Marketing in 2018: The High-Grounds and the Booby Traps, What Players, Govt. Need Do
With benefit of hindsight, having been in the trenches long enough and rising through the ranks, Aare Fatai Odesile, Managing Director, Grand Oak Ltd, one of the leading manufacturers and marketers of some iconic brands in the country, eminently qualifies to make a prognosis on marketing and the FMCG sector. In this interview with BrandCrunch, Aare Odesile x-rays the past years, signposts rays of hope for the industry and conditions that will enhance opportunities and growth in 2018. He also delves into issues that could adversely affect the marketing environment for brands and agencies alike. Excerpts.
As a leading light in the industry, can you give a review of the immediate past year (2017) as regards marketing, especially in the FMCG sector?
2017 was an interesting year both nationally and even for us at Grand Oak Ltd, as an organisation. As Nigerians we wobbled through 2016 with so many problems. We are all living witnesses to the ridiculous fluctuations in the foreign exchange market. As I said at a forum, since my 28 years plus experience in this business, 2016 witnessed, perhaps, the highest price reviews in the FMCG sector. This is because practically every week we got our costs and we had to control ourselves. However, we couldn’t pass all the costs to the consumers. So, we started 2017 with a lot of hope, projections for dollars, projections for fuel, benchmarking oil prices and so many propositions.
Indeed, 2017 I think, has separated the boys from the men. We knew that even as recent as April/May 2017, some industries were retrenching. So, the year started with lots of activities, such as redundancies, which also affected business. If you go back in retrospect to 2017, some key businesses in the aviation industry went under; they are just scrambling now to come back. From aviation to news print, telecoms to important drinks and FMCG products lots of people lost their jobs. Just about a week ago, I read in a publication that officially put the number of people who lost their jobs to between 4,000 and 5,000 in one year across the entire industry. That is massive.
Were there positive points in all these?
Sure, 2017 also provided lots of opportunities for those who were ready for the market – a platform to rethink the entire business propositions. Take a look at the FMCG sector, a number of our inputs were imported, but the situation as always became a turning point for this business.
From the story we met, even the birth of Nigeria Distilleries in 1977 was due to what we call the indigenization decree of former President Obasanjo. Prior to that era, the company was bringing in some brands like Rose, Key Schnapps, Capstan, Dubonnet and Campari under licenses. But following that green light, the company got into action and came up with some of today’s biggest brands, Seaman’s Schnapps, Regal, Bacchus and Lord’s Dry Gin. So, those were benefits of inward looking strategies, which were pressured by the environment. Such innovations cut across industries and sectors.
2017 has also shown us a lot of inward looking insights. Even though it wasn’t this year, we had long anticipated this. The alcohol manufacturing plant came in handy because of foreign exchange. It helped us a lot to weather the storm. Again a number of our inputs which were being sourced from abroad were now sourced locally; this gave us the insight and encouraged us to look inward. I can tell you today, when you compare December 2017 and December 2016, a lot more of our inputs are sourced locally than it was because we still have to deliver value to the consumers without compromising. I know brands in this market that reduced the input so that they can still sell at the same price. But we said no, we will give consumers what we promised. We are consistent and that is what we do. 2017 really gave us an opportunity to look inward.
It was also the year we re-launched one of our biggest brands, Regal Dry Gin. Regal Gin, today, rubs shoulders with top world-class brands. If you look at the packaging and presentation of Regal, today, it is a novel product and a bundle of benefits and value. 2017 was also a year we moved to re-take significant share of our market that we lost during the challenges of 2016 and earlier. If you look around, you would see upbeats in our marketing activities in 2017. Then, towards the end of the year, there was some stability in the dollar. Of course, not back to the 2015 rate, but, at least, it enabled organisations to plan against the daily fluctuations.
2017 was a year for those that are smart; a year to set a proper foundation for the millennial consumers and what will become the norm in Nigeria. Honestly, it was an exciting year; that’s why it is a bit sad that we ended it on a tough note of fuel scarcity.
You are coming from the positive perspective mostly; but does the consumer experience 2017 in that light?
Remember, I am also a consumer of other brands, so I can speak for consumers. How do I measure my consumers’ happiness; the brand’s off take and ability to add values which are reflected through patronage? Consumers know that it is tough, today, but honestly to a large extent with the potpourri of challenges, based on dip-stick and research, I can say consumers still prefer 2017 to 2016.
How were you able to curtail adulteration and faking of your products? This class of goods thrives during recession; or was there no such threat?
It is a matter of choice. You have to be careful. The issue of faking and adulteration transcend the economic hardship and it somehow transcends Nigeria. We have people faking dollars. This challenge is a little bit higher now than it was. The challenge for us is to continue to project the original brands that we have and connect with the consumers in the kind of form and presentation -sizes and format that they want. For example, a consumer may want to take Seaman’s for its quality and not for prayer or pouring libation. So, he doesn’t need the big bottle. You must connect with the consumers by giving them the small pack sizes and still deliver that quality and continue to ensure availability. Fakers are sure to try but make sure the original is available. You must also collaborate with credible regulatory agencies, NAFDAC, CPC and Nigerian Police to raid the markets. The truth is that in some markets, consumers know the original from the fake. For instance, if you go to the eastern part of the country and you want to buy Bacchus, the sellers would ask you if you want number 1 or number 2. So in some instances you would do what you can do but if consumers decide that they want to buy fake, there might be little you can do. That is not to say the innocent consumers must not be protected. We have been doing a lot of reforms, deploying innovative marketing and technology to protect our brands and consumers.
