How FoodCo surmounted challenges to become Nigeria’s fastest-growing retailer

Ade Sun-Basorun is the Chief Executive Officer (CEO) of FoodCo Nigeria, a fast-growing omni-channel retailer with interests in supermarkets, quick-service restaurants, manufacturing and entertainment. The company was recently listed amongst Africa’s fastest-growing companies by the Financial Times, the only Nigerian retail company to make the list.

In this exclusive interview, Sun-Basorun talks about a sundry of issues, from how the company dealt with the COVID 19 challenge, the rising profile of indigenous modern retail operators as well the state of play in Nigeria’s organized retail space.

How does it feel to be listed as one of Africa’s Fastest-Growing Companies by Financial Times?

We are clearly excited and grateful for the recognition. I believe that it is testament to the loyalty and commitment of our customers. We also have to commend the dedication of the entire FoodCo team who continue to give their best despite the long hours and challenging work to ensure that we deliver excellent service across the value chain. We are humbled by the listing and it will serve to motivate us to do more.

Two years ago, the world economy was faced with the challenge of the COVID Pandemic. The retail sector was especially affected due to the disruptions in supply chains amongst other challenges. How did FoodCo navigate through the period?

Indeed, that was a very sensitive and challenging period for all of us. There was a high level of uncertainty and it brought about significant change across all sectors, not just the retail sector within which we operate. We are grateful that Nigeria and the broader global community have been able to move past the worst of that terrible healthcare and financial crisis.

From a business point, we have had to transform our business in a number of ways. We had to focus on health and prevention methods to ensure that the customer and staff were safe.

Beyond that, we also saw a significant change in customer buying habits. The good thing is that, as a company, it gave us the opportunity to accelerate our digital transformation. We were able to launch our digital channels which enabled us to expand our service offerings. In fact, we effectively transformed into an omni-channel retailer and today we are only one of two omni-channel retailers in the country.

We will continue to invest in this capability to ensure that consumer demands are met such that they are able to be served where they want to be served whether via social media, web or even in our physical stores.

Over the past couple of years, there has been an influx of indigenous operators who appear to be taking over the reins in the formal retail segment. As an indigenous player, what would you say is driving this trend?

It’s true that we are seeing significant growth and influence of Nigerian companies within the space. This is evident across the broader retail ecosystem from grocery, pharmacy and online retail, stretching into the wider corridors of the consumer goods space. It is also the case in the quick-service restaurant segment where we also operate. So, undoubtedly, there’s some momentum around indigenous players who are taking up the responsibility to formalize, modernize and deliver to Nigerians the quality retail services and products that they deserve. We are grateful and excited to be a part of that movement.

I would say that for a long time, Nigerians have been underserved in many categories of the consumer goods sector and it is important that the trajectory shifts and continues to shift. I believe this movement is powered by a few underlying factors. One is the positive demographic trend of the youth population as well as the middle-class population that crave modern retail services and are able to pay for them. Second is the growing realization that it is possible to create profitable and sustainable businesses in this space by providing quality service. Third, competition certainly plays a role since it drives a higher level of service delivery and fourth is exposure and access to competencies and capabilities in the area of talent.

FoodCo is one of the pioneers of modern retail in Nigeria. 40 years after, the company is still going strong and is recognized as one of the fastest-growing on the continent. What is the secret?

First, it is the grace of God. We are grateful for the favour that the Almighty has bestowed on the business so He is the first person we need to give credit to. Second, it is important to recognize that it hasn’t always been rosy over these 40 years. The business has had multiple challenges within the period and was almost completely shut down at a point.

However, there are a few things that have helped us become successful. One is that there has always been a real focus on the customer. We work hard to live by the premise that the customer is king and we have put a lot into delivering quality products at affordable prices. We also work hard to bring some level of distinction into the products we stock and that has given our customers something they can resonate with. For instance, our manufacturing department churns out six variants of Sunfresh bread and 16 variants of Sunfresh ice cream in addition to our latest product, Sunfresh premium table water. So, our customers are not only assured of quality but also have a wide stock of options to choose from.

One other thing that has helped is the continuous investment into the business. Our shareholders have always been focused first on what needs to be done to help the business continue to grow than on how we take profits out of it. That has been very helpful in ensuring that the business has the capital and funding it needs to be successful and sustainable.

The Nigerian consumer goods sector seems to be a paradox of sorts. At a time when inflation, especially food inflation, seems to have become the norm, analysts are predicting a positive outlook for the sector. From your experience, what will drive the expected growth?

For the food sector, let’s start with the acknowledgement that people need to eat. Food is a basic commodity and people have to allocate a meaningful portion of their resources to ensure that they have enough nutrition for their families. From that standpoint, there is an installed base of spend that is allocated to the segment. The other thing to also note is that as our population continues to grow, the spending in some categories like food will also go up.

Additionally, our population is aspirational. That influences certain trends with respect to their spending patterns. For instance, there is the propensity to patronize Quick Service Restaurants for both convenience and status conferral. However, when consumers are strained, their allocation for spending changes – the frequency of eating, the spend-per-meal when eating out, and the types of food they combine/ Additionally, they could opt for locally made products over imported products. They could also substitute foodstuff for more expensive processed foods. Changes of those sorts could happen in what you call the mix of products. However, in many areas, the underlining demographics are supporting continued growth, or at a minimum, stability, with some positive inflation adjustments on the revenue line or the top line.

Nevertheless, it is important to realize that these factors do not necessarily guarantee profitability. The ability to convert that top line to profit is now more challenging than ever. It was already challenging with the inflation we had coming in from last year. Now, with the rapid acceleration in the cost of power, it is virtually impossible for most consumer-facing businesses to be able to pass on costs to consumers. We are seeing a reduction in profitability and that is likely to continue until we get more normalcy in the energy market or some moderation in the inflation within the system.

Can you give a 5-year forecast for the industry?

Over the next five years, we expect the growth to continue and, if anything, accelerate. I believe we will see even more exciting diversity and quality in consumer-packaged products coming into the market. We will see higher levels of localization of all categories of consumer products as more manufacturing is done in the country both at a large and smaller scale. Standards and diversity within the retail and quick-service restaurant space will continue to increase.

I believe that the big winner in all of this is the Nigerian consumer. They are going to continue to get better offerings which would be delivered at lower pricing. From a business standpoint, I believe the competition is going to increase so those that will win are those that can define clear value propositions targeted at a specific segment and be disciplined about executing in a way that their customers can count on that value to be constantly delivered. Conversely, those that struggle in any of these dimensions could be in for a rough ride.

We hear there’s a new FoodCo outlet set to be launched in Ikoyi. Can you tell us about it?

Yes, and we are excited about it. It is going to be our 16^th store and the best one yet. Since branching out of Oyo state, we are excited at the reception we received from Lagos and Abeokuta, Ogun State, and that has encouraged us to expand further to meet the teeming needs of consumers for modern retail services.

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