How Asians Cracked the Nigerian Market— The Tolaram (Indomie makers) and Opera story — Part 1
In 1988, Nigeria’s Gross Domestic Product (GDP) was $23 billion and life expectancy for the country’s 91 million people was 46 years. GDP per capita was $256 and about 78% of the population lived under $2 per day. By this time, the country has already experienced six coups in its 28 years of existence and a Military General was currently the Head of State. This was a very poor nation and worse still, a very volatile one. Anything could happen.
Two brothers and executives from Singapore, Haresh and Sajesh Aswani who had been selling textile paid little attention to these statistics. From an initial importation of two containers of Indomie noodles, The Tolaram group has managed to build Indomie Instant Noodles to the eighth most-purchased brand in the world. With more than 4.5 billion packets sold per year and a staggering yearly revenue of $700 million.
How were these East-Asians able to build such a successful business in one of the most difficult places to do business on earth? How were they able to grow an 18 cents-per-packet product to a billion-dollar business?
Here’s another story.
Opay became popular in June 2019 when it introduced its Oride bike-hailing service with a promo of N100. It had actually begun in July 2018 when it started using a network of agents to reach Nigeria’s 36 million unbanked population. By August 2019, it had over 40,000 active agents across the country and $5million in daily transaction volumes.
However, the Opay story does not begin there.
Opay had been operating since 2010 as Paycom Nigeria Limited incubated by Telnet Nigeria Limited as a mobile payment platform. After seven years in operation, Opera decided to purchase the company in 2018. It doesn’t even begin there.
Now let’s look at the parent company.
In 2006 a Norwegian company, Opera Group ventured into Africa with its mobile browser Opera mini. A time when only 5.5% of the 142 million population even had access to the internet. As of August 2019, opera had the second-largest market share of mobile browsers in Nigeria and the second-largest in Africa after Google’s Chrome. Of over 460m internet users in Africa, Opera has about 120m using its mobile browser.
Opera’s second quarter (Q2, 2019) report recorded a $4million income gain (including non-cash gain in from Opay’s increased valuation) and today, Oride does as much as 100,000 rides daily — more than Gokada and Max.ng. In fact, the competition was so fierce Gokada had to suspend operations for a couple of weeks to restrategize.
How were these foreigners able to scoop up so much market shares from these industries? What do these foreigners understand about Nigerians that we don’t?
I will break down what I believe these foreigners discovered about doing business in Nigeria. Don’t forget, Tolaram almost shut down operations in 1998 and began making a profit after 20 years. So, they too made mistakes, but they learnt something new, something we probably can all learn: how to sell to Nigerians.
- Patience and long-term view
Today Tolaram controls more than 74 percent of the instant noodles market in Nigeria and that’s a drop from 2006 when it was a complete monopoly. It now has 17 manufacturing plants in Nigeria and manages a fleet of over 2,000 trucks for its logistics.
However, it took Tolaram 20 years to gross $100m and a few more years to realise a profit-making formula. They were patient about growth, however, they were inpatient about profit. They realized that they were targeting the needs of Nigerians who were generally poor and decided to make long-term investments by cutting cost, so they moved the noodle manufacturing to Nigeria. Today, with an investment of $330 million, they are building the busiest port in Lagos.
Opera the company behind Operamini and Opay had actually been in the Nigerian market for about 13 years. During this period, they patiently studied the market, demography, customer behaviour; mapped out what worked and what did not with hard data. Jeff Bezos says it takes at least 10 years to create an overnight success. Today Opay is rapidly expanding and if you don’t know the back story, you keep wondering how they figured this out in so little time.
Since these two businesses figured out the right formulae, they have both been executing like a well-oiled machine. Tolaram has had a compound growth rate of 36% since 2001. Once profit formulae is discovered, the growth of the enterprise tends to be explosive. But this takes time and continuous process innovation.
I will share more in Part 2 of this series.
My name is Klein Udumaga.
