If we are to compete in the same commodity market where the real volume trade of garri is taking place, can a Commercial Garri Processor really beat the price competitive edge that Rural Cottage Processors have?
We all know that the prevailing low purchasing power in the country, which is common to majority of prospective buyers of garri makes them more inclined towards patronizing quantity over quality. While I admit the fact that majority of buyers know and appreciate quality garri, majority of them often compromise this desire as they prefer to utilize the little cash they have to purchase more quantity products that will last for a longer period, given the condition that the latter is equally edible and safe. And the Trade ( I’m referring to the wholesales market) who are the real volume drivers will definitely continue to go after low cost product that they will easily sell.
In my attempts to sideline the wholesale and make my products available close to consumers, perhaps product trials and experience would convince them of my quality offers compare with others garri in the markets, I experimented with few drop points as my direct sales stores in 2020. The sales volume was only impressive as a starter. That was even only for stores located in urban areas in Lagos State. The requirements to grow additional drop points was so exhaustive for me as a starter, bearing the fact that many of them wanted credit sales which I could not contain alongside my growing operational cost at the factory. I also made several efforts to sell to bulk buyers within neighborhoods, their persistent resistance due to the price I was offering eventually frustrated the moves. I was consequently left with no choice than to deal with trade as best as I could.
I was processing garri from Oluke, in Ijoko, Ogun state. Why do you think a bulk buyer selling inside Sango Garrage market (in a neighbouring Local Government) prefer to jump me (despite all my sales appeal) and travel all the way to Iseyin in Oyo state to procure same garri, when my own quality was even better? Why should I struggle to sell despite the fact that I operate close to the vicinity where the market is? The reasons were not far-fetched. It was just because of the price differences. Or is it not strange that what those traders travelled to a long distance to bring down landed at even s cheaper price than mine that’s produced at their door step. And it will take someone who has looked closely to also understand that it’s not only about the price but also their mode of buying from those locals, which gives them additional volume advantage.
And because I also wanted to be at an advantage with the raw materials (like the rural cottage processor) I moved my facility to a farm settlement area where Cassava tuber is being cultivated on a large scale. Even now that I’m buying Cassava tubers at almost same price as my cottage competitors, THEIR SALES PRICE IS STILL LOWER THAN MY PROCESSING COST. This is simply because of the fact that they are not incurring production cost as I do in my own operations. Its only through my ability to do few business and technical abracadabras that is sustaining me in the business up until this time.
Many people will argue that having a mechanized production all through would have given me the required production cost competitiveness. What I will say is that such school of thought should consider the inherent associated cost of running those machine viz the value of the output, even now that cost of diesel has jumped through the roof. I need not over- emphasize the technical limitations of many of those machines any longer.
The fact remains that bulk buyers prefer to do business with the local processors than Commercial garri Processors and this is simply because of price differences and ‘self measurements’ advantage they have with the locals.
Now, to the critical forward looking questions and scenarios;
Can the commercial processors match the prices offered by the local cottage processors? My answer is YES. Without compromising quality (as many of local processors do and their patronizers are aware), a commercial processors can produce at cheaper cost and offer a competitive price same with the locals. This will only be possible if such processor is on a mechanical production system that is FULLY BALANCED with energy consumption. If such facility has regular supply of electricity (at minimal cost), it is saved to a larger extent. If such facility would depend on running of generator, it must make efforts to have more than one mechanical fryers operating at the same time in order to spread the diesel cost. The regular generator that welders use (R 1115 engine with good/compatible alternator) can power 3 mechanical fryers each with capacity of 500kg per day very conveniently. Now that we also have mechanical fryer that works effectively and efficiently with petrol engine, it is a new breakthrough for moderate capital set up.
So, with this, whoever is coming into this business to contend with the local competitors should know what to prepare for.
And if you don’t have the investment capacity of this kind, how best can you contend with them to remain in business? You will need to wear your thinking cap and tweak your processes here and there. You may need to combine your garri Processing with other areas so as to spread your factory costs. You may need to look far beyond your locality for a more advantageous market for your product. You may have to go the way of branding and product differentiation if that will give you an edge (though the volume may not be impressive). You will have to just double your Strategic pace to remain relevant. But for how long you can sustain that struggle, I cannot tell.
And why it seems obvious that you can not/never beat them, why not join them in the scheming of things? If they are compounding their garri with adjunct or milled lumps, which food law says you cannot do that? And the buyers are not complaining. Who says you can not have two or three different offers for different markets.
I need to give a hint that the big players are coming. Coming with technologies and dynamic changes that will make them offer garri at lower prices that will be difficult for many Commercial processors to adjust to. The cottage processors may not feel their impacts much, as they will definitely adjust by subsidizing further with their sweat.
Now that we still have the chance, Commercial processors should do all the needfuls to stabilize their existence. The fact remains that WHOLESALE TRADE are strong pillars in this business and you must enter the business with their interest in mind, if you really have sustainability in mind.