Silafrica: Quality Packaging for Food and Beverage, Personal Care and Paint in Kenya and East Africa

Interview with Akshay Shah, Group Executive Director of Silafrica

What is your assessment of the packaging sector in Kenya and East Africa? What are the latest trends?

Silafrica is in the business of manufacturing packaging largely for food and beverage, personal care, paint, etc. From a top down perspective, we first start to assess the sector by looking at the country’s Gross National Income per capita. The lower that is, the more the demand is driven around beverages. As that increases, we start to see the demand for food packaging and personal care packaging increase. It is not to say that those things are not there, but in lower income per capita countries they are largely dominated by local brands. As you pass 1,500 dollars per capita, you start to see more multinational brands coming in. At Silafrica, we stand for quality packaging and that means the customer has to want to buy quality packaging. The processes that create quality packaging are really based on the right people, systems, audits, technology, standards, etc. We have to pick the customers who want that and not just sell a commodity. If a market has customers that want what we are selling, that means that we invest in those markets and invest in the right technology to serve those customers.

Is this region that sort of market?

Tanzania and Ethiopia are on the lower end in terms of income per capita. The customers there that would want our level of packaging are largely in beverages. Kenya is in the lower-middle to middle income. There, we see demand for food packaging in addition to beverages. There is also demand for personal care packaging. Kenya also has a strong middle class relative to the other countries. That starts to create more diversity in terms of quality of packaging. Kenya also has more multinational brands that are operating in the country and they automatically need the same global standard of packaging that they would be getting elsewhere in the world. It is not just that we are serving almost 200 million consumers within Kenya, Tanzania, and Ethiopia. The key thing is that each of these countries that we are in cover the different trade regions of COMESA, SADC, and EAC. The combined population of all of these trade blocks is 620 million people. What we are really doing is creating a platform for our customers to access 620 million consumers. Most of them are young, ready to enter into the job market, ready to become the future consumers in Africa.

Is the environment competitive? How do you stand out as a company? Do you compete with local brands as well as the multinationals?

Our intention is to keep growing the business around those three areas of performance delivery, technology leadership, and circular economy so that in the next two to three years, we will be able to bring in a strong strategic partner.

We always emphasize three things that we stand for. The first is performance delivery. That basically means having the right systems, people, and culture. That is a minimum standard that any company must have in order to serve their customers the right way. We really invest a lot in people, processes, and systems to make sure that when we make a promise to our customers that we honor it. It is very rare that we default. Sometimes, there may be actions that happen outside of our control, but all our manufacturing operations have multiple levels of redundancy. Even if there is a power failure or fuel shortage or anything else unexpected, we always have enough backup to be able to continue to supply our customers. We are known in our market for being the most dependable supplier. If our customer is running their filling line and they do not have enough packaging, the knock-on costs to the entire value chain are much higher than just the cost of our packaging. The second thing we focus on is technology leadership. In this market, whether it is looking at the stability of the product in our packaging as it goes through the value chain, looking at how the product can attract consumers through better branding and packaging design, even for us to continue to be relevant to our customers through better economic value for our products and being competitive without compromising on quality, all that comes from investing in the right technology. Every year, we spend millions of dollars to upgrade our technology, our plant, our systems. Right now, one of the things we are doing to make sure we remain relevant is investing a lot in IoT industry 4.0 so that we can move towards a smart factory operation. Some of the technology that we have invested in in the last couple of years is a process called injection compression molding. This enables production to be done with a much lower energy and material footprint which is also making us more sustainable. The third pillar is circular economy. Circular economy is the new way of looking at sustainability in a more holistic manner. In the past, we used to recycle plastic waste. Now, it is much more of a holistic, systemic issue. If the packaging design is not compatible with circular economy, then we are always fighting upstream against the packing design. The first step is to start looking at sustainable materials whether it is plant-based polymers or recovered polymers from the post-consumer value chain, designing packaging that is easier to recycle, and engaging in conversation with our customers to rethink and relook at the value chain. We are looking at how our product can be transported from our factory to the customers in returnable packaging over one-way packaging. How can our customers get their product to their last mile retail in a more sustainable way with returnable packaging? With the actual product itself, whether it is a shampoo bottle or a beverage bottle, how can that potentially move to refillable, returnable, reusable, and reduce the amount of plastic that is being used? Most important is to actually reduce the number of different components that are used to manufacture that packaging. The definition of “100% recyclable” is that 95% of the weight of an entire pack has to come from one material and the remaining 5% must not hinder the recyclability of that 95%. That is not a reality of today’s packaging design. We have made a commitment that by 2025 all the packaging that we are producing for our customers will be 100% recyclable.

How will you achieve this?

