29 June 2013

Nigeria: 'It's Sad We're Less-Competitive Against Imported Brands in Our Country'


As a child Patrick Anegbe was fascinated with airplanes and machines. So he dreamt he would become an engineer someday. He did. Another memorable childhood event he recalls is stealing into his father's room to have a taste of his Whisky. "I liked the aroma," he said. He did not eventually fly airplanes or create machines but by some providence ended up distilling the stuff he had sneaked into his father's room to have a taste of.

After graduating as an electrical engineer from Auchi Polytechnic and obtaining a Masters degree in Production Operations Management from the Lagos State University, Anegbe attended several business schools including the Lagos Business School, ISA Business School, Barcelona, the University Of Chicago School of Business, the IMD School of Business in Brazil among others. Anegbe, managing director of Intercontinental Distilleries Limited speaks with KASIE ABONE about the challenges local producers face and why the government should protect local players

What was it like at the early years for your company?

IDL was incorporated in 1983, under the name International Distillers Limited, as a subsidiary of International Distillers and Vintners which was the wine and spirit division of the then Grand Metropolitan Plc of UK. The company started production in 1984, on a manual production line, with just one product known as Eagle Aromatic Schnapps. The staff strength then was just 53 out of which three were expatriates. Since then, the company has gone through a series of expansion and a number of products have been developed to meet the needs of our numerous consumers.

The company became wholly owned by Nigerians in 1997 when the Europeans divested from Africa. Since then we have been waxing strong as the number one distillery in the country and our products are commanding market leadership. Relying on our good understanding of the Nigerian spirit and wine market, we have been able to develop a wide range of brands that are very popular and well accepted in the market. Many of them are leading brands today. We have very popular brands like Chelsea London Dry Gin which is now popularly known as 'the Spirit of Naija' and I can assure you that it is the most popular gin in Nigeria today. We also have Squadron Dark Rum, one of the leading rum brands in the country and which can compete comfortably with any rum anywhere in the world. We also have Samba Coconut Rum, Finlays Tonic Wine, Veleta non-alcoholic drink, Teezers and Commodore Schnapps. We ,recently, introduced two strong brands into the market, DeRok, a unique brand and Action Bitters. We have gone through a number of expansion stages and today we have several automated bottling lines. We have over 600 workers in our employment and over 100 people working as contract staff in various areas like security, catering and some other areas their services are required.

Many manufacturers often say the operating environment is harsh. Do you share such sentiment?

The Nigerian business environment, especially the manufacturing, is a very harsh one and a very difficult one to operate in. It is like getting water out of stone. The Nigerian government in the past has not really paid enough attention to manufacturing sector. Though the current president is trying to revitalise the sector, but a lot still has to be done. In the past, the manufacturing sector was not protected. We still remember what happened to a lot of industries in the past; companies that make manufacture things like battery, textile, tyres, how they went into early graves. We were having infiltration of inferior and substandard products coming into the country and government didn't do anything about it. These companies operated in very harsh environment without incentives. The same thing also happens in our industry. We have all sorts of products coming into the country from different parts of the world, Europe, Asia, even from other West African countries; they are dominating our economy. Most of these products are substandard and dangerous to the health of Nigerians. But it appears nobody cares. Such products that they can't even sell in their countries, they smuggle in without paying taxes, levies and they are competing with our brands here. One other unfortunate thing that happens in Nigeria is that Nigerians go for anything foreign without bothering what they are taking. Though we have regulatory agencies like NAFDAC, SON trying to do their best but unregistered products still find their way into Nigerian markets. Government has not really paid enough attention to other daunting challenges operators face, especially infrastructural challenge. We face challenges of erratic power supply, inconsistent government policies, smuggling activities, multiple taxation and insecurity to lives and property. People who smuggle their products into the country have a better operational environment, steady power supply, good roads and other incentives. In my company, we have two or three generators running at the same time every day. On a weekly basis, we buy three trucks of diesel at over N5 million per truck. We spend over N16 million weekly on diesel alone. If the company is making that as profit, that is not bad business. We are not even talking of the wear and tear on the machines and other overheads. These are sources of serious threats to the growth of our business.

What are some measures you think government can take?

We can't, for example, go to Ghana to establish or export our products. That is not possible. They take you through rigorous registration process, but in Nigeria it doesn't happen like that. You have those products coming in even without being registered with the regulatory bodies. They make you pay a fee even before starting operation there because they want to make you less competitive with their own companies. But in our case, they are covered by the ECOWAS Trade Liberalisation Scheme, where they are not supposed to pay tax and with the incentives they are given back home and more favourable operational environment. Also, most of the products are smuggled into our country, so how can we compete with them? It is unfortunate that even in our country, we are less competitive against imported brands. So, the government really has to do something about the unbridled influx of foreign products. There should be some form of restrictions which happens in other parts of the world. We are not afraid of competition. We are a very sound company and we have good brands. We can compete with any company from any part of the world, but let them come and set up operational facilities in Nigeria so that we can have a level playing ground.

How helpful have the regulatory agencies been?

Manufacturers Association of Nigeria (MAN) has done extremely well trying to protect manufacturers. But sometimes, you push for certain things but you find out that government policy is not consistent with the way MAN wants things to go. MAN needs more government understanding to be more effective. MAN has been very supportive in ensuring the continuous growth and survival of the manufacturing sector. For example, since last year we have continued to see continuous influx of those brands in our market. We have been fighting that war through MAN. And, of course, we also have our own association, Wine and Spirit Distillers Association of Nigeria, which I chair. Through MAN we have made our requests and positions known to various organs of government and regulatory bodies. We have been to NAFDAC, National Assembly, Customs. We have even been to the Presidency. Of course, I can see some form of actions taking place. In fairness to them, some of the regulatory bodies have started working but they still need to do more. We can see that the borders are better manned now though there is still room for improvement.

