Rajat Kapur: Local Sourcing of Raw Material Critical to Cost Efficiency

The Managing Director of Henkel Nigeria Limited, Mr. Rajat Kapur, in this interview speaks on how cost efficiency and innovation enable his company to run at nearly 100 per cent manufacturing capacity. Dike Onwuamaeze brings the excerpts:

Those w How are the challenges in the Nigerian operating environment affecting Henkel’s operation in the country?  

That is a tough question to start with but I think that there is no disputing the fact, and I think that everybody in Nigeria knows that, that it is tough not just because of the Naira devaluation but also because of the volatility of the Naira, which does not enable easy planning. But I think that what is most important is that in the end we must realise that this is a country of 200 plus million people. So there is a vast potential and opportunity. And as the government drives to fix the volatility that opportunity still exists on the ground. To navigate this, the easiest thing is to look at two bouquets. The first bouquet is your cost structure and how you can be more efficient when it comes to energy, usage of materials and the way you are doing business on the ground. That is one of the Henkel’s global goals of doing sustainable business by reducing not only energy consumption but by being able to produce at the same quality. Henkel is the first company in Nigeria to move to fully dissolvable formula. That has two benefits. One, it means that you will get the full benefit of the formula. The second benefit is that because it dissolves fully, it will not harm marine lives. This is giving two benefits at the same time: sustainability and better efficiency. The second bouquet is more on the consumers. You need to understand the consumers’ needs. You can divide Nigerian consumers into two categories: the mass consumers and the premium consumers. For the mass consumers, you need to have the right offering: efficiency at value cost. For the premium consumers you need to come up with other things that they need on top efficiency and cost.  So, is diversification of your portfolio and looking at the Nigerian landscape ways of tackling this challenge of volatility in the market. Is it going to be hundred per cent easy? No! But always keeping it in the back of your mind that you have 200 million plus consumers on the ground will make it easier for you to survive the volatility and wait for better times to come.

Are you considering expansion to other markets beyond Nigeria or across the West African market?

I can answer this in a simple way. We came to Nigeria in 2016 and the entire rationale of coming to Nigeria was that we will take the strongest place as the base for expansion into West and Sub-Saharan Africa. And we want to continue on that vision that we use Nigeria as a base to offer operation which will expand first into the West African markets like Ghana, Senegal, Ivory Coast, and Burkina Faso and even to Cameroun, which is not part of ECOWAS but is a country that is close by to Nigeria. 

How far have you achieved this vision of producing in Nigeria and exporting to other countries?

There are products that are going into Chad and Ghana. But in the coming weeks, hopefully we will have formula for people in other countries like Ghana that will increase the efficiency of our manufacturing and also helps us to get more foreign exchange into Nigeria at a much higher rate. Are we there 100 per cent? No! Absolutely not! Are we still moving in that direction? The answer is yes. We are making partners on the ground in the relevant countries to further expand in a very formal setting.

Are you meeting your timelines in realising this vision?

We were able to meet most of the timeline in 2022 despite COVID-19 being on the ground and causing some challenges. Our manufacturing footprint is being utilised at nearly 100 per cent capacity level. The recent volatility that we have seen has impacted us to some level so there have been some delays in the past one year. But if you ask in the past eight years, I will say that we are practically on time though we have seen some delays because of the recent challenges. So, I am sure that we will catch up on the timelines. But in 2022 we were pretty on the time lime especially at the expansion. Imagine that we were operating virtually at 100 per cent capacity utilization, which is a dream for most manufacturers. There had been some setbacks in the last year but I am hopeful that with all the measures being put on the ground that we will get the whole thing going again.

What are your sustainability goals?

