In April 2017, Nigeria woke up to the news that Dangote Flour was selling off its noodle business. This was no champagne-popping affair; rather a sombre fire-sale of a fumbling business – to Dufil, of all companies, its arch competitor and producer of the nation’s number 1 noodle brand, Indomie.
Dangote’s business credentials
For a business executive with an uncanny Midas touch in any venture he enters, this was an uncharacteristic “L” (loss) for Mr Dangote.
You see, Dangote has had the following antecedents work in his favour:
- Africa’s richest human: Boasting of a track record of raising and deploying vast amounts of capital to finance ambitious ventures across Africa.
- Power broker extraordinaire: Arguably the most powerful non-politician in Nigeria; as well as the most capable individual investor on the continent.
- Market dominator: With the exception of wheat-related businesses (flour, pasta and noodles), Dangote companies dominate every commodity-based market in Nigeria; namely cement, sugar and salt.
It is hard to fathom the thought of Dangote being outcompeted in business. Some fundamental forces have conspired to frustrate his ambitions and ultimately forced his hand to sell – against his ideal wishes.
Understanding Dangote Noodles’ inability to compete with Indomie
Meh quality product:
Definition of “meh” = unremarkable. Consumer reaction to the quality of Dangote Noodles ranged from lacklustre to poor. Dangote Noodles did not appear to whet the Nigerian consumer’s appetite in any memorable way. Indomie, on the other hand, tantalized its consumers with an array of products very amenable to the Nigerian palette; in flavours and pack sizes suitable for every consumer sub-segment.
As much as noodles have become a staple in Nigeria, they still require heavy marketing. Why? Well, because the market leader, Indomie, markets like crazy. Deploying above-the-line, below-the-line and between-the-lines campaigns, Indomie’s marketing efforts were (and still are) more akin to what one might expect from a challenger brand looking to disrupt the industry rather than a well-heeled market leader.
This “stay hungry” marketing approach was not mirrored, matched or bested by Dangote Noodles. The net result was that it had relatively little capture of consumer mindshare. A common marketing adage says that “people only buy what they know”. Majority of consumers knew Indomie; most didn’t know Dangote Noodles. They bought the noodles they knew of and “passed over” those they didn’t know of.
Limited last mile distribution:
Dangote Noodles was well distributed – but mainly up to the superficial level of key distributors. Its direct distribution efforts were limited at the lower rungs of the chain especially the last mile i.e. the point where final consumers make their purchases.
Indomie, on the other hand, had no such problems. Its producer, Dufil, has a sister company engaged in FMCG distribution named Multipro. This company, it can be argued, pioneered last-mile distribution in Nigeria. As a result of this ability, Indomie was force-fed into practically every kiosk, stall and retail outlet across the country. Another adage says that “consumers buy what they see”. Indomie was everywhere for consumers to see and buy. Dangote Noodles? Well, not as much.
Well capitalized competition:
One of Dangote’s strengths is the ability to raise and deploy capital at a scale unmatched by most competitors. Dufil and its parent, Tolaram Group, are cut from the same capital cloth. They also have access to capital and could match Dangote dollar for dollar, naira for naira, in the noodle business. It can be argued that Dufil even outspent Dangote in capturing the leadership of the market.
While today, the Dangote name is synonymous with manufacturing, its origins actually lie in commodity trade. The “trader” strain of the Dangote business DNA has apparently not evolved completely. This was evident especially in the noodles business, wherein the mindset was more or less transactional i.e. produce the noodles; sell the noodles; job done.
Dufil, on the other hand, exhibited a “farmer-type” disposition towards nurturing its noodle business. Not only did it expend the effort to develop great products, but it also engaged its consumers deeply through robust marketing, invested heavily in end-to-end distribution (from plant to consumer) and positioned itself to be an integral part of the Nigerian convenience food ecosystem for a long time to come. Its willingness to do the hard work set it apart from its competitors. The net result is its stranglehold of the market so much so that Indomie is today the metonym for “noodles” in Nigeria.
It would take more than one sell-off to dent the unassailable business reputation of the legend known as Aliko Dangote and his eponymous business empire
One thing that has become clear, however, is that Dangote is not unbeatable in business.
Dangote Group’s Achilles heel appears to lie in markets such as pure-play FMCG that require competitors to be capable of intuitive product development, strong consumer engagement, granular distribution networks and substantial capital deployment, as displayed by Dufil-Multipro-Tolaram.
It is expected that Dangote’s next foray into the pure-play FMCG would address these shortcomings to forestall a repeat of an Indomie-style whitewash.