How about imported illicit products?
This is a more disturbing trend. Because of the economic hardship, people capitalize on the situation to bring in all manners of products. Illicit products are poor in quality and dangerous; they, may be, imported or made locally. You begin to wonder why Nigerians give consideration to these drinks – the names are scary, really unprintable names and the odour is nauseating. This is one of the areas the government has a lot of work to do. While brands’ owners will protect their brands from fake, there are many nameless and faceless drinks from evil doers, which people buy considering that they are cheap.
So, adulteration challenge is there but there is a bigger challenge of people capitalizing and exploiting the current hardship to bring in all manners of products. We need to be careful of their effects on the health of the consumers.
The consumers, if anything, have become more segmented and diverse more than ever before, no thanks to digital and social media platforms. How have you been able to keep track of these highly mobile consumers?
It is to be proactive. I mentioned the millennial consumers earlier. Follow the consumers. We have been following the consumers, anticipating what their next move would be. Lord’s Gin, as one of our brands, has been there but when we saw what was happening, we did what we needed to do in 2016. Right now, it is one brand that is firing on all cylinders. Similarly, we just introduced Naija Café Rum, which connects perfectly with the millennial consumers and what the youth of today are doing. The consumers out there continue to see value and we continue to anticipate them. Always thinking ahead what is the next thing? Today, brand’s loyalty has disappeared; there is no such thing as loyalty unless you are able to keep the consumers, anticipate them, offer them what they want and in the right format. Back in those days, probably we would have started with a big bottle instead of coming in sachets and in a 9cl formats. Today, it’s a different game; give them the value, anticipate what their need is and surprise them beyond their expectations.
Despite all the challenges, you painted not too gloomy a picture of 2017; what does 2018 have in stock in terms of marketing?
It is going to be a year of great recovery for strong brands. Remember that at times in an economy like ours, particularly those of us in the FMCG go through curves like this. When you come back, it is usually a boom. 2013 was a particular year when things were very terrible because of what happened in 2012. Prices went up and all of that, but we came back to rosy times in 2014 and 2015. So, I see 2018 as a year of recovery. Still challenges are there; don’t let us deceive ourselves. As we speak, we are battling the federal government. There was a misconception at the level of the federal government in classifying spirits and some of our domestic brands along with champagne. They were trying to make it a luxury good with a view to increasing the excise duty from about twenty and above naira to two hundred and fifty naira per bottle, not minding the high cost of inputs. If that happens, then, it would force a lot of consumers to go into drinking illicit products and force legitimate companies to close shops. We do hope government won’t go that route.
So, if we assume that the current level of seriousness on the economy by the government continues, 2018 would offer a more interesting field for marketing.
Also look around you, there are virtually no serious global players in the drink business, especially spirit, today. Coca-Cola has now come with Whiskey and more, while Guinness has established a plant in Benin that can produce any type of drink. Distell also has bought some shares in Tanamount and it is establishing on its own. So, spirit is where everybody is coming to play because it does offer you the sociability platform that you desire. So, I see 2018 as a very interesting year in the marketing environment, but most, importantly, it’s going to be a year when spending will be high because of political activities. It is anticipated that FMCG should have high level of patronage and even the consumers, given our politicking style, should be able to get some economic lift in 2018.
You seemed bitter on the levy proposed on imported goods; is it because probably government’s intention is to safeguard the home industry but failed to properly communicate or what is the challenge?
They are killing the home industry. Back in 2015, I was a member of the board of distillers committee of the Manufacturers Association of Nigeria (MAN). We lobbied the federal government with appeals to protect the local industry. How? Then, there were so many products being dumped into the country from Asian countries. Therefore, we said come and establish your companies in Nigeria and let us play on a level field, but don’t dump all manners of products into our country. They do not pay education tax, VAT or any levy because most of their products come through the porous borders. The government listened and I remember, specifically, Okonjo Iweala signed 70% increase in the tariff on imported goods, which forced companies like Diageo, Pernod Ricard and others to come in to establish their facilities. It was a fantastic initiative. But the issue now is to carry out the proper segmentation of the brands that are made locally and the ones that are imported. We do not do Champagne, Cognac and Vodka in Nigeria. What do we do? Schnapps, Gin, Tonic wine, Bitters and others. But suddenly, the government is attempting to throw all of that into one basket; that’s where the problem is and that’s why local industries will actually die. How much is a bottle of Dark Sailor Rum? Probably 400/500 naira and government is slamming N200 tax on it. The gross margin, today, in most industries is not up to 15/20% because alcohol already has taken 50% of the input and it is largely imported. The price of alcohol in 2015 used to be N150 per litre but it moved to N250. Today, it is N500 per litre and that is 50% of the bottle when an extra N200 excise duty is slammed on it; how is the local industry being protected?
