Entrepreneurship Zone: 23 July 2024: How this cookie company cracked the Nigerian market

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Entrepreneurship Zone: 23 July 2024:  How this cookie company cracked the Nigerian market

 


 

 




 


 

 


 

 

 

Debby Lawson, founder and COO of Fastizers, speaking during launch of the company’s Nibit brand.

Fastizers, a producer of cookies and snack foods, was established in 2010 in Nigeria. The company’s founder and COO, Debby Lawson, shares with Jaco Maritz the journey of penetrating the nation’s informal retail sector and operating in an intensely price-sensitive market.

Nigeria’s informal retail sector, estimated to account for 90% of consumer goods sales, is a vibrant ecosystem of table-top vendors, street stalls, and large open-air markets, interlaced with hawkers weaving through traffic. For fast-moving consumer goods (FMCG) manufacturers seeking to tap into the mass market, securing a place in these stores is crucial. But penetrating this bustling maze can be a complex task.

In 2010, Gbola Lawson, the then-fiancé and now husband of Fastizers’ founder Debby Lawson, sought to help her introduce the company’s cookies into Nigeria’s informal market. He devised a strategy to minimise the risk for these vendors to stock the company’s products.

One Saturday, Gbola took a number of packs of cookies, which at the time were primarily sold in offices and a few neighbourhood stores, and headed to the streets. He approached a merchant at a busy bus terminal in Lagos and gave him six packs to sell, not charging the retailer for the products. He assured the vendor that if the cookies didn’t sell by Monday, he would personally buy the stock. The merchant agreed to this no-risk proposition. Gbola then went to two other informal sellers and cut them the same deal.

By Monday, Debby, filled with anticipation, called the first vendor to check on sales. He reported that all the cookies had sold out on the same day and he wanted to order more, but he didn’t have her number. When she called the other two vendors, they too reported selling out of the cookies that afternoon. “I was excited; I was jumping,” Debby recalls.

Encouraged by this initial success, Fastizers started providing these sellers with more stock, and in a short while, the company was delivering three dozen packets to each vendor daily.


Founding the company with 960 naira


Debby Lawson’s original plan was to build a career at a bank or oil company. After finishing her university studies, she found herself working at a bakery in Lagos while applying for jobs. She enjoyed the role as she always had a passion for cooking. Her responsibilities included not just baking, but also being involved in several other areas of the business ranging from managing employees to handling marketing and accounting tasks.



Fastizers’ factories have a capacity for 30 tonnes of snacks per day.

On an occasion where the bakery team had to work through the night to fulfil a large cookie order, Debby was struck with an idea: she could bake these cookies herself and give them to her sister to sell at her office. She took 1,000 naira (US$1.30 at the current exchange rate) to the market for ingredients to make her first cookie batch. “I returned home with only 40 naira left, so I always say Fastizers started with 960 naira,” she reminisces.

Using the bakery’s ovens, Debby produced her inaugural set of cookies, packing them in plain paper. She gave 20 packs to her sister who sold them all by noon. The next day, she gave her sister 30 packs, and they also sold out quickly. Debby believed that a name and branding might boost her cookie sales even more. She named them Fun Cookies, a product that remains Fastizers’ flagship today. Sales also slowly expanded beyond her sister’s office to include a few local neighbourhood stores.

Balancing her bakery job with her budding cookie enterprise eventually proved too demanding for Debby. Consequently, she decided to leave her position at the bakery. With no further access to the bakery’s ovens, she transitioned her operations to her sister’s small kitchen in a three-room flat. Her baking commenced every evening following the completion of family meals. “Sometimes I’d be in the kitchen at 2am baking cookies. But when you’re doing something you love, it really doesn’t feel like stress,” says Debby. “Seeing the progress, from 20 packs to 50 packs to 100 packs per day… It was exciting.”

Before long, her sister’s kitchen became too cramped to handle the increasing volume of orders. Gbola, who only formally joined the business in 2013, encouraged her to transition to a larger facility to alleviate some of this strain and to allow the business room to grow. As a result, in 2011, the nascent company leased a modest space in Lagos’ Oshodi neighbourhood, financed by a personal bank loan secured by Gbola.

They began to approach informal retailers stationed at prominent bus stops throughout Lagos, employing the same tactic they had used with the initial vendors. After a short while, Fastizers was directly supplying to over 100 merchants daily.


A new distribution approach


Supplying directly to informal shopkeepers soon became a challenge for Fastizers. Many of these vendors, who purchased stock on credit, would change locations, leaving Fastizers struggling to recover money owed to it. Debby, therefore, decided on a new approach: instead of dealing directly with the vendors, she would work through FMCG distributors.

Each major bus terminal in Lagos typically hosts distributors that supply the nearby informal retailers with a wide range of products. Distributors, being more stable entities that usually remain in one location, offered Fastizers a safer avenue for business. These distributors also maintain strong relationships with the informal retailers, occasionally even relocating them from rural villages to sell their products. Given that Fun Cookies were already known in the market and sought-after by vendors, it was relatively straightforward to persuade distributors to include Fastizers’ products in their offering. Thus, Fastizers shifted to supplying in bulk to these distributors, who also cater to street hawkers and other retail outlets, thereby further expanding Fastizers’ sales channels.