We do a lot of things that have societal impacts on the ground. But I will talk about two that we focus on. We have a global programme that has been brought to Nigeria that targets primary school kids by teaching them STEM skills. What is interesting there is that they will contribute to the economy in a better way if you can get them to get interested in science, technology and mathematics and they pursue this line to become engineers, scientists and researchers. This programme has already impacted on about 2000 students. We started with Ibadan and have come to Lagos and are preparing to expand to other parts of Nigeria.  The other project that we do in a big way is what we call “Peer to Peer (P2P)” that gives opportunity to the unemployed youths to become entrepreneurs. They are youths that want to do something that is positive and gainful but does not get the opportunity. What we do in this case is to invest in them by training them on how to sell in the market, providing them with mobile shops, teaching them accounting on how to manage cash flow and we give them the skills. We are letting them to start their own business at zero cost to themselves. As they sell and make money we can give them credit lines from our distributors to pick more products so that they can sell more. We started with two youths in 2018. Today we have more than 250 such P2P entrepreneurs on the ground. For me, this is the classic example of turning job seekers into job makers. I have a lot of examples when a person who started with us as jobless person is today a retailer with people working under him. These are our two main initiatives but we are also working on a project in an orphanage in Ibadan to help the people in the orphanage. We have an international world giving day where employees and team members donate their time to go and help on the ground or cleaning the street or doing something else.

How are you managing to stay afloat?

The only way to do this is to stay close to the consumers and to launch innovations fast enough. Also, invest strongly on the structures that are on the ground, keep looking at the macro trends, keep adapting and focusing on innovations. Over the past year, we have launched new technologies like anti-bacterial detergent that cleans and removes bacteria from the clothes. We have been in existence for 147 years. We have a huge global portfolio which we can bring into Nigeria and adapt them for the Nigerian needs. That gives us two approaches. One is coming up with local ideas that we launch for Nigerians. The other is to look at our global portfolio and adapting it to local needs as much as possible. That is the way we keep addressing the changing needs of Nigerians.

How has it been getting the appropriate workforce for your operations in Nigeria?

There is high availability of human resources on the ground. But at the same time you need to invest a lot in their training on vocational skills. We invest properly and systematically in bring up the local talent. The challenges of finding the right talent here are similar to challenges in any country. But the advantage that we have is a legacy of knowing how to build within the organisation. Whether it is in Germany or 73 countries that we operate in, we have systematic way of building local talent on the ground. The arrangement should be that at the end of the day the organisation is running sustainably. 

Looking ahead, what do you think is the future for Henkel Nigeria?

We are pioneers at heart for the good of generations. This is what we believe in. At the end of the day what is critical is that we are not thinking short term but for the future on the long term. What is important for us is to have sustainable manufacturing footprint on the ground, including efficiency in energy utilisation that is built on sustainability on the ground. We are conscious that what we want to achieve will be beneficial for the oncoming generation. We will not be a business that is there for only 10 or 20 years. We should be a business that lives for hundreds of years. Because of this, having the right people, having the right processes, having the right manufacturing footprint on the ground are very important. That is what we want to do. We believe that our products should appeal to the changing needs of Nigerians and we ensure that the company is able to deliver them very sustainably with profitable results irrespective of challenges and volatility on the ground. Our idea is volatility proof operating system. That is what I will say.

What percentage of local inputs do you have in your products? 

On raw materials, 70 per cent are sourced locally and that is critical to our cost efficiency also. Imagine we are to import all these raw materials and everything from outside when foreign exchange (FX) is very volatile? If we have been doing that, we will be far more exposed to FX volatility. It is in our own benefit to source more inputs locally as much as possible. Only patent raw materials that cannot be made locally that we are importing currently.

How are you positioning your organisation for the emerging AfCFTA market?

We are still at our step one, which is expanding and taking advantage of the ECOWAS sub-region, which is where we are currently. And we have not taken the full advantage of ECOWAS yet.  Once we have achieved our step one then we will leverage the AfCFTA on step two and expand the base further.

What does it take to be a distributor with your organisation?

It takes a lot of things. But what we consider most imposrtant are collaborative and entrepreneurial spirits. We are not looking at only what you bring to the table in terms of money. We are willing to invest in our distributors to make them grow with us and a lot of them have. But, first of all what it takes is collaboration, which is very important in arriving at mutually agreeable position. For me, the entrepreneurial and collaborative spirits are more important than the money because the money will always come. Money is important but it is not the key point in starting the relationship.

What advice do you have for the government on improving the business environment in the country?

I truly, truly believe that it is a tough time for everybody. If you look at it from an economist’s point of view, every decision that has been taken by the government ii fundamentally the right decision for the country. Yes, it is causing volatility and shocks but I honestly believe that many countries have gone through this and emerged better off for it. I do not have any real advice to give to the government but I must say that whatever they are doing, they must systematically keep doing and follow through with what they are doing already.