Nigerian manufacturer cashing in on demand for drinks in Africa
With more Africans drinking beer and soft drinks, GZI is well placed to expand its business.
West African aluminium can manufacturer GZ Industries (GZI) is hoping to ride on increasing consumption of drinks to expand its business across Africa. The continent is tipped to become the world’s fastest growing beer market, according to a study by Dutch multinational banking and financial services group Rabobank.
The report, titled Beer on the Frontier: Opportunities for Brewers in the African Continent, shows brewers are looking to Africa where growth is expected to be driven by rising salaries, rapid economic growth and a growing population at a time when developed markets in Europe and the US are facing declining beer volumes.
The Nigerian company manufacturers 1.2bn cans annually for sale to Guinness, Coca-Cola, Heineken and SABMiller. Founded in 2009, GZI is also establishing its third plant in eastern Nigeria which will bring in an additional 600m cans a year when its starts production in 10 months time.
The Rabobank research shows that for the five years leading to 2018 Africa is expected to have the largest increase of legal drinkers as birth rates in other parts of the world slow down.
The soft drinks market is also displaying potential with leading players SABMiller, Coca-Cola and PepsiCo investing millions of dollars in emerging markets in the continent.
GZI chairman Dr Tunji Olowolafe told How we made it in Africa the company is expecting increasing demand for its cans across the continent. To kick-start its pan-African expansion, GZI is investing US$100m in a manufacturing plant in Kenya which will have an annual production capacity of 450m cans.
Olowolafe says Kenya made a compelling case for GZI’s first location outside Nigeria because the economy is growing rapidly, consumer purchasing power is increasing and democracy is entrenched. The Nigerian investor says he expects the Kenyan market “to grow by leaps and bounds”.
“We see Africa as an emerging market. We see Africa as a stable market and Kenya is one of the leading democracies in Africa. It was just compelling… to invest in Kenya,” says Olowolafe. “For us to have come all the way [here] only shows that democracy in Kenya is entrenched, there is rule of law and there is stability and peace. We have brought in the risk capital because of our absolute faith in Kenya.”
Kenyan brewers and soft drink bottlers currently rely on imported cans. Olowolafe says the company expects the demand for cans in the East African nation to surpass the capacity of the GZI plant under construction.
“Honestly, we want to sell more than that [450m cans]. We have done our studies, we know there is demand and we are very bullish about the economy. The Kenyan economy is growing and there will be more demand for canned drinks in coming years. So we expect good growth here. Ultimately we will ensure Kenya never has to import cans.”
GZI’s story
GZI was founded by a group of Israeli investors who had lived and worked in Nigeria for over 30 years, led by the firm’s current managing director Motti Goldmintz. GZI opened West Africa’s first can manufacturing plant.
It has since attracted investors including Nigerian investment and financial advisory firm Verod Capital, the private equity arm of Standard Chartered Bank and London Stock Exchange-listed investment group Ashmore.
A medical doctor who quit practice to venture into private equity, Olowolafe joined GZI two years ago with Verod Capital.
“The numbers were compelling. It is an import substitution business. The products, as we speak now, are all being imported into Kenya and many other countries. Why would you import a can with just air into Kenya to then refill? It is a no-brainer. Of course, the risk is still there just like any other business, but we liked the idea of creating jobs and transferring technology to our youth. It always excites me when we manufacture in Africa. This is good for Africa.”
As it charts its expansion across Africa, Olowolafe says GZI will be riding on the lessons learned in Nigeria over the last four years.
“It is about detailed planning, not taking anything for granted, ensuring the best people in the world work for us… and understanding the local nuances.”
A major challenge the company faces is access to human capital.
“This is a very highly automated business. When we employ local people we need to do a lot of training. There are very few people in the world who have done this before so we would need to train Kenyans, especially on the technical elements.”
Olowolafe reckons good governance, rule of law and political stability will encourage increased investment in manufacturing, an industry that has the potential to “unlock Africa’s economic growth”.
“Africa has kicked off. We are seeing the transformation but it is always tough at the beginning. You may not feel it now but in the next five years it is not going to be the same Africa.”
He says Rwanda, Ghana and Botswana are interesting markets but adds that opportunities in Africa are not only limited to traditional investment destinations.
“There are many interesting countries in Africa that have opportunities but there is limited equity for individual companies. You cannot deploy all your capital at the same time in different countries simultaneously. So you may need to choose depending on your in-house criteria using different metrics to decide where you want to expand to next.”
Nigerians are natural entrepreneurs
A renowned entrepreneur in Nigeria, Olowolafe founded Deux Project, a company which initially focused on restructuring and fitting hospitals but later expanded to include general civil engineering, construction and consultancy.
He notes that Nigerian entrepreneurs are keen to invest across Africa in countries where democracy is entrenched.
“Nigerians are natural entrepreneurs. We are courageous enough to risk capital. It is all about courage and having faith in the environment. As long as the rule of law is there, Nigerians will invest.”
To be successful, Olowolafe says, entrepreneurs should “be highly ethical” and undertake processes that are transparent.
“You must believe in what you are doing. You must have the courage and the faith and ensure you employ world class professional to assist you achieve your goals.”