How Indomie Noodles Transformed Nigeria’s Economy

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SINGAPORE, Singapore — One would be hard-pressed to believe that, in 1988, investing in Nigeria’s economy was a lucrative idea. With a population of 91 million, life expectancy was just 46 years and annual per capita income was, in today’s values, approximately $535. Furthermore, only 22% of the population survived on more than $2 per day, around 50% of the population did not have access to potable water and 63% of the population did not have “access to proper sanitation.” However, where others may have seen a lost cause, Haresh and Sajen Aswani of the Tolaram Group saw tremendous opportunity. Their revolutionary idea to transform Nigeria entailed introducing Indomie noodles in the country.

Introducing Indomie Noodles in Nigeria

The fact that Nigeria did not have a pre-existing noodle market did not dissuade the Aswani brothers despite people thinking they were initially just “selling them worms.” Rather, the low cost and convenience of their product convinced the brothers that they could create a noodle market in light of the country’s growing and urbanizing population.

In 1995, the Singapore-based company decided to open a noodle manufacturing plant in Nigeria to lower production costs. At the time, Nigeria lacked the basic infrastructure for the operation of such a plant. So, the Tolaram group “pulled” the infrastructure it needed by investing in “electricity, waste management and water treatment” facilities. However, having the means to make Indomie noodles affordable was redundant if the company did not have the means to make the noodles available to the public.

Once again, Nigeria’s pre-existing infrastructure fell short of being able to facilitate this so Tolaram formulated a solution. From scratch, the company built a new supply chain to ensure that Indomie noodle packs could find their way into local retail stores and, ultimately, into the hands of consumers. This meant the construction of warehouses, storefronts and the acquisition of hundreds of trucks to move the product.

In addition to this, Tolaram provided, and continues to provide, supplemental training in disciplines relevant to the business, such as electrical engineering and finance, to new employees recruited from Nigeria’s top schools. As an article on Africa’s New Generation of Innovators in the Harvard Business Review notes, “where some multinationals might push expatriates into an emerging-market assignment, Tolaram pulls its leaders for Africa from Africa.”

The Impact of Indomie Noodles on Nigeria’s Economy

Since it arrived in 1988, Tolaram has invested more than $350 million in the expansion of its business and, by extension, the Nigerian economy’s development. Today, it “operates 13 manufacturing plants in Nigeria” and controls 92% of the factors of production that go into making Indomie noodles in Nigeria.

Tolaram’s risky decision to enter a country at a time when 78% of the population lived in poverty under military rule is paying off bountifully. With each packet of noodles selling for “less than 20 U.S. cents,” selling 4.5 billion packets of Indomie noodles in Nigeria annually, the company brings in $1 billion in revenue and contributes approximately $100 million in tax receipts to the Nigerian government. Further, Tolaram’s education schemes and deliberate effort to hire locals has made inroads with unemployment.

Given Tolaram’s immense success with Indomie noodles in Nigeria, other firms have emulated the company’s strategy in other African countries. For instance, a company in Ghana called MoringaConnect provides farmers with the necessary raw materials and financing to plant and harvest Moringa trees whose leaves have nutritional and medicinal properties. To date, the company has planted two million Moringa trees and has supported more than 5,000 farmers in kick-starting their Moringa farms, reducing poverty in Ghana.

The Concept of Disruptive Innovation

When Efosa Ojomo, a researcher at the Clayton Christensen Institute for Disruptive Innovation, heard of an impoverished community in Nigeria struggling with a water shortage, he believed the answer to the problem was obvious: building a well. However, after several months, the well he had built for the community began to break. Ojomo then realized that the obvious solution was not the optimal solution and that, instead, a more counter-intuitive approach was needed. He describes this approach as “market-creating innovation,” otherwise known as “disruptive innovation.”

This is the very approach Tolaram used to conquer the instant noodle market in Nigeria. The term “disruptive innovation” was “coined in the early 1990s by Harvard Business School Professor Clayton Christensen.” His institute defines disruptive innovation as “innovations that make products and services more accessible and affordable, thereby making them available to a larger population.’’

Disruptive Innovation as the Key to Transforming Africa

In an article published by the World Economic Forum, Ojomo posits the idea that disruptive innovation is the key to a bright future for Africa, as evidenced by the work of Tolaram and MoringaConnect. While he acknowledges that existing infrastructural deficiencies and low incomes may serve as deterrents for investors and entrepreneurs, he believes that such obstacles need to be reframed as “opportunities” as it is under such ostensibly uninviting conditions that disruptive innovation can thrive.

The fact is that Africa is experiencing significant demographic transformations. The United Nations estimates that by 2050, Africa will be home to 1.8 billion people, and by 2100, 2.3 billion people. Without new and innovative economic intervention, Ojomo believes that such changes can only spell disaster for the continent. However, if disruptive innovation becomes the new norm for Africa, the concept may usher in the prosperity it brought the United States, European nations and the Four Asian Tigers, averting a continental economic quagmire in the foreseeable future.

Vyas Nageswaran
Photo: Flickr

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