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African flour mills fight for market share

By Julien Wagner
Posted on Tuesday, 19 March 2019 11:00

Africa's appetite for flour makes milling a booming but competitive sector. REUTERS/Akintunde Akinleye

The flour milling business in Africa is booming, leading to consolidation among the bigger players and the launch of new smaller and independent outfits.

Why the agribusiness boom?

  • Demographic growth is bringing new mouths to feed and local agricultural production is insufficient.
  • The purchasing power of sub-Saharan African families is modest, but wheat is one of the cheapest food sources on the market.

Agriculture-focused investor Unigrains estimates that milling capacity in sub-Saharan Africa grew by 12%, or 3.6m tonnes, between 2014 and 2017 to reach 34m tonnes.

Who’s profiting?

The big multinationals are buying up competitors and expanding their operations.

  • Singapore’s Olam is “the most aggressive in launching price wars and launching production in countries where there is weak competition”, says Yann Lebeau of the Casablanca office of France Export Céréales.
  • US-based Seaboard bought 50% stakes in the Grands Moulins de Mauritanie and the Ivorian and Senegalese operations of Mimran in 2018.
  • French-owned Somdiaa operates through its subsidiaries in francophone Central and West Africa. It is building a fourth flour mill in the port of Pointe-Noire in the Republic of Congo.

Large African players are also expanding on the continent.

  • Sudan’s Elnefeidi Group launched production in Cameroon in 2015.
  • Tanzania’s Bakhresa Group is focused mostly in East and Southern Africa: Uganda, Kenya, Burundi, Rwanda, Malawi and Mozambique. West Africa could be its next target.

In Nigeria, Flour Mills of Nigeria, Honeywell and Dangote Flour Mills concentrate on feeding the country’s 200 million population, with competition from Olam, which has become the country’s second-largest flour miller. Nigeria still imports 89% of its flour.

Small upstarts are hungry for market share in countries like Angola, Guinea and Mali.

Traders say that this trend is likely to continue because of the particularities of each market. From Nouakchott to Luanda, there are dozens of ways to use flour. Smaller firms try to be more agile and to understand local habits better.

Warnings and strategies

The flurry of activity hides an important trend. France Export Céréales’ Lebeau says that some investors who lack experience in flour milling are getting burned because they underestimate the complexity of the section.

  • Céline Ansart-Le Run of Unigrains says profitability is not a given: “There is an overcapacity problem that has existed for several years.” In Cameroon, for example, the price of a bag of flour has dropped by 20% over the past decade.
  • The bigger global players like Seabord have buffers because of their trading and transport activities, unlike their smaller competitors.

After integration, diversification

Vertical integration is the most common strategy for firms to grow.

  • Webcor, a Switzerland-based and Lebanese-owned firm active in Angola, and Les Grands Moulins de Conakry, owned by Lebanese investor Ibrahim Taher, are importing wheat, milling it and producing food.
  • Many millers have set up or are setting up pasta-making operations, largely thanks to an innovation that allows the use of cheaper, soft wheat rather than more expensive hard wheat.
  • Seabord is studying whether to add soft-wheat pasta production lines to the Mimran plant it bought in Côte d’Ivoire.

Animal feed is another promising sector. Somdiaa is producing feed for birds and started a programme producing chicks in Congo.

This article first appeared in Jeune Afrique.

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