Entrepreneurship Zone: 20 September 2023 :: How this Nigerian trader built an agricultural exports business

Wed Sep 20 10:10:06 CAT 2023

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Entrepreneurship Zone:  20 September 2023 ::  How this Nigerian trader built an agricultural exports business

 <http://www.dulys.co.zw/> Lanre Awojoodu, CEO of Sourcing and Produce – which exports crops like hibiscus flowers, sesame seeds, and ginger – has endured numerous challenges to position his company where it is today. This is his story.

Lanre Awojoodu candidly describes life as an entrepreneur as deeply challenging. “Many days are filled with tears,” he says. Over the past two decades, he has seen both successes and setbacks.

During his tertiary studies, he found early success running a chicken and chips shop at Obafemi Awolowo University in Ife, Nigeria. However, this initial triumph was soon overshadowed by significant financial losses from investments that overpromised and underdelivered.

In 2010, a conversation with a cocoa farmer reignited Awojoodu’s entrepreneurial spirit. He successfully pitched to friends and family for investment, leading to the establishment of a cocoa farm in Osun State. However, he faced challenges early on when dishonest suppliers delivered only 3,000 of the promised 5,000 trees.

Awojoodu’s foray into agricultural commodity trading was driven by his impatience with the timelines of cocoa farming. As he awaited the first harvest, he delved into researching the post-harvest process, specifically the export of cocoa pods. It was during this research that he wondered: why couldn’t he take on the role of an exporter while still maintaining his farming operations?

A turbulent start to trading

His first trading deal wasn’t without its challenges. Acting as an intermediary between a cocoa supplier and a seasoned exporter, he paid the supplier upfront but faced difficulties obtaining the agreed quantity of cocoa. When he finally secured the cocoa four weeks later, the exporter’s enthusiasm had diminished because of shifting prices.

Awojoodu remained undeterred. He founded his own trading firm, Crystal Green. Confident in his deal-making abilities, he got on a plane to attend a cocoa trade fair in the UK in 2012. He vowed not to return home without a cocoa contract. He came back with two. Awojoodu had a Dutch consultant review the contracts. Choosing not to proceed with the first due to unfavourable terms, he pursued the other. This contract, with a German cocoa importer, required trade finance of 8 million naira (equivalent to US$10,000) to secure the supply.

It took eight months to secure the necessary capital to buy the cocoa. Despite having a legitimate trading contract, no financial institution was willing to back the deal. He found himself once more leaning on his connections. An early investor in his farm linked him to a financier, and in October 2012, the transaction was completed. Due to major price shifts during the wait for financing, the company earned a slim 1% profit on the contract.

“I was so happy, I did not even look at the [little] profit I had made,” Awojoodu says.

Matching markets with commodities

At the end of the cocoa season, Awojoodu immediately looked for the next commodity to trade. He decided on cashew nuts, which were in high demand from local companies. In March 2013, he made his first domestic trade, followed quickly by a couple more. “Within a month, I had made 10% [profit],” he recalls, yet he remained focused on his goal of conquering the export market.

Awojoodu began emailing cashew importers in Europe, but none responded. He then decided to copy in the Dutch consultant who had helped him with his cocoa contracts, hoping his involvement would provide added credibility. With this endorsement, Crystal Green secured a contract for 100 tonnes of cashew nuts.

After landing the cashew nut contract, Awojoodu made strategic visits to warehouses storing agricultural commodities before they were shipped, engaging with staff to ask about the various products and their destinations. His inquiries led him to the ginger market. With the help of a local contact, Crystal Green soon secured a ginger contract with a Netherlands-based buyer in June 2013.

Trading ginger brought about enhanced profit margins and a more straightforward sourcing process. Yet, despite these successes, securing trade finance for larger contracts remained an obstacle, with Nigerian banks consistently demanding collateral.

Lessons learned: The importance of proper processes

Awojoodu’s journey taught him a lesson in the importance of sound financial and management processes.

“The moment you start raising money, to the tune of 10 million naira, you need a full-time accountant,” he says. His delay in hiring one and not pushing for better trading terms were mistakes he wishes he hadn’t made.

In 2014, Awojoodu met representatives from a Swiss company willing to provide the trade finance he was seeking. The CEO advised Awojoodu to implement improved processes and financial controls, but with business proceeding well, he didn’t see it as a priority. From 2014 to 2015, the company exported commodities with the Swiss firm’s support. But in 2016, a $90,000 shipment to a Brazilian client faced a payment delay, causing tension with the Swiss partners. After another non-payment incident in 2017, the partnership came to an end.

Course correction

By 2018, after seven years as a trader, Awojoodu felt compelled to reset. Seeking guidance from mentor and businessman Folabi Esan, he reflected on his past missteps.

While he maintained a few trades to keep his network active, the real transition came in 2020. Awojoodu relaunched the business under the name Sourcing and Produce, with Esan stepping in as chairman of the board. The new team consisted of five members, including an accountant to ensure robust financial oversight. Esan, leveraging his experience as a partner for Adlevo Capital and his roles on various boards like fintech firm Paga, proved invaluable. From the onset, the company put in place structured processes and standard operating procedures. It also integrated a customer relationship management system, SalesForce, and adopted QuickBooks for accounting.

Determined to get things right this time around, Awojoodu encountered an unexpected challenge: a global pandemic that severely impacted international trade.

In the economic fallout of Covid-19, some farmers, facing reduced local demand and eager to tap into global markets, were willing to offer their harvests upfront and receive payment later. Sourcing and Produce renegotiated terms with buyers, insisting on partial payment against shipping documents before dispatching the goods.

>From a single contract under these adjusted terms, the company yielded a profit of 11 million naira ($13,900). Awojoodu reflects, “From having nothing, I bounced back in one deal. [And I realised] I can replicate this again.”

During the pandemic, demand for immune-boosting natural products like ginger and turmeric surged, resulting in an increase in trades for the company. By the end of 2020, annual revenue had surpassed $1 million.

However, with the resurgence of local demand for these commodities, farmers became more hesitant to supply without receiving payment upfront. To address this, Sourcing and Produce started seeking investors and found a willing partner in MBO Capital Management, which provided $500,000 as working capital to date.

Introducing branded products

In 2021, riding the momentum of its growth the previous year, Sourcing and Produce launched its own brand, So Pure. It opened a shop on Amazon, targeting the Nigerian diaspora in the US with products like the ancient grain fonio, fufu flour (produced from starchy vegetables such as cassava and yam), ofada rice (the unpolished, parboiled rice indigenous to Nigeria), pepper soup spice, blended crayfish, and suya mix (a rich combination of West African spices). The company sources these processed products and packages them in Nigeria, then ships them to the US, where it has also inaugurated an office in Wyoming.

Growth into the rest of Africa and beyond

Sourcing and Produce Farmers’ Cooperative was established in 2021 to enlist farmers capable of supplying the company’s required export commodities. That year, Awojoodu also founded Sourcing and Produce Tanzania.

As of 2023, the company has extended its activities to Malawi and has plans underway for Liberia. Sahel Capital recently extended a $1 million trade finance facility to boost Sourcing and Produce’s hibiscus flower supply chain and support the aggregation of the flowers from smallholder farmers.

Awojoodu has big plans. In 2024, the company intends to expand to Zambia, and it has its sights set on launching the So Pure brand in European markets, given the substantial global market potential of the Nigerian diaspora.-howwemadeitinafrica

Lanre Awojoodu

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