What has been the outcome of these engagements? What are your specific demands?

What we are saying is that imported products should be regulated and there should be some form of restriction on these products. For instance, we have been making efforts to enter the Ghanaian market and the process required for entry is a long one. They ask potential manufacturers to pay a fee and that fee will make you to consider whether it is worth going in there to set up. And you ask yourself, am I making the right decision? Should I just put my eggs in one basket and continue my business at home? But when they want to come into Nigeria, there are no such considerations. Somebody with just one carton can decide to come into Nigeria and may not even pay any duty. So, what we are saying is that there should be some form of control. The current duty being paid by foreigners is inadequate. Government should find a way of protecting local manufacturers. Government should increase the duties and levies that are paid on imported wines and spirits. Government must ensure that the duties and levies are actually paid and reduce smuggling activities.

We have met with the controller general of customs and he gave us the assurance that they are going to really work towards increasing their checks and control at the borders. We also met officials of the ministry of finance which is the supervising ministry of the Customs and they assured us that they will do something about that. We have also met with the Presidency and a committee set up by to look into our concerns visited our factory last week on a fact-finding mission. They saw what we have on ground and we believe that if we are encouraged and are able to expand our facilities, we can meet up with the demand of this country. And we can create more jobs as well as more revenue for the government. I know that at the moment, the Nigerian budget is based mainly on revenue from crude oil, but if the manufacturing sector is developed, the government can make so much money through taxes and duties from the manufacturing sector and, of course, government will also solve the problem of job creation which it is clamouring for through manufacturing.

Do you plan to expand into some African markets?

At the moment, we are studying the possibility of exporting outside the country. Though we are not doing so directly now, but in some West African countries, you find our products there. We are not there officially yet but we are making serious efforts to be there very soon. We are trying to be very cautious especially with what we have experienced with regard to expansion. The unbridled influx of smuggled brands creates a situation where if you invest, and these brands keep coming in and selling cheaper, then we are becoming less-competitive in our own country. If that is not controlled, you don't talk about expansion but survival. On our own side, we are working hard to ensure we expand our facilities to meet the demand of Nigerians and at the same time, create employment opportunities for more Nigerians. We have plans to expand but we need that protection from government to create an enabling environment that can ensure sustainability of business and growth.

What is your company's CSR profile?

We have really done a lot in the past and we are still doing more. We take CSR very seriously. As a company, we have a policy of giving back to the communities where we operate. For example, We built a fully-equipped five classroom block for a secondary school. We have also been making computers available to various schools, both primary and secondary. The immediate communities where we operate are currently enjoying treated drinking water and we also provided them with electricity supply. We gave them a 500KVA transformer. A little distance away from this community, we have provided two boreholes for another community. In fact, they initially requested for one borehole but after we agreed to provide it for them, another group came and said the location of the borehole is a bit far from their community which is even more populated. They requested for another borehole and we obliged them. A number of schools in Otta, Ogun State, have been renovated. We are concentrating more on schools because we believe that when children are given good education, they have a better future.

What do you consider IDL's competitive edge?

As a company, we have always taken pride in producing brands that are world class. We believe in quality. We do not compromise on quality, which explains why we have a sophisticated research and development unit that constantly researches on our brands. And once a brand is established, we never compromise on quality for any reason. For instance, if you take Chelsea London Dry Gin now and you take it again next year, you should expect to get something a bit better than what you had before; but it can never go down. We are very proud of our brands.

What is your background like?

I'm from Uromi in Esan North East Local Government Area of Edo State. I had a very humble beginning. I had my first educational experience from my parents who taught me the precepts of life and how to communicate. I attended Government Primary School, Uromi, now known as Eguare Primary School from where I moved on to Sapele Technical College. Young and very vibrant at that time, I was always nursing the ambition of becoming an engineer. I achieved that ambition on the platter of hard work, commitment and determination to succeed. I studied electrical engineering at the Auchi Polytechnic and obtained my Masters degree in production operations management from the Lagos State University. I have been to a number of higher institutions across the world. I attended the prestigious Lagos Business School which is now the Pan-African University, the ISA Business School, Barcelona; the University of Chicago School of Business, the IMD School of Business in Brazil and a host of others. I cannot mention them all now, but what is important is that I make sure that every year I attend at least one international managerial programme anywhere in the world.

I started my working career with Guinness Nigeria as assistant electrical engineer from where I joined IDL. I rose through the ranks to become the managing director and chief executive of the company today. I am an active member of different organisations and charities. One of them is the Committee of Chief Executives of Association of Food Beverages and Tobacco Employees (AFBTE). I am the chairman of the Distillers and Blenders Association of Nigeria. I am the immediate past President of the Lagos State University MBA G20 or LASUMBA G20. I am a patron of Esan Progressive Union, Ota and Esan '83 Club of Lagos. I am the immediate past president of the Christian Fellowship Society in my Church. I am a member of the Lagos Country Club and a Knight of St. Mulumba.

Childhood mischief

I think I had an experience with my dad. It was a regret I had that lingered for a very long time. Of course, as a child you are not allowed to get close to whisky. Each time my father took a sip of his whisky, I perceived the aroma, which I liked very much. So on this day, nobody was around; I entered his room, took a sip and I liked it. I did the same the second time. The third time, I said to myself, 'if this man noticed that his drink had been tampered with, what would I do?' So, I got some water and topped the whisky. I added more water than the quantity that I drank. But when my father went back to his whisky he discovered that it was more than what he left. And the moment he took a sip, he knew that someone had tampered with his whisky. I was the suspect. I admitted I did it. I was admonished but I felt terribly bad.

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