Fisco makes around 20 products under two brands: the SIMAD label includes homecare items such as laundry wash, dishwashing liquid, bleach and floor cleaner. Meanwhile, the SIMPHARMA brand comprises personal hygiene products such as shower gel and shampoo.
Sikam spoke to James Torvaney and shared some of the key lessons he has learnt since starting the business in 2012.
1. Make things
I see a lot of people trying to sell services but failing to really scale their businesses. In sub-Saharan Africa, we still have many basic needs to fulfil, physical products that we need to manufacture.
More than 80% of the consumer products sold in Cameroon are still imported – from orange juice to condoms, from rice to medical supplies. There are so many opportunities for companies that can manufacture these kinds of products domestically.
We chose hygiene products specifically because they are relatively straightforward to manufacture and because 90% of diseases in the country stem from poor hygiene practices.
2. Focus on products with mass appeal
When deciding on which business to go into, we wanted to go into something that was scaleable, and for that we needed mass appeal and a large market.
There are a lot of new products being pitched to high-end, elite consumers, but is there really a big market for that right now? It is a very small percentage of people, so there is a limit to how big you can grow the business.
The products we sell are things that ordinary people can afford, and use on a daily basis.
3. Build flexible supply chains
The last couple of years, and the last few months in particular, have seen huge disruptions to global supply chains. This is a trend that looks set to continue for the foreseeable future, but we have managed to minimise a lot of the effects due to our supply chain.
Traders that rely on products and ingredients manufactured in China, for example, have found it much more difficult, and more expensive to get products. In the last three months, I have seen shipping costs for certain items more than double, leading to increases in the cost of basic goods such as sugar and palm oil. Containers that used to cost $2,700 to ship are now costing $7,000. Everybody has been affected by it. If you are relying on importation you are also prone to deprecation in your local currencies against the dollar.
We always try to minimise the number of our ingredients that are imported, even if some ingredients still cannot be sourced locally. This means we can get our product to our customers more quickly as we are less reliant on global supply chains.
It also means we can respond and adjust production quicker in response to changes in the market. For example, at the beginning of the pandemic, it was a lot quicker for us to boost production of hand sanitisers. Those that relied on imports, however, had lead times of several months.
Another benefit of this strategy is that we have been able to get licences to export our products free of customs charges. In Cameroon, one of the criteria for this is that at least 40% of your products’ components must be manufactured locally.
4. Keep your manufacturing simple
From a manufacturing point of view, many of our products are very similar.
Whilst we have around 20 different products, we only require four production lines. For example, handwash, dishwash and glass wash have differences in ingredients but we can use the same production line for all of them. This makes things easier to produce at scale.
5. Work with retailers/distributors that can scale
Right now we sell in three countries outside of Cameroon: Equatorial Guinea, Gabon, and the Republic of the Congo. Next year we are looking to expand further, into Côte d’Ivoire, Niger, Guinea and Benin.
A large part of what has made it easier has been our customers.
When we first started, we relied heavily on traditional trades such as local distributors who sold through informal retailers and marketplaces. Most of the time these sales are relationship-based, and we had difficulties because our distributors gave priority to faster-moving foodstuffs like rice, pasta and tomatoes, over cleaning products.
We quickly realised this was a difficult way to scale, and moved our focus to modern trade – supermarkets. In 2015, around 70% of our goods were sold through traditional channels. Now the same proportion are sold through large supermarket chains such as Carrefour, Spar and Casino.
Modern retailers offer us a number of advantages: they are more structured, less likely to haggle over price, and offer better payment terms, which make them much easier to deal with.
The other major advantage of working with supermarket chains is that it makes it much easier to expand internationally. When you have your products stocked in a Carrefour, say, in Cameroon, it makes it much easier to get that product sold in the same chain in Congo. You’re not always building relationships from scratch.
6. Compete on price first
In Western markets, where there is more disposable income, companies with strong brands can easily charge a price premium.
However, the vast majority of Africans make purchasing decisions based primarily on cost. People are extremely price sensitive. Even with a really strong brand, we would have to compete favourably on price with imported products from the likes of Procter & Gamble, Henkel, Colgate-Palmolive, Unilever, and Johnson & Johnson.
Generally we aim to price our products at least 20% less than competing products. Our bleach, for example, costs around XAF 700, compared with around XAF 900 for imported products.
7. Market at the point of sale
Buying fast-moving consumer goods is not like buying a car or a perfume. It is not a thinking process; the decision is often made at the point of purchase, which is usually the supermarket aisle. If they recognise the brand, and the price is good, people will buy.
So the majority of our marketing is focused at the point of sale – in the supermarket. We want to make sure it’s visible to consumers and easy for them to buy. This is hard to do with traditional distributors but with supermarkets we can work together to create specific promotions that help push our products.
From what I’ve seen, social media marketing hasn’t really made much of an impact. People react and ‘like’ our posts, but they don’t necessarily act upon them. This could be because social media users are not the people making household purchasing decisions, or because the marketing is so far removed from the point of purchase.
We still put a small amount of money into general awareness campaigns, but it’s very difficult to quantify the actual benefits. We used to run challenges on our Facebook page – the winners would win a basket of our products. But when we looked into it, the winners were all connected to each other. It was the same people playing over and over again – they were playing as a full-time job!
8. Finance growth gradually
Financing is very difficult in this part of the world; there is little support from local banks or the system in general, particularly for new entrepreneurs. It is a real difficulty and we could have been a lot bigger than we are today if there were better financing options available. But rather than taking on large amounts of debt with high rates or equity with less favourable terms, I’ve preferred to build bit-by-bit, with most of our expansion funded by cash flows from our own operations.
We manage our working capital by dealing with large suppliers that pay on time, and building up high levels of trust with our suppliers, allowing us longer to settle our payables. When I’ve needed external financing, I’ve taken on small loans from local banks. I’ve built up trust over a number of years, which gives me more flexibility with these things now.
Fisco CEO Joel Sikam’s contact information
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