles. We want to become the leader in whatever category we enter and play in. We are currently the leader in the noodle category and we have just entered into manufacturing of pasta where we also want to be a leader. We wanted to understand how the manufacturing industry works and after studying, we decided to go into noodles. That category of the total big picture is close to 5 to 10% of the total food industry. In addition to that, we are playing in the snack category, the refined oil category, milk, and ready to eat breakfast cereals. The vision of the entire company is to be the biggest FMCG company in Ghana. We have been in Ghana for ten years. We started our operations in 2006. So, we were a single brand, and as a single brand, in Ghana, there is no company who is as big as we are. As an entire organization, we might not be comparable to Unilever and Nestle because they have close to 200 brands. But individually, as a brand value, in terms of single brand, we are doing much better than they are. In terms of marketing, the BEI, Brand Equity Index, for our brand is close to 9.6 or 9.7. So, you can understand how good the brand position is. The food industry is growing at a rate of 8-12%, and we are also in that line. Our CAGR is close to 15-16%.

How do you assess the market in Ghana? What can you expect from investing here as an international investor?

The vision of the entire company is to be the biggest FMCG company in Ghana. We have been in Ghana for ten years.

With the current government and the current Finance Minister in place, there is a lot of stability in the currency. In terms of monetary policies, the biggest challenge in the past was that the cost of borrowing here was very high. The interest rates were at 28-29% and the monetary policy rate was at 25-26%. Now, the monetary policy rate is holding at around 17% and the interest rates have come down to 19%. The current account deficit is now at the surplus level. We have close to 4 or 5 months of reserves equivalent of the reports. The fiscal deficit, which was at 9%, has come down now to 5.5-6%. The inflation, which was at 19%, has now come down to 9.6%. So, all the parameters of the economy are doing extremely well. The GDP is growing at a rate of 7-7.5%., which makes Ghana’s GDP the fastest growing in Africa and the sub Saharan African Region. So, if an investor is looking at these types of parameters, Ghana will be the best country to start investment in. For an investor, the ease of doing business is important, and compared to other African countries, Ghana is the best. However, in terms of industry incentives, we are lacking. If you are in a free trade zone, you definitely will get incentives. But not everyone is looking to set up a manufacturing unit and to export. Many people want to set up a manufacturing unit and sell locally. But for them, they do not see any incentives. There is no support to them from the government or any bank who can provide them a single digit loan. There are no incentives from the government who can give them electricity at a single digit, which is a huge cost. For comparison, here, the per unit electricity tariff is 20 cents, whereas in Nigeria, it is 10 cents. So, the cost of manufacturing in Ghana is very high. If the government can look at those aspects it will be good. The government is looking towards productivity. They know what my reserves are, what my restrictions are, but keeping those restrictions confined, how I can increase productivity and get revenue?

What are the main challenges that you as an industrialist are facing? Are you interested in attracting partners or investors?

One major challenge as an investor is firstly, getting affordable local borrowing. For a person who is doing business here, 20% borrowing on the cedi is very high. Secondly are the incentives. For every organization or every investor who is coming into the country, they will take at least the first two or three years to establish the business. But then, there is no incentive for them. For example, there is no tax incentive where for ten years you are in a specific bracket where you do not have to pay tax, you build your facility, you build your brand, you invest in the brand, and then after the ten years, you start paying. Whatever losses you have, you can carry forward and you can adjust from your profits. We do not have those types of incentives. From day one, you have to start paying your direct tax, indirect tax, and all types of taxes. For an investor, this becomes a bit tight for him because his bottom line is red, and the tax revenue authorities still want him to pay taxes. Secondly, there is no policy for protecting the interests of a local manufacturer. For example, today we are manufacturing pasta, but there are so many brands which are being imported from other parts of the world which are cheaper than what I can produce in Ghana. So, what is my protection? Who is protecting my capital? If the government itself has no policies protecting me, then what is the incentive for me to come and invest in Ghana? For example, in Nigeria, we have close to 20 noodle plants that are 100% backward integrated. There, the government is protecting investors by saying in their policies that noodle importation is banned. So, I know that I have this facility and I can invest more and I can work it easily. No one can import from China and establish a brand and encroach on my business. Here in Ghana, we do not have that. Irrespective, I am constantly losing, and one day I will have to close down and leave. This leaves investors with the feeling that there is no reason for them to invest here.

How do you enhance your footprint in Ghana? What is your strategy?

We are serving food to a consumer. In Nigeria, we provide the product within 48 hours to a consumer, so it is very fresh, even though it has at least one year of expiry. But still, we want to provide the freshness of the product and serve to the consumer the best quality we can. Currently, it is 45 to 50 days until the product goes to a consumer in Ghana. That is one of the key factors which is influencing our decision of manufacturing the product here, because we feel that for us, providing consumers the best of the product is the key for any country we go to and for the brand as well. Currently, we are trying to set up a plant here. It is still only the planning stages, we have not executed yet. Our strategy is to make the process as efficient as we can so that we can produce an affordable product so that our consumers can really enjoy that product.

You are in competition with very famous giants like Unilever and Nestle, and you are still doing well in your segment. What is your competitive advantage? Why are you doing so well compared to these huge, international, experienced companies?

Nestle and Unilever have been in Ghana for six or seven decades, whereas we have been here for just one decade. For them, they might have five or six key distributors in Accra, who have over the period developed the infrastructure and they just provide the goods to them. We go the extra mile. We will not approach those distributors because they have already been established and they will not value our product. So, we go to the next level and find someone who has entrepreneurial skill, an appetite to grow, but only small capital. So, we see his appetite, we make him a distributor, and he goes and distributes my product. We are giving them that support so they will become very loyal to the brand. Secondly, in typical big organizations, there is a conventional system of distribution wherein the product moves from company, to distributor, to sub distributor, and then to a retailer. These big organizations give the product to the distributor and they will have their own system by which it will go down the line. We do not stop at that distributor level. With our route to market, our product will move from us to the distributor, then we have a team who is monitoring that distributor of whether my product is moving down the line. If not, then our merchandisers will take the product down to the sub distributors. At that level, if we see that the walk-in traffic to the shop is not there, we will take it another level down. We will attach vans to the subs, let them keep the van, and go down to the retailers and sell our product. So, our entire focus is on these distributors and how to make it successful for them. If that individual has spent 100,000 cedis on my project or in my brand, I make sure that he is able to earn 110,000 from me. Until then, whatever support they need, I will give them. So, we work for them, they do not work for us. That is the extra mile that differentiates us from the other big conglomerates.

What is your vision for the medium term? What will the company be here in Ghana in three years’ time?

My vision is to become the largest FMCG company in Ghana. We want to be the leader in selling and distribution in Ghana. For example, for a single brand, Nestle is ideally giving a turnover of 150 million dollars. Our all vision strategies and action plans are how to take my brand from the current level to that ideal level as well.

FAIR USE POLICY
This material (including media content) may not be published, broadcasted, rewritten, or redistributed. However, linking directly to the page (including the source, i.e. Marcopolis.net) is permitted and encouraged.