This is the kind of enlightenment we want to put out there because I know that, indeed, the intention of the government should be very honorable. But the kind of information at the disposal of the government is what we need to work on or else the government will actually kill the local industry, and as well endanger the lives of consumers who will resort to illicit drinks. A lesson should be learnt from what happened in Port Harcourt. There is no way you can force consumers to pay additional N200 per bottle. Additional N200 on a bottle of Champagne, Hennessey and Moet that go for about N16, 000 means absolutely nothing. But additional N200 on Regal or Lord’s Gin will cause great damage. The government needs to get this clarification before it lands the sledge hammer to kill everybody.
Our own perception is that is there any sensible person that is not paying VAT today because it is 5%? It can’t be avoided. If government charges the right levy, then, even as an industry, we will partner with government to point out those who are not paying. In any case, if government says N200, how many companies would pay? They will only be enriching some government officials, who will collect whatever and look the other way. The government should charge reasonable levy and, then, put in place machinery to collect, just like in the case of VAT. If that is done, more revenue would get into government’s coffers.
Secondly, the industry will be better for it and ultimately the consumers and the society will get value. So, it will be a win-win situation instead of trying to enrich a few officials.
As a member of the BOT of National Institute of Marketing Nigeria, will you say the training available to practitioners, today, is adequate to serve the ever growing needs?
It’s a cultural thing. In Nigeria; there is need for a fundamental shift in the perception of captains of industry, whether ADVAN or NIMN. They are all in the industry. The perception, today, in some industries is that if you train people you do them a favour. This has to change because training puts the employer in advantage position. When you have a well trained employee, the productivity level will be higher, you work smarter, innovation will be on the roof and waste is reduced. The current level is not encouraging, and it is not limited to a few associations or organizations. I think it’s a fundamental thing in the society. We are in the middle of recruitment interviews right now. You will be amazed to see responses from MSC /MBA holders. It is as bad as not being able to construct good sentences and creative thought patterns. There are very few good hands and those good hands are product of training. So, organisations lose them easily. Again some captains of industry believe that “if you train them now, they will go”. But what if you don’t train them; they will stay and they will mess you up or your company will go down! So, why can’t I keep on training them? It’s a perception thing. Yes, today, the level of training is not what we want it to be, but I know that the current presidents of NIMN, Tony Agenmomen and Folake Ani-Mumuney of ADVAN have been talking about how to provide quality training at a very competitive price to the industry. Today, how many companies can afford the LBS kind of training? However, at the level of NIMN and ADVAN, if we collaborate, there are marketing directors, active and retired, who are ready to put in qualitative-all-round training for the benefit of the industry and up-coming managers. We only hope the partnership takes effect.
What are your three priorities that will enhance marketing in 2018?
We need to look at security in Nigeria. There are some muted agitations that if not well managed could actually snowball into regional conflicts and that could affect the fabric of Nigeria’s economy. Marketing itself is a way of life; there is no way marketing can shy away from such issue as security.
Training is another critical point. For lots of global players, Nigeria is the destination now. In those days, we said “No, don’t take these things to South Africa”. They are not even waiting, they are right here. A lot of these companies where I had produced my commercials outside the country are all here now. If we as domestic players do not up our game, increase our competency and our skill level, then, we won’t be impacted. So, training will be a major impact in marketing communications in Nigeria. The other is religion. These three, for me, will impact the marketing industry in 2018.
What is your take on advertising in the Nigerian market as some brands are looking outwards instead of inwards?
There are so many misconceptions being dished out on this subject. The problem is that people take advertising literally forgetting that it has to be deep rooted. In my days, I could engage and even the advertising persons were engaging me, because they had deep brand knowledge. These days, both the brand, in terms of the quality of the brief that goes to the agencies, and the agencies, in terms of the interpretation and richness of the proposal, need to measure up. Fortunately or unfortunately, the foreign agencies have recognized that, today, without getting into Nigeria, they are bringing lots of values across here, all courtesy of digitalization and internet of things.
So, the advertising perspective, today, needs deeper reflection. Those days, anybody in the adverting side could become a brand manager on the client side and he’s going to perform well but it’s difficult nowadays. Today, advertising is gradually becoming media. I hope am wrong. If you look at the quality of materials on the TV, Radio and in newspapers, you wonder, ‘did this come out of an advertising agency?’ In those days you cannot look down on any advertising agency staff as a brand person because he’s very competent, he knows the brands, you are in the trenches together, he can stand up to you and say this won’t work these are my facts. Today, are people taking brief? They take instruction; that is my issue with the industry. I am not exonerating the brands managers because they are also not giving the kind of brief that shows vision, shows deep understanding, do environmental analysis, give different propositions, says look these are the problem definition, these are boundaries of issues and then the agency is able to see clearly what the issues are. What do you find today? You find propositions or proposal that put you on the 5th floor but does not tell you how you got there! No diagnosis, people jump into solutions. Tough questions nobody ask anymore; you can only ask question from the strength of knowledge.