Most top brands often face the monstrous challenge of pass-offs on their brands or outright faking of their product brands. Added to this is the right milieu to make businesses thrive, which is the sole responsibility of government. Mr. Peter Folikwe, Managing Director/ Chief Executive Officer, Berger Paints Nigeria Plc, in this interview with Chris Ugwu, speaks on challenges facing the manufacturing sector and other issues affecting paint business
As one of the top operators in the paint industry, what are the major problems affecting manufacturers in Nigeria?
The Purchasing Managers Index (PMI) recently shows that some sectors of the economy had recovered from the recent recession. Recall that Nigeria ran into recession in 2016 and, by now, only the agricultural sector and one other sector, but certainly not manufacturing, has recovered from the recession. There is no gainsaying that the manufacturing sector is the major employer of labour in this country. I praise investors in this sector for their selfless service to humanity. Unfortunately, government seems to be a bit insensitive to their plight.
Government’s promise for forex availability to manufacturers has not been fulfilled as most manufacturers depend on importation of raw materials. The official CBN FX rate of N305/$ has remained an illusion. Since 2015 up until now, Berger Paints has never bought dollar at N305 for its LC transactions. I don’t really see it happening for now. Even when you bid through the forex windows, it will take the grace of God to be allocated in a bid. This invariably affects our operations as local suppliers who mostly buy FX at the parallel market, offer the raw material at a premium price, yet we cannot pass the excess cost to customers.
Government is the biggest spender in the economy and there was a time it was criticized for not patronizing made in Nigeria products. What is the current trend?
The trend has not totally changed, although government keeps talking about it. I was privileged to be at a forum of CEO’s with Lagos State Governor, Akinwunmi Ambode, recently and I raised this pertinent issue. I told him that I have taken time to review some of his projects where decorative paints were applied. Virtually all the project paints used have faded within a short period of time. Suffice to note that Berger Paints also quoted for these projects, but for whatever reasons, these projects were awarded then to unbranded paint companies. I explained that one of the ways by which government can encourage indigenous companies who fulfil their statutory obligations like Berger Paints is to patronize their products.
So long as our products meet with the specifications and standard, we ought to be given preference. This is one way to protect the indigenous companies rather than sacrifice them on the altar of penchant for foreign products that are of less value at times. In fairness to Governor Ambode, he has put in place some processes to address this concerns in Lagos State. I hope other governors and indeed the Federal Government with its mass housing scheme will take a cue.
To what extent is the influx of fake products affecting paint manufacturers and, by extension, Berger Paint Plc’s bottom line in particular?
Most top rated brands often face the heinous challenge of pass-offs on their brand or outright faking of their product brands. Berger Paints is not an exception. We apprehended some of the criminals recently and handed them over to the police for persecution.
On our part, we are doing all we can to direct the unsuspecting customer to our selling points – online (www.berpaintsnig,com) or from our business partners represented in major capital cities in Nigeria.
We can also be reached on twitter, Facebook, Instagram and the likes. The Lagos State government is assisting us in our efforts to apprehend those who are de-marketing us through fake products. When people fake your product, not only are they destroying your brand reputation, they are also taking food off your table. Why do they fake our products? This is unacceptable.
We don’t have data to validate the details of the impact of fakers, but we know it impacts our top and bottom line numbers. Just like we have zero tolerance for fraud in our business, we have zero tolerance for fakers. Whether it is internal or external, we have that same attitude towards those who indulge in fake products. We actually go after them. We get law enforcement agents involved to ensure that they are prosecuted. As we speak now, some of them are in Kirikiri prison.
How would you advise government on how to create the much-needed enabling environment for the manufacturing sector?
My advice to government is to do a rethink of its policies as they affect the manufacturing sector. This is the sector that would actually grow the economy if the potential within were properly harnessed. Government must have clear understanding that it is not the portfolio investors that grow an economy because government keeps saying: ‘we are trying to encourage investors that grow economies.’ It is government’s ability to create enabling environment that can make companies operate optimally, make profits and ultimately become attractive to both indigenous and foreign investors.
The Ghanaian government made a deliberate decision to grow its manufacturing sector in regions by deliberately enacting policies that will achieve that purpose. Nigeria needs to take a cue from them.
Government can give land free and grant tax holiday, among others, in order to encourage investors. The second thing, which I think government should address as a matter of urgency, is to evolve a policy that would help create a value chain for crude oil instead of exporting only in its primary state to the developed world who then process and sell back to us as raw materials/petrochemicals.
The question is what stops Nigeria from getting there? Even the refining of petrol and diesel has been subjugated for importation. It doesn’t make sense! Thank God for the likes of Alhaji Aliko Dangote that is coming up with a private refinery. These are some of the things that government should encourage rather than just selling our solid minerals, in crude state.
