‘Government seems to be insensitive to plight of Nigerian manufacturers’
Peter Folikwe is the Managing Director of Berger Paints Plc. He has 25 years of experience in Marketing, Sales/Distribution and General Management, having worked in a number of top-rated companies in Nigeria. He had two years working experience with UAC Foods, a joint venture between Tiger Foods South Africa and UAC of Nigeria, between 2013 and 2015. He also had an impressive career at Vitafoam Nigeria Plc and was among the pioneer staff of MTN Nigeria Communications Limited in 2001. He spoke to capital market journalists on how Point of Sales (PoS) has enhanced the firm’s business strategy and the challenges facing manufacturers in Nigeria. HELEN OJI was there.
What efforts is Berger Paints making to attract more patronage to the company’s shares on the Nigerian Stock Exchange?
We have put in place a number of marketing initiatives that will soon start yielding positive results and 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. We are also working round the clock to ensure that our products are visible in the market place. Our products are on 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 top-line and bottom-line figures without taking our eyes off excellent customer service for repeat purchase. At Berger Paints, we have always come up with innovative marketing ideas, new products development and ensuring that we continuously improve on our quality standards.
For instance, Berger Colour World has been one of our flagships in the past. What we have done is to deploy PoS machines for customising paint colour with JIT delivery and majority of our colour world stores. We are deploying that to a very large extent to get the market closer to us or get us closer to the market. Equally, our colour charts where you have all the colours schemes are readily available to specifiers- Painters, Architect, Quantity Surveyors and Builders who now have access to our colour charts as at when due. Part of what we are also doing is to make sure that we create visibility about our outlets. For instance, we are installing ‘the directional signs’ along major roads where our stores are located for better visibility and identification of our colour world stores. These are some of the initiatives in collaborating with our partners to achieve the overall corporate objectives. We value our business partners as they represent us in the trade. We are educating our team in the area of Customer Relationship Management so that customer chain is unbroken.
Government is the biggest spender in the economy and there was a time that government was criticized for not patronizing made in Nigeria products. What is the current trend?
The trend has not totally changed although the government keeps talking about it. I was privileged to be at a forum of CEO’s with the 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 that fulfills their statutory obligations like Berger Paints is to patronise their products.
So long as our products meet with the specifications and standards, 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 him, he has put in place some processes to address this concern 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 Berger Paint’s bottom line?
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 then 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 pan 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 products, 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 do not 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.
As a frontline operator, what would you regard as the major problems affecting manufacturers in Nigeria?
The Purchasing Managers Index (PMI) recently showed that some sectors of the economy have recovered from the 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 the country. I praise investors in this sector for their selfless service to humanity. Unfortunately, government seems to be a bit insensitive to their plights. Government’s promise for forex availability to manufacturers has not been fulfilled as most of them are still dependent on importation of raw materials. The official CBN forex rate of N305/$ has remained an illusion. Since 2015, up until now, Berger Paints has never bought dollar at 305 Naira for its LC transactions. I do not 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 must buy forex at the parallel market offer, yet cannot pass the excess cost to the customer.
How would you advise the government on the creation of 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 potentials within are properly harnessed. Government must have clear understanding that it is not the portfolio investors that grow an economy because the government keeps saying, we are trying to encourage investors that grow economies. It is the government’s ability to create enabling environment that can make companies to 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 that government should address as a matter of urgency is to introduce 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, diesel has been subjugated for importation. It does not make sense. Thank God for the likes of Alhaji Aliko Dangote that is coming up with building 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 investment and knowledge in science and technology, but I tell you, we have Nigerian locally and in the diaspora making greats 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 the government’s unfettered support. We need to act fast if Nigeria should keep pace with the global development in economic transformation.
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 for fund to do business. The cheapest fund is obviously through the Capital Market. We were the first Paints Company to be quoted on The NSE. It shows that we understand the nitty-gritty of the market and quickly took the advantage of the opportunities then. But, it is increasingly becoming difficult nowadays to get this cheap fund. Investors are 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 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 for from BOI for purpose of completing our new ultramodern 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 do not 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 51 years, our pedigree and brand positioning are very solid. If you take a critical look at Oba Akran, Ikeja, today, only few companies that started at about our time then, are still in existence. Our pedigree shows that investors will continue to show confidence in our stocks.