Today, Fastizers’ products can now be found across more than two dozen states in Nigeria. Debby highlights that much of the company’s expansion beyond Lagos was organic, with minimal effort from the company itself. Its initial foray beyond Lagos came about when a distributor from Aba, Abia State bought some cookies during one of his frequent visits to Lagos to procure products for the eastern region of the country. The response from this part of the country was enthusiastic, prompting the distributor to place bulk order with Fastizers.



The company’s flagship Fun Cookies brand.

 

Serving as a commercial hub for eastern Nigeria, Aba attracts buyers from cities such as Calabar, Enugu, and Owerri who source their products there. As a result, Fastizers’ products naturally found their way into these areas, catching the attention of local distributors who soon began reaching out to the company directly. In some of the larger states, Fastizers serves up to three distinct distributors. To manage these relationships, the company has appointed sales managers in the more prominent states.


Production expansion


By 2013, Fastizers was achieving an annual turnover of about 200 million naira (US$256,000 at the current exchange rate) and decided it was time for a bigger production facility. They purchased land and a building, funding the factory with their own savings. Since then, they’ve established a second factory, and currently, their combined facilities can churn out 30 tonnes of snacks per day. Fastizers is currently in the process of further expanding its production capacity, a move partly funded by a recent $2 million investment from private equity firm Aruwa Capital Management.

The Nigerian snack food industry, valued at $883 million in 2021, is projected to reach $1.5 billion by 2024, reflecting an estimated annual growth rate of 20%. This surge in consumption is largely attributed to increased urbanisation and population growth. The sweet biscuits, snack bars, and fruit snacks segment, which encompasses most of Fastizers’ products, is also expected to experience growth – from $578 million recorded in 2021 to $695 million by 2026, signifying a 20% increase.


Diversifying the product range


Debby says success in the FMCG industry requires constant innovation and giving customers something to be excited about. Looking back, she wishes the company had diversified its product lineup earlier, which might have cushioned the blow during economic downturns, as not all products would have been equally impacted.

With that lesson in mind, Fastizers launched the Nibit brand in 2019. These are bite-sized cookies which were created to cater to a growing preference for small, easily consumable items like peanuts. To further diversify its offering beyond cookies, Fastizers next brought out Sweet Stix, a brand of chin chin – a crunchy snack made predominantly from wheat flour that is popular across West Africa. The company could use its existing machinery to produce chin chin, meaning there was no need for additional investment in equipment.



A consumer goods distributor in front of Fastizers’ products.


Dealing with price sensitivity in the market


Approximately 90% of Fastizers’ sales derive from the low-to-middle income segment. These consumers typically commute with buses and shop from informal retailers. Although the company does have a presence in modern retail outlets such as Spar, frequented by the upper-income consumers, these only make up a minor portion of the total sales.

The low-to-middle income segment is extremely sensitive to price changes. A nominal increase in a product’s price could trigger a shift to a competitor. Fastizers has continually navigated this issue of price sensitivity. For example, in 2015 economic headwinds led to a significant increase in the cost of raw materials, impacting Fastizers’ bottom line. Even though demand for Fun Cookies was buoyant, the company was running at a loss at the time due to the steep raw materials costs.

In an attempt to address the situation, the company chose to increase the price of a tray of Fun Cookies from 100 naira ($0.13) to 150 naira. Aware of the likely sales drop, they nevertheless prioritised profitable operations over unsustainable top-line growth. However, the effect turned out to be much harsher than anticipated, with sales plummeting drastically.

In a bid to course-correct, Fastizers rolled out Fun Cookies Bitty, a smaller product priced at 50 naira. However, this new offering didn’t find the expected acceptance. The reduced cookie quantity in comparison to the 100-naira product didn’t sit well with consumers, particularly when compared with other products at the 50-naira price point. After enduring a disappointing three-month market stint, the company concluded that the Bitty brand wasn’t working and decided to stop the product.

Nevertheless, Fastizers was still faced with the profitability issue of its flagship Fun Cookies product. A marginal reduction in the original Fun Cookies’ size was out of the question due to the technical constraints of its machinery. Ultimately, the company opted to decrease the number of biscuits per pack from eight to seven and lowered the price back to 100 naira. “Fortunately for us, sales picked up gradually again, so that was how we were able to handle that situation,” Debby recounts.

Fastizers’ production costs continued to face relentless pressure. For the year ending June 2023, Nigeria’s annual inflation rate was 18.71%. To exacerbate matters, President Bola Tinubu, inaugurated in May 2023, abolished the longstanding fuel subsidy. Following this decision, Debby reports that fuel and raw material costs skyrocketed, pushing Fastizers’ production costs even higher. Unable to raise product prices, Debby says the only alternative is to cut costs and take advantage of economies of scale. Consequently, the company has established a fully automated production line to enhance its operational efficiency.



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