Government should create an environment where people can actually be engaged as part of the process of translating raw materials to finished products. Yes, it requires a lot of investment and knowledge in science and technology, but I tell you, we have Nigerians locally and in the Diaspora making great strides in science and technology. All they need is the enabling environment. Nigeria is blessed with abundant human and material resources that can drive the whole processes, given government’s unfettered support. We need to act fast if Nigeria should keep pace with the global development in economic transformation.
In view of the challenges facing manufacturers in Nigeria, is Berger Paints considering capital injection by leveraging on the opportunities in the capital market?
For Berger Paints, we are careful about how we source fund to do business. The cheapest fund is obviously through the capital market. We were the first paints company to be quoted on The Nigerian Stock Exchange (NSE). It shows that we understand the nitti- gritty of the market and quickly took the advantage of the opportunities then. But, it’s increasingly becoming difficult nowadays to get these cheap funds.
Investors are more than ever cautiously looking at the market indicators that will encourage them to invest in a company. Considering all the challenges facing the manufacturing sector, many high net worth investors are apprehensive of putting their money where returns will not come quickly in view of the state of the economy. As for Berger Paints, we efficiently manage our working capital to ensure that we minimise our exposure or avoid borrowing as much as possible, except for our capital projects.
We, however, recently took some money from BOI for the purpose of completing our new ultra modern factory project currently at completion stage. This is a project that will transform our operations and reinforce our position as an industry leader. We are mindful of the inherent dangers of borrowing. You don’t take short-term borrowing for long-term projects. It will be a mismatch. We are capital market friendly and the shareholders are always ready to support our initiatives. Having existed for over 59 years, our pedigree and brand positioning are very solid. If you take a critical look at Oba Akran, Ikeja, today, only a few companies that started at about our time then still exist. Our pedigree shows that investors will have confidence in our stocks.
Last year, Berger Paints underwent a brief period of industrial dispute with its labour force. What is the current situation?
I will say that the situation is like the Yoruba man will say, ”the nose is very far from the head!” The situation has been turned around. It was well managed. What management did with the support of the board was to listen to feedbacks from the staff because these are issues that dated back so many years. It is just that the issues crystallized a few months ago. There is nowhere in the world that disputes are settled when opponents are at war. They are ultimately settled at a round table discussion and that was basically what we did. We listened to each other, understood each other’s grievances and sorted out everything. In a home, husband and wife may disagree, but they settle afterwards. The way we settled shows how pragmatic we are as an organisation that is ready to listen to all stakeholders. We just hope that government will one day listen to us – like we listened to our staff. I can confirm that relationship between the management and the unionised labour is cordial.
They are very committed to their duties. Without being immodest, I can say that Berger Paints has one of the best brains in the chemical and allied paints business. In terms of technical and production processes, we pride ourselves as adding value to the lives of our employees by training and retraining them. In fact, we encourage personal development, so that every staff can add value to his or her life. We take issue of staff welfare and morale very seriously.
Looking at the factors that drive a company’s share price, which are the financial performance – demand and supply and market hearsay, what efforts is Berger Paints making to attract more patronage to the company’s shares on NSE?
We have put in place a number of marketing initiatives that will soon start yielding positive results. It will also create more visibility for our brand. Marketing is not just about advertising.
There are other legs of marketing such as public relations, media management, and investor relation etc. We are also working round the clock to make our products visible in the market place. Our products are in high demand because of its superior quality and competitive pricing. We really need to make our products available within the reach of our teeming consumers.
Berger Paints is a strong brand and we need to ensure that those who represent us at every level of the value chain propagate our brand culture and values. If the reputation of a brand is tainted, it stands the high risk of negative market response and every business must manage this. Our focus therefore is on the topline and bottom-line figures without taking our eyes off excellent customer service for repeat purchase.
What is your vision for the company in the next five years?
When I was coming to assume duty as the chief executive officer in this company, my decision was to leave Berger Paints someday better that I met it. I will say we are not fully there yet, but a number of initiatives we have executed are aimed at achieving this singular objective. One of the objectives we aim to achieve is to change the route to market dynamics because if you don’t get your route right, your topline will be threatened. As mentioned earlier, we are completing our new factory, which will offer innovative products of international quality standards. This will no doubt enhance our leadership role in the paints business in Nigeria. Our leadership is not only in terms of numbers, but also in product quality, customer service delivery and a host of other performance metrics.
What is your advice to the shareholders?
For the existing shareholders, they know our track record that we pay dividends annually without fail, irrespective of the challenges in the economy. We paid dividend at the height of recession of 2016. As for potential shareholders, they should do their analysis. I am confident that they will appreciate the leadership of a company, its investment in modern equipment and human capital development as keys to growth and profitability. Efficient and effective leadership, as you know, is hinged on integrity. I am not here to blow our trumpet, but I can say in Nigeria today, Berger Paints can pride itself as one company that operates within the confines of corporate governance. Therefore, when a shareholder invests in our stock, the investment is safe and rewards are assured.
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