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Can instant noodles boost African manufacturing and agriculture? 18 Dec 2015

One of my very distinct memories of childhood in Kuala Lumpur was going to the local hawker and ordering a plate of “char kway teow.” (Char kway teow, literally means "stir-fried rice-cake strips." It is a popular noodle dish in South East Asia made with flat rice noodles, stir-fried over very high heat with light and dark soy sauce, chilli, a small quantity of belachan (fermented prawn paste), whole prawns, de-shelled blood cockles, bean sprouts and chopped Chinese chives.) I can even smell this dish as I write.
    
That was a treat. However, if I was at home and wanted noodles quickly, it would be instant noodles. In Malaysia, the ubiquitous brand was “Maggi Mee”. (Mee means noodles in Malaysia and Indonesia). The brand had a slogan of: “Maggi Mee cepat di masak, sedap di makan” – roughly translates into Maggi Mee quick to cook and tasty to eat.

A brief history of instant noodles

Like many successful products, the instant noodles had humble beginnings. A Japanese/Taiwanese inventor, Momofuku Ando (1910-2007), founder of Nissin Food Products, invented "Chicken Ramen" in 1958 in a shed behind his home by rapidly drying cooked noodles and flash-frying them in oil.

From that shed, the instant noodle has grown into a massive global industry that supplies 100 billion servings (that's a lot of noodles) annually to people across the world. There is even a World Instant Noodles Association www.instantnoodles.org and World Instant Noodles Summits.

In 2007, the New York Times said that Mr. Ando (known as “Mr. Noodles) deserved an eternal place in the pantheon of human achievement. According to a Japanese poll in 2000, "The Japanese believe that their best invention of the twentieth century was instant noodles."

Industrialisation and manufacturing

In February 2014, the Economist published an article titled, “Manufacturing in Africa – An Awakening Giant.” The premise of the article was the need for Africa's economies to “start making a lot more things.” The current downturn in the prices of commodities has exposed this need even further. The article went on to say that few countries have escaped poverty without “putting a lot of workers through factory gates”. And African countries are taking heed as countries like Ethiopia (where manufacturing is growing at 10% a year) and Kenya are leading the way.

Fast forward to another Economist article in November this year titled, “Industrialisation in Africa – more a marathon than a sprint”.  The premise here was that the manufacturing sector's contribution to the continent's total economy actually declined.  

The Economist goes on to say what we know too well. The key reason for this lack of manufacturing is weak infrastructure that has an impact on costs which makes African manufacturing uncompetitive.  

Africa imports too much food. The arguments that Africa can feed itself and the world; and the point that the continent needs to increase its manufacturing capacity are well known. However, without the right leadership, policies, infrastructure, technology and support, these objectives cannot be achieved.

The annual food import bill for Africa is almost double that of the food sector's export earnings ($81 billion vs. $45 billion, according to MD Ramesh of Olam International).

The demand for processed food in Africa is expected to increase seven-fold over the next 25 years, according to a Michigan State study in the United States. In Africa's increasingly urban spaces, middle class consumers are eager for the convenience and flavour that processed food delivers. Whilst for the poor, it's both aspirational and in some cases economical. A packet of indomie retails in Nigeria at 35 naira (about 0.15 USD).

Local and foreign entrepreneurs have seen this opportunity and are manufacturing local food products like instant noodles using local materials.
Indomie in Nigeria

When I first visited Nigeria years ago, I was surprised to see Indomie adverts. Digging a bit deeper, I learnt that Indomie was brought (from Indonesia via Singapore) to Nigeria by Singapore's Tolaram Group in the early 90s and is the most popular instant noodles brand in Nigeria. Indomie is owned by De United Foods Industries Limited based in Lagos and is a joint venture between Singapore's Tolaram Corporation and Indonesia's Salim Group.

Amazingly (to me at least), I also found out that instant noodles are very much part of the Nigerian diet with instant noodles being eaten across the country by all strata of the society. What was even more incredible was how Indomie had built an initially non-existent instant noodles sector into a $600 million business – with 70% market share and is now the household name for instant noodles in Nigeria.

In September of this year, Kellog's (world's biggest cereal maker) announced a $450 million joint venture with Tolaram Group to develop breakfast foods and snacks for the West African market, with the focus on Nigeria.

The Tolaram/Indomie story is an African/Nigerian success story in the food and manufacturing sector that I wanted to learn more about. Luckily, I got the opportunity to do this by doing my usual “phone a friend” approach to writing these articles. So when I was in Singapore in November, I got in touch with the “Oga at The Top”-  Mr. Haresh Aswani, Managing Director of the Tolaram Group Nigeria. Amongst his many titles and accolades, the ones I like best are his Chieftaincy title of "Baagbile Korede of Ota by the Olota of Ota" and his informal title of “Baba Indomie.”

