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PHARMACEUTICAL INDUSTRY IN NIGERIA IS FACING TOUGH TIME

By NBF News
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Nnamdi Okafor
This may not be the best of times for the pharmaceutical industry in the country as the sector is still grappling with tough challenges that simply refuse to go away after many concerted efforts. According to Mr Nnamdi Okafor, the CEO, May & Baker Plc, the problems, which range from intense competition, low capacity utilization, serious faking and adulteration of original brands and even low buying power of customers, have been giving the industry a reputation of low profitability and return on investment.

But how does he intend to go through with these problems as the new helmsman of a 67-year-old healthcare institution?

'I have my ideas on where I want to take the company which is also in tandem with the corporate vision. We want to take this good company that has been handed over to us and turn it into a great company.

A truly strong and stable world-class company powered by strong global brands, aggressive business diversification, optimum business process efficiency and good corporate governance principles.' Okafor said at an interactive session with media men, his first ever since assuming office, where he bared it all on his roadmap to take the company to its promised land. To him, the strength of any company is a reflection of the strength of its brands. 'So we intend to increase our support for our brands. We recognize that May & Baker is a strong brand and we shall continue to build on that strength', he added.

Okafor, a fellow of the Pharmaceutical Society of Nigeria(PSN) and the Nigerian Institute of Management (NIM) and an alumnus of the Lagos Business School, has been with May & Baker since 1985. He became the managing director of May & Baker Nigeria Plc on February 1, 2011 following the appointment of his predecessor, Dr Joseph Odumodu, as the Director-General of the Standards Organisation of Nigeria (SON).

He holds a Bachelor of Pharmacy degree from the then University of Ife, Ile-Ife (now Obafemi Awolowo University, Ife) as well as Master of Business Administration (MBA) in Marketing from ESUT Business School, Lagos. Commenting on the appointment of his former boss as SON Director General, he was full of praises for the man who put the company on a good pedestal for the 13 years.

His words: 'I want to put it on record that I inherited a good company. Our former managing director did a fantastic job in his 22 years of service to this company, 13 of which were spent at the helm of affairs. He navigated this company through its most turbulent years and put it on a sound pedestal with impressive revenue and profit growth, robust asset base and strong corporate reputation. So we are standing on a solid ground and are very proud of what he accomplished.'

This solid ground he promised to build on to make it a greater height by turning May & Baker to one of the fastest growing and profitable businesses in its category. 'This we intend to accomplish by developing a strategic mindset, putting our business on a rapid, stable and sustainable growth path, building systems and processes that function seamlessly and developing appetite for stretch financial goals. We are already working on a new strategic plan which will form the new road map for our journey towards our vision.'

In this piece, he shed more light on how he intends to achieve this lofty ideals.

Excerpts:
Background
I became the managing director of May & Baker Nigeria Plc on February 1, 2011. As you are aware, the transition became necessary when our immediate past managing director, Dr Joseph Odumodu, was appointed the Director-General of the Standards Organisation of Nigeria (SON) by the President. I am not new to the May & Baker family, having spent the 25 years of my working life in the company. If anything, I can say with every sense of modesty that I am indeed on a familiar terrain having also been on the board of this company as executive director for the past eight years.

My participation in the management of this company over these years has given me good knowledge of the business and will help me avoid past mistakes in trying to chart a new course for the company. However, it has its potential pitfall which is a tendency to perpetrate status quo. I can however assure you that the latter will not be the case here.

This is because the first thing I did on assumption of this new role is to reset my clock to my first day at work in May & Baker. This is to enable me see opportunities for change. It is clear to me that the only way to move this business to a new level is by implementing change through injection of new ideas and ways of doing things. So we will implement change. But we shall not implement change for the sake of change, we will only implement changes that will enhance our processes, business results and ultimately shareholder value.

Vision
I want to put it on record the fact that I inherited a good company. Our former managing director did a fantastic job in his 22 years of service to this company, 13 of which were spent at the helm of affairs. He navigated this company through its most turbulent years and put it on a sound pedestal with impressive revenue and profit growth, robust asset base and strong corporate reputation. So we are standing on a solid ground and are very proud of what he accomplished.

On this note, permit me to give you an outline of my vision for the company and the strategic direction of the new management. May and Baker has a corporate vision which is 'To Be Among the Top 10 Conglomerates in Nigeria by 2020'. That vision remains unchanged because we believe it is the best we can have at this time. It was the collective decision of the management team taken at a strategic retreat three years ago and we shall vigorously pursue this dream.

However, I have my ideas on where I want to take the company which is also in tandem with the corporate vision. We want to take this good company that has been handed over to us and turn it into a great company. A truly strong and stable world-class company powered by strong global brands, aggressive business diversification, optimum business process efficiency and good corporate governance principles.

