“We have embarked on what we see as a long term relationship with Olam International. 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 FeedNavigator.
He said that In Vivo NSA, which has a strong presence in South Africa — with two feed and premix plants — and a distribution network in Algeria, in addition to exporting extensively to multiple countries within Africa, plans to expand its reach on that continent. It sees this tie-up with Olam as a “blueprint” for future investment on that continent, said Leroy.
“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.
He said InVivo NSA also sees the deal as a way of promoting its animal nutrition knowledge transfer services to a wider audience.
It is initially set to run for two years but Leroy expects the partnership to continue beyond 2018. “We expect the first two feed plants to be up and running within that 24 month period,” he added.
Olam entry into feed market
KC Suresh, Olam’s head of grains, said the partnership with InVivo NSA will accelerate its penetration into the feed space, allowing it to quickly scale up commercial activities.
Olam only announced its entry into the feed industry in November 2015, with Nigeria, it said, its preferred entry market on country selection criteria, which include 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.”
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.
Olam has wheat milling business in Nigeria, and it said, in addition to bran from its flour mills, it will leverage its local procurement network to source a majority of other inputs required for producing poultry and fish feed in that country: “This will reduce import dependence, benefit local farming communities and generate youth employment, which are key priorities for the Nigerian economy today.”
The move into feed production there, said the company, will involve investment in poultry and fish feed mills as well as hatcheries to produce day-old-chicks.