Entrepreneurship Zone: 28 October 2021 :: Producing tomato paste in Nigeria: Tomato Jos’ seven-year journey

Thu Oct 28 03:35:03 CAT 2021

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Entrepreneurship Zone: 28 October 2021 :: Producing tomato paste in Nigeria: Tomato Jos’ seven-year journey

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Nigerian agro-processing company Tomato Jos, led by American-born entrepreneur Mira Mehta, last month officially launched its tomato paste factory in Kaduna State, almost seven years after it first started growing tomatoes in the country. The facility is said to be the third-largest of its kind in Nigeria and can produce one carton of tomato paste sachets every minute.

Construction of the factory began in January 2020 but was put on hold owing to Covid-19-related restrictions. Building was recommenced in August 2020 and the Italian processing equipment worth €3.5 million arrived in November. In March this year, Tomato Jos had its first production test run.

The company aims to soon introduce its branded tomato paste sachets in the Nigerian market.

Tomato Jos spent five years focusing exclusively on its farming operations before investing in the factory. “De-risking the upstream side of the [business] was unsexy and didn’t make headlines but it will make the factory successful,” says Mehta in a Twitter post.

According to the CEO, the trick to running a successful tomato-processing venture is to first ensure a consistent supply of tomatoes of sufficient quality and at the right cost. If a tomato paste factory doesn’t have an adequate tomato supply, it won’t be profitable. “If your capacity utilisation drops below 80%, your cost per tonne of production will balloon up, and you won’t be able to make money from your finished product,” Mehta explains.

“Instead of making paste one batch at a time, you need to constantly feed raw materials into your factory, every hour of every day, to spread the huge energy costs over as high a volume of finished product as possible.”

Inside the factory.

Figuring out how to produce tomato paste in Nigeria

The idea to process tomatoes into tomato paste first came to Mehta as she was travelling for her non-profit work in the north of the country in 2008 and saw first-hand the post-harvest loss of tomato crops. After attending Harvard Business School in 2012, where she fine-tuned her business plan, Mehta founded Tomato Jos in 2014.

Tomato Jos has been perfecting its tomato farming process ever since, increasing its yields and training local partner farmers. “I didn’t think it would take this long,” Mehta said in an earlier interview with How we made it in Africa. “I thought it would take us maybe two years to figure out the farming and then we’d be on our way to processing. In the end, it took us five years to figure out how to bring gold standard processing to Nigeria and to marry those practices with the realities on the ground.”

With every annual harvest, the Tomato Jos team learnt lessons that could be implemented only the following year. “You can’t just take a perfect system from California and plonk it down in Nigeria and expect it to work. You have to figure out which things move yield the most, and which things are possible in Nigeria given infrastructure constraints,” she adds.

The gradual progress the company was making convinced Mehta she was on the right path. “The fact that we were doing it differently to everyone around us gave me confidence. I realised if we can build our business this way, we were creating a pretty strong barrier for entry for competitors.”

Outstripping average yields

The company sources its tomatoes from its own land and a network of smallholder farmers.

Since its first year of operation, Tomato Jos has achieved improvements in tomato cultivation far above Nigerian baseline yields. According to documents shared by Mehta, the average yield for tomatoes in the country is just five metric tonnes per hectare. Tomato Jos’ average yield is 39 tonnes per hectare and its highest yield achieved was 71 tonnes. Through classroom and field-based training, Tomato Jos has focused on changing more than 100 specific farming behaviours for the farmers in its programme and increased their income by up to 15 times.

The underlying low productivity of Nigerian farming is a primary reason why so much food is still being imported, reveals Mehta. “For the processor, the farmer has to sell at the right price and imports are still cheaper due to the way products are grown in Nigeria.”

It took Tomato Jos some time to find the correct approach to increase productivity. The company had to work with the realities on the ground. To get 80% of its programme farmers compliant with a 50-tonne per hectare yield was far better than 10% of farmers with a yield of 100 tonnes per hectare.

Tomato Jos founder Mira Mehta.

Taking on the competition

Nigeria is the world’s 13th largest importer of tomato paste. This is despite significant post-harvest losses of approximately 45% of the tomatoes cultivated in the country because buyers cannot be found.

“There was this obvious market anomaly, where the link between supply and demand seemed to be broken. Driving across northern Nigeria during certain times of the year, you would see piles and piles of tomatoes that the farmers couldn’t sell. There was also the market opportunity in the way Nigerians consume tomato paste as part of their cuisine,” Mehta says.

She admits tomato paste is a competitive space with most of the major multinational companies vying in the market spending millions a year on advertising.

Tomato Jos will highlight that it uses local Nigerian tomatoes, grown by local Nigerian farmers. Secondly, it will be looking at distribution deals with larger food companies that would see tomato paste as part of their product offer. “In Nigeria, distribution is key. If you can get your product in the market via the correct distribution channels, it will sell,” Mehta explains.

In 2020, the company raised €3.9 million in funding, led by Goodwell Investments through Alitheia Capital – its West African partner – with participation from Acumen Capital Partners and VestedWorld.-Howwemadeitinafrica

The new Tomato Jos factory in Kaduna State.

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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