To me the strength of a company is a reflection of the strength of its brands. So we intend to increase our support for our brands.

We recognize that May & Baker is a strong brand and we shall continue to build on that strength. However we also recognize that this equity is only strong with the older generation. Therefore we will deliberately target the younger generation with products and corporate social responsibility initiatives that will appeal to their lifestyle. Our strategic intent is to make May & Baker one of the fastest growing and profitable businesses in it's category.

This we intend to accomplish by; developing a strategic mindset, putting our business on a rapid, stable and sustainable growth path, building systems and processes that function seamlessly and developing appetite for stretch financial goals. We are already working on a new strategic plan which will form the new road map for our journey towards our vision. This plan will be unveiled in the next three months and guide all our subsequent investments and resource deployment.

CSR
In May & Baker we have supported the society through various sponsorships and donations to individuals, professional groups, governmental and non-governmental bodies. We intend to move a step further by being a credible source of information on public health and safety education, awareness and disease prevention. To achieve these objectives we are interested in partnering with societies and groups that invest in social wellbeing

New plant
As some of you are aware, May & Baker started a new pharmaceutical plant in Ota in 2008. It is a world class plant designed to blaze the trail in Nigeria as the country's first WHO pre-Qualified pharmaceutical facility. This feat is meant to be not only a corporate accomplishment but also a national achievement. With it, Nigeria will be recording another first in West and Central Africa because the plant would be the first of its kind in these sub-regions. When fully certified by the WHO, the pharma plant in Ota will open a gateway to international business as well as help conserve the country's foreign exchange in the area of drugs. This facility will be open to both local and international drug procuring entities who currently buy from Western and Asian manufacturers.

The facility, which has taken investment in excess of N3 billion, is now near completion and will have a capacity of about 30 billion tablets and 25 million bottles per annum working only two eight-hour shifts per day. This, in addition to our current capacities at the Ikeja factory, will represent a significant percentage of Nigeria's drug requirement. The successful take-off of this plant in a short time is a major objective of the new management. In the years ahead we shall remain focused while playing on high stakes. We have plans to take full advantage of new openings in the economy and shall vigorously pursue opportunities in the export business especially within the West African sub region under the common external tariff programme of ECOWAS.

WHO certification
We are not the only company in Nigeria that is going for the World Health Organization (WHO) certification . But I believe that we have the best chance of getting it because we have the best chance of getting it because we have the best facility. The process of getting WHO certification is a long process. It takes up to 18 months. It is a long process of documentation and it is also a political process. We are working very hard to get it in record time and I want to also say that NAFDAC is doing a very good job in this area by trying to assist companies which are ready to collaborate with WHO. We are going to Geneva next month(April) for a workshop meant to open up an avenue where drug manufacturers would interact with WHO officials who are in charge of this process.

That will facilitate the time frame for achieving it.

Challenges
You know, the new plant is a very massive project. And I would say that we underestimated what would be involved. And as the project gets towards completion stage, we have challenges. So we have challenges with some of our contractors who started appealing for reviews and reviews. And at some point, we could not continue to grant such requests. So we have to change the main contractor who was working on the project. And in doing so, we lost some months-about two or three months. But I want to reassure you that that factory will start test running by the end of this month (March). We should be ready to start running on some products by the end of this month. And before the end of half year, we should officially commission that facility.

The year 2011 promises to be a very uncertain year for business generally. The reasons among others include the April general elections, adverse weather conditions in Asia and impact on food prices, revolution in the Middle East and impact on crude oil supply and prices and the overall impact of all these on inflation and purchasing power of an average Nigerian. As you are all aware, the pharmaceutical industry has been challenged over the years by various issues ranging from intense competition, low capacity utilization, serious faking and adulteration of original brands and even low buying power of customers.

This has given the industry a reputation of low profitability and return on investment. However at May and Baker Nigeria PLC, rather than being deterred by these negative signals, we have decided to drive our business and have performed above industry average. Our key strategies for higher performance in 2011 include stronger support for our brands especially our foods brand Mimee Noodles, broadening of our products offering and expected increase in output following commissioning of our Ota plant.

We are embarking on various expansion projects to deliver an enviable company for all. What we promise the shareholders is that we shall continue to make their investments in our company worthwhile by ensuring that they enjoy the benefits accruable from a strong entity in terms of returns on investment, capital appreciation and security of investment. We intend to excite our shareholders with more robust dividends.

Products
Crunch Mee is still in the market but I must say it is not doing as much as we have wanted. The reason is that consumers seem not to like the way it is presented. People want it to be in form that would be easier for them to manage. At some point, we had to change its flavour and in that way improve its acceptability. We are in the process of reformulating it. But for it to get to the level that we want , the form will have to change and that will also involve some capital expenses. And because we are struggling to finish the one that we are doing, we are not in a hurry to put in money in buying machines for now. Mimee too is not out of the market.