First is to always keep ourselves abreast of the latest trends. We attend trade conferences and technical conferences within our sector. We talk to some of our suppliers who are always ahead of the game. We invest a lot of time into that conversation. We are always educating ourselves on what is coming around the corner. We then roll it back and connect with our customers to see how it fits with their needs and how it fits with our ability to differentiate in the competitive marketplace. Once we have identified what we need to focus on, then we start redeveloping packaging design and internal manufacturing systems. That is how we embrace changes in direction when it comes to investing in new technology.

Are you looking to attract investors?

The way we look at business from our parent company, Sumaria Group, is that we are in the business of scaling businesses to ultimately create very high value companies that investors who come in can achieve a lot of value from. We know how to operate and scale businesses in Africa. We have been doing this for more than 60 years. What we are more interested in is creating that value by scaling and selling the business by bringing in strategic investors. We have moved away from the typical family business model where you are just simply harvesting a business forever and the business becomes a parking lot for future generations to be employed in. That moves us away from our entrepreneurial spirit. That is the reason why we actually scale to sell but also sell through strategic partnerships. We know that a multinational packaging company which is trying to get access to the 620 million people in the markets that we cover will probably have better capabilities financially to scale business beyond how far we could get it. But they might not have the capabilities on the ground of how to run a world class operation in our part of the world. Combining these two things together creates the best value. That is the reason why we do it. We are always focused on bringing in the right kind of investor that helps us to scale the business at the right stage. Right now, we have a private equity investor that holds a minority stake in South Africa. Our intention is to keep growing the business around those three areas of performance delivery, technology leadership, and circular economy so that in the next two to three years, we will be able to bring in a strong strategic partner.

Are you looking to take the Group public?

We have looked at it before. There are two challenges, though. First of all, we are a B2B company. Most consumers do not know us. They now the brands which we manufacture the packaging for. Everyone knows Vaseline, but Vaseline is made and packed in containers that are manufactured by Silafrica. Everyone knows Coca-Cola, Pepsi, Heineken which all come to the customer in crates that are manufactured by us. Unilever, Blue Band Margarine are all packed by us. Our customers are very popular brands, but we are not a consumer brand. That affects the ability to have a successful IPO, especially if you are looking at retail investors. The capital markets are also not as liquid or as dynamic. The third reason is that we are in an industry where acquisitions really have more to do with strategic reasons like expanding your footprint and continuing to serve the multinational brands no matter where in the world they operate. For us to continue to serve our customers without diluting what we really stand for, it makes more sense for us to have a strategic investor that is aligned to what we need to do for our customers.

What makes you different from other employers to your employees?

Hiring great people is always a challenge. The root cause of any internal issue within the organization will always come down to the people. The first is for us to create the most enabling environment that we can so that no matter who we hire, they cannot say they do not know what to do. We want to ensure that the alignment to our vision, strategies, core values, goals, KPIs is solid in our company. It is something that we have been good at for many years. the second thing is that we have a performance-based culture. Remuneration is based on performance and KPIs that are linked to the company’s objectives, budgets, targets, and goals. The third thing, particularly for our senior management team, is that we have an employee stock option. They also get to benefit from the value creation that we do. We also focus on soft issues like culture building, values, and continuous training. The operations excellence model that we have is almost a curriculum. No matter which factory you go to, we use a standard template called the Silafrica Way. There are 20 specific skill sets depending on the job you are doing and what you want to become an expert in. You simply go through that curriculum, practice it, become good at it, get benchmarked on it. It is almost like coming into an environment where everybody knows what they need to do, how they need to improve, what the organization stands for. We want them to join in the success of the organization from a monetary perspective as well. The one thing we cannot control is the intrinsic attitude of the person: the sense of accountability, ownership, drive. We need people who have those values intrinsically. For the rest of it, we have the enabling environment.

What is your vision for the company?

The biggest trend that we are facing, not just in East Africa or Africa, but globally, is climate change. Packaging can either be a problem or a solution in this fight against climate change. Anything that we do going forward has to be about how we can be part of the solution. In 2019, through the Kenya Association of Manufacturers, we at Silafrica have really been supporting the introduction of a circular economy framework. We launched it just yesterday and the government of Kenya is fully aligned to support this private sector initiative. It is a voluntary framework, but we hope that it will eventually be enacted into law so that it becomes mandatory. What this framework does is reorient the entire industry to move from linear economy which was really started off with the Industrial Revolution where we would simply extract resources, produce, consume, and then incinerate or throw away to redesigning the entire value chain to become circular. This is a huge shift. It is not just about making packaging recyclable. It will change business models and create new jobs and entirely new economies and new businesses. It will be as revolutionary as the Industrial Revolution. Being at the forefront of this, helping our customers, consumers, and supply chain partners to get onboard with circular economy is the single biggest mandate we have going forward. We want to be aligned with what is the right thing to do for the planet.

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