Over the last 3 weeks, I have been writing about how tech is playing a significant role in the evolution of the Nigerian transport and logistics ecosystem. I started with ride-hailing, where I wrote about Nigeria’s first attempt at Uber (Easytaxi) and how (or why) it failed, same as GoMyWay. I covered current incumbents (Uber and Taxify) as well as a new entrant (ProTaxi). I also wrote about bike-hailing and how the model evolved from e-commerce logistics and delivery infrastructure (ACE, then MaxGo and now Gokada).
Today, I will write about the trucking and logistics vertical; how technology is making that space a lot more efficient, increasing the earning power of truck drivers, making goods trackable, and improving insurance penetration, thereby ensuring that manufacturers can focus squarely on their production and marketing, while “tech” handles distribution and logistics.
Today, I will be profiling a few startups – Delivery Science, Trade Depot, Kobo360 and Truckit. But before then, I will look at how the FMCG companies are solving their logistics needs at the moment.
Logistics is no doubt one of the biggest pain points of any consumer and industrial goods business. There is no point in manufacturing or spending money on marketing any product if there is no clear path for getting the product to market. How do I get my soft drink to Udi in Enugu, Odukpani in Cross River State, Barkin Ladi in Plateau State, as well as Ogbomoso in Osun State? This is a difficult task.