I asked Haresh about the secret of Indomie's success in Nigeria. His responses were:
•    keeping the brand fresh by constant introductions of new flavours and increasing the target     range of products to its consumers;
•    having a great distribution network - regular prizes are given to the best performing distributors;
•    extensive branding and marketing with billboards and signage across the country;
•    controlling the inputs and the supply chain by self-producing supplies locally;
•    ability to negotiate or control (through self-supply) low prices for consistent quality wheat flour and palm oil – these two ingredients make up about 70%  of the product by weight;
•    creating brand loyalty through various channels, including providing free samples;
•    constantly striving to introduce new flavours to stimulate demand and making products with flavouring to match local palates (that's why you get Assam Laksa in Malaysia,  joloff and pepper chicken in Nigeria and Nyama Choma in Kenya).

Noodles in Zambia

Part 2 of the “phone a friend” strategy was to speak to Monica Musonda, CEO of Zambia's Java Foods. Monica's entrepreneurial journey is fascinating. She quit her job as a lawyer with the Dangote Group and started a food processing business focused on providing nutritious and convenience foods made from local products. Java's first product was eeZee instant noodles.

I asked Monica why she started with noodles given that they are not food indigenous to the Southern African market. Her response was that the drivers that made Indomie popular in Nigeria also apply in Zambia (and surrounding countries). In addition, Zambia is becoming increasingly urbanized (approximately 49% of the population live in cities). Zambia also has a very aspirational and growing youth market that is not tied to old traditional foods; and is willing to try out new products if the price is right.

Zambia also has the competitive advantage of being a net exporter of wheat – a major raw material in instant noodles. Whilst Monica was bullish for eeZee as the first indigenous owned brand in Zambia and having first-mover advantage, there have been challenges including raising the required capital. Noodles being a new product, the significant marketing required was underestimated. Also the fact that although formal retail is one of the fastest growing sectors in Zambia (conservatively at 15% per annum), a majority of consumers still shop in the informal (general) markets which required Java creating its own distribution network. The depreciation of the kwacha resulting in a number of price adjustments has also hurt the eeZee growth trajectory.

Noodles in Kenya

In Kenya, Mr. Ando's Nissin Foods has developed an instant noodles product customized to Kenyan tastes by using whole-grain durum wheat flour (atta) and sorghum as an alternative to refined white wheat flour. Nissin took this product into Kenya very scientifically by testing it with Kenyans from all walks of life – from university students to people in the markets; educating consumers on the product from the production process to how to cook it; customising the product to suit the local palate, texture (chewier versus al dente) and colour (brown versus white) and the concept of using different ingredients. Nissin also created different flavours -  e.g. chicken and “Nyama Choma”  (local roast meat dish).

Nissin is looking at using local crops such as yam and cassava starch in their noodles. Many of these local crops are high in protein, rich in minerals and gluten-free. In Ethiopia, the company is looking to use teff.

The interesting thing about Nissin developing noodles from local crops is the opportunity for this to spur growth in the agricultural sector. If Nissin gets this right, the company could create a stable demand for traditional crops that will encourage local farmers to produce more. So in Kenya, sorghum is drought-resistant and locally available, but because it has a low market value, farmers prefer to grow maize.

Challenges

Challenges to starting an indigenous noodles manufacturing company in Africa are numerous. These include competing with cheap imports from large multinationals; price fluctuations and high costs of raw materials, distribution and packaging; getting products to consumers and the lack of a distribution network; unpredictability of supply; large capital costs associated with the production process, which involves both steaming and deep frying in palm oil prior to drying and packaging.

Others are challenges involving difficulty of achieving consistent product quality when starting up; getting economies of scale, which is critical to competitiveness – the highest capacity production lines now churn out 1,200 packets per minute; and product development and advertising costs that can be prohibitive.

Can instant noodles help feed Africa?

Whilst instant noodles are considered globally as a fast food, using local ingredients with high nutritional value could result in a cheap and easy-to-cook meal that is also healthy. Fast food is also in fashion for young people, even in rural villages where people don't change their attitudes easily. If this fashion can also be nutritious, it can make a significant contribution to food security and the quality of diets. So whilst the Chinese and Italians argue about who invented noodles, Africa has the potential of turning the instant noodles into a cheap, nutritious and staple food whilst increasing manufacturing and agricultural output.  
    
PS. If you are a Nigerian in the UK and those hunger pangs are eating at you and you want a quick and cheap reminder of food at home, you can buy a pack of 40 “Nigerian Indomie” on Amazon for £0.41 (0.62 USD) per packet.