Some of your competitors have a policy of annual colour that people look out for every year. Are you thinking along that line?
We do not do colour of the year at Berger Paints as we believe that customer preferences keep changing by the day. We only observe colour of the month. This promotes an array of colours annually. For instance, our colour for this month is lemon–yellow. If you are Observant, you will notice this at the entrance gate. It is also visible on all our online platforms- website, facebook, among other places.
What is the philosophy behind the introduction of the PoS machines?
It is a simple philosophy. This is about demand and supply and we have come to some understanding that Nigerians travels a lot, they see what is happening in other clines, especially in our business segment. Nigerians love quality with high standards. The POS machines offer the customer the liberty to customise their colour choices in whatever quantity they want it and the delivery process is a lot quicker. These decision makers have limited time and there is a need to take the product close to them. That is the objective of the PoS machine.
For instance, the PoS machine actually addresses the issue of batch production in a pragmatic way. It is a changing trend and as a dynamic organisation, we are equally living up to the consumer demand trend. In the past, people do not really play with colours. Today colours have their personalities and people now express themselves in colours. People are limited by the colours, which the paint maker makes available in the market. But when you want those customized colours, you can actually have them too in the outlet in whatever quantity you want. We can even dispense as low as one liter, four liters, and twenty twenty liters in a simple production process. We would be the first Nigerian company to offer such customised colours in volume of twenty liters per production process.
Congratulations on your recent award as one of the top 25 CEOs in Nigeria by Businessday Newspaper. How did you receive the announcement?
I will say the announcement came with mixed feelings because when you had set a high standard for yourself and you felt you have not achieved much and out there, people recognised even the little efforts you had made, it can be very humbling. But, at the same time, I still ask myself that, do I really merit being considered and even voted as one of the top twenty-five CEOs for 2017? However, when I looked at the criteria used for the selection process, it became glaring to me that the organizers knew what they were doing. They considered factors such as the share price movement, the share index and year on year performance of the company.
These are obvious facts as presented in our company’s audited financial statements. I am however humbled by the announcement. But the reward for hard work, as you know, is more work. I am therefore challenged to do more. When you are on top, you would always want to aspire to remain on top and it is a lot more challenging to remaining at the top.
I feel encouraged by the historic award, particularly for the very pragmatic team whom has collectively and selflessly supported the company to achieve this feat. It is not an achievement for me alone but for the board, management and staff of Berger Paints because we are all driven by the same vision and purpose. I felt a sense of pride for the Berger Paints team.
Considering the fact that people tend to see Berger Paint’s products as meant for the rich only, is there any strategy being put in place to segment your products without compromising standards?
Fundamentally, every one of us understands that there is no way a company can address every market segment. You obviously have to set your goals around your target market. You cannot target everybody. You need to profile your customers and cascade them into segment. People however migrate from one segment to another, depending on the shift in their economic status at any point in time. The segment we focus on is the medium to the upper class of the economic strata. We are not saying that we are beyond the reach of the lower economic groupings. We expect people to improve in their economic status. Obviously, our products are aspirational brands! Everybody out there is interested in our products because of the top class quality. Being that as it may, the way people look at price and value differs. We believe that if you buy value, over time the economics of paying for premium ab-initio pays-off into the future because of durability/quality.
There is a saying that ‘cheap is expensive’. A lot of people do not understand what that means. For instance you buy product today for N100; meanwhile, there is an alternative for N30. If you buy the one hundred Naira brand, it will last you for 10 years. Conversely, if you buy the thirty Naira brand it will only last you for two years. If you do your proper arithmetic, the one hundred Naira brand is less expensive in the long run, aside saving time and inconvenience on the replacement of the less durable product. Therefore, on the face value, the N100 may look initially expensive, but from the perspective of intrinsic value, you actually get more value than the cheaper alternative. That is what makes cheap expensive. Note however, that we have our budget brands for aspirational customers at the lower consumer segment.
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