Olam’s Nigerian feed business plan costed at $150m

© istock.com/kylieellway

Olam International said it has broken ground on an integrated feed mill, poultry breeding farm and hatchery in Kaduna State, Nigeria. When completed, it will be the largest such operation of its kind in the African country.

The global agri-business player revealed this month it will be investing a total of US$150m to develop its poultry and fish feed operations in Nigeria.

The aim is to contribute, said Olam, to the development of the Nigerian poultry and aquaculture sectors by providing not only competitively priced feed and chicks, but also technical support to local poultry farmers.

Around US$100m has been committed to building and operating the facilities in Kaduna State while US$50m has been set aside for the development of an integrated poultry and fish feed mill located in Kwara State, reported the company.

Capacity of mills

At full capacity, both feed mills are expected to produce in excess of 600,000 ton per annum of poultry and fish feed. The poultry breeding farm in Kaduna is expected to produce over one million hatching eggs every week for the hatchery, said the company.

Olam’s CEO for Africa, Venkataramani Srivathsan, said the venture into animal feed was a “win-win” for Olam and Nigeria. The company already has a wheat milling business in that country.

“Domestically produced meat [in Nigeria] is being hampered by a lack of good quality feed, support for farmers and availability of young stock, but consumption is set to increase. By investing in poultry and fish feed, we can utilize the wheat bran from our wheat milling operations, as well as maximize our sourcing networks to buy corn and soy from local farmers. Our investment in the hatchery will help boost poultry production and, in the long run, help reduce the country’s reliance on imports,” he added.

First time entrant into feed sector

It only announced its entry into the feed industry in November 2015, with Nigeria, it said, its preferred entry market on country selection criteria.

Those parameters included meat consumption per capita, degree of fragmentation, extent of vertical integration and of commercial feed penetration, scalability potential and supply and demand factors impacting the feed raw material trade:

“In Nigeria, increasing urbanization and a change in consumer preference towards more protein-rich diets is driving a strong demand for poultry and aquaculture products and the commercial feed market is expected to grow at over 10% CAGR over the next 5 years,” said Olam back then.

Carey Wong, research manager at OCBC Investment Research, told us previously that Olam's entry into the feed market is a natural extension of its grains business. "It is moving downstream and, in a way, creating 'demand' for its upstream products," he said.

Partnership with InVivo NSA

In January French animal nutrition specialist, InVivo NSA, said it was partnering with Olam to support it in its efforts to establish a poultry and fish feed business in Nigeria.

“We will support that company in feed formulation, R&D trials, veterinary field support and feed mill construction in that market.

But, essentially, the partnership is about sharing best practices. Olam will benefit from our recognized technical expertise on the nutrition front. Olam has been in Nigeria for 25 years, working across multiple commodities, so we hope to gain greater understanding of raw material supply in Africa and gain insight into a complex market like Nigeria,” Matthieu Leroy, InVivo NSA director of projects, information systems and communication and advisor to the CEO, told us previously.

The French company, he said, sees this tie-up with Olam as a “blueprint” for future investment on that continent.

“Nigeria has the fastest growing population in Africa – it offers a lot of opportunities in terms of animal protein and nutrition but there are risks attached to entry into such a market as well. This strategic partnership, then, will help us navigate unknown territory without having to invest any CAPEX. We hope to leverage such knowledge to develop our business in other countries in Africa thereafter,” said Leroy.

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Comments (1)

Dr.Muhammad Azam - 12 May 2016 | 08:07

Appreciation

I personally appreciate such encourage initiative of the Olam in Animal,poultry and aquaculture Grain in Nigeria,

12-May-2016 at 08:07 GMT

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