We are very much in the market. Mimee is also not operating at 100 per cent capacity. We still have some spare capacity. What is happening is that that industry has full capacity. Some people came in, Dangote came in, Flourmills came in, Honeywell has been there. So we have a lot of capacity. In fact, Dangote built three factories and as I talk to you now, only one is functioning. The other two are down because the operators in the industry, unfortunately, are not expanding demand at the pace in which capacity was going up. There is some tough competition going on. That is why we have decided to, on our own, do something about demand. Very soon, we are going to be breaking our new campaign. And that campaign, I believe, is meant to sensitise the consumers and to get more people to try Mimee.

Adulteration
I am aware that some 10 years ago, this was a very bad situation because it was being done on two fronts: One, people were doing their own here and some were going outside Nigeria to also adulterate or fake these products. NAFDAC has done a lot to stem the tide. I would say that the incidence of adulteration has significantly come down. However, we still have issues of products being faked from time to time. I know we have encountered some of our products that were faked outside the country and brought in. And what we did was to quickly get in touch with NAFDAC.

And working with NAFDAC, we were able to round up some of the parties that were involved in it because it was a very big cartel. What we have to do was trying to apply the break to whatever they had done and possibly confiscate the items. But beyond that, the legal system is a bit difficult to go through and we were not being prepared to go the whole hog of trying to imprison the people behind these things. But we just want to keep them uncomfortable and ensure that we dissuade them from continuing.

On the issue of faking, if you have followed the trend of the fakers, you will find out that they are evolving. One of the initiatives that we have also subscribed to is the use of identification code for the products. A lot of the products that can easily be faked would have some codes that people can pick up, and send SMS to a particular number and then get confirmation whether such product is genuine or not. As I said, the fakers are evolving, this is technology. For now, I am not sure they have been able to beat that particular system. So we are adopting it. And we keep looking at better ways to handle such situation.

Liabilities
It is true that when you inherit assets, you also inherit liabilities. We know the environment that we are operating in and we know that everything is not rosy. And as business, we have liabilities. Of course, the first one is the fact that we need to build stronger brand as a company because that would help us to weather the storm, I mean when there is shock and withstand that shock in the system. If you have very strong brand, you will be able to withstand it.

Of course, the fact that we are building a factory and we are borrowing money, we will also be paying interest on these funds. And what that means is that it would put some pressure on cash to run the business. That is one area that I am looking at with the Finance Director. That is what I can say for now. We will continue to improve on the good job that the past MD did. And there is always room for improvement.

Future plan
We are set to intensify our drive for rapid business expansion and diversification. We have already concluded plans to deepen our activities in current markets and enter new markets with new exciting products through parent and subsidiary companies. We are also at the verge of expanding our activities into new geographic markets including aggressive Inroads into export markets. We have in place established processes, procedures, policies and control systems that have guided our operations. Notwithstanding that these systems are working satisfactorily, we intend to look at some of them again with a view to making them more efficient. So we intend to continually fine tune our systems, processes and procedures for higher efficiency and better results.

Our work force remains our most valuable assets. We are proud to have a rare assemblage of highly qualified and dedicated staff. This is made possible because May & Baker has a highly transparent recruitment process that ensures that only people who demonstrate the right competencies, mental and psychological disposition are employed. We shall provide the right environment and training for these talents to blossom into world class work force. We intend to adopt best practices in corporate governance. We shall run the business with the highest level of integrity and compliance with all relevant laws and regulations.

Advice
One thing that I want to say is that we are lucky as a country that we are exporting crude oil. So when the price of this crude oil goes up in the international market, and now that the Niger Delta situation is a bit under control, what this means is that we are going to export more crude; we are going to earn more revenue. The only thing that I would like to request is that the way this money is utilized will make a whole lot of difference.

As against what happens now, I mean the sharing of the money among the states and nobody can really accounts for what comes out of the extra windfall, the Federal Government should try to use this money to improve on infrastructure. Because a lot of people in the country are doing nothing because there is no power. For instance , imagine that we have 24 hours power supply, a lot of people will be working and also generate income for themselves. And that would reduce the difficulties that people are facing. It is important that government applies whatever resources(at its disposal) well.

And like what is happening in some countries, food is very critical. The Federal Government should continue with what they are doing, which is subsidizing inputs of agriculture, which is important. And if it is possible, like it is being done in other parts of the world, subsidise some critical commodities like flour. The cost of flour has gone up and Nigerians like bread a lot. This means that they have to pay more for it. I think that the government should step in for such important items to see how the cost can be put under control.