The agribusiness group said it will leverage its grains platform to expand into animal feed and related businesses in Nigeria.
“The global animal feed industry is a large and growing part of the agri-commodity complex with attractive returns and a strong growth outlook, particularly in emerging markets,” said Olam.
Carey Wong, research manager at OCBC Investment Research, told FeedNavigator, Olam's entry into the feed market is a natural extension of its grains business. "It is moving downstream and, in a way, creating 'demand' for its upstream products," he said.
Following a detailed review of the global feed market, the company said it has chosen Nigeria as its preferred entry market as it ranks favorably on the country selection criteria, which include meat consumption per capita, degree of fragmentation, extent of vertical integration and of commercial feed penetration, scalability potential and supply and demand factors impacting the feed raw material trade.
“In Nigeria, increasing urbanization and a change in consumer preference towards more protein-rich diets is driving a strong demand for poultry and aquaculture products and the commercial feed market is expected to grow at over 10% CAGR over the next 5 years,” said Olam.
The move into feed production in that African country, said the company, will involve investment in poultry and fish feed mills as well as hatcheries to produce day-old-chicks.
And it said such investments are consistent with its strategy to develop prioritised platforms - the grains business being one such platform and its cocoa business another – in October the agribusiness group finalized its US$1.2bn purchase of ADM’s worldwide cocoa business.
Olam’s existing business includes processing of agricultural products and food ingredients, with operations across 16 platforms in 65 countries.
It started as a grains originator, marketer and processor in 2008. While its main focus is on wheat, Olam said it intends to build up its involvement with other grain products such as maize, barley, sorghum, rye, flaxseed, chickpeas and soybean meal.
“A relatively late entrant into the grains business, our growth strategy has been to develop supply chain competencies in relatively new origins and niche destination markets. Midstream, we are currently assembling a configuration of port-based milling assets that will enable us to explore wheat milling in Sub-Saharan Africa,” said the company.
Olam has wheat milling business in Nigeria, and said that, in addition to bran from its flour mills, it will leverage its local procurement network to source a majority of other inputs required for producing poultry and fish feed in that country: “This will reduce import dependence, benefit local farming communities and generate youth employment, which are key priorities for the Nigerian economy today.”
Olam said such investments will also contribute to the development of the Nigerian poultry and aquaculture sectors by providing competitively priced inputs and technical support to local poultry and fish farmers, thereby improving productivity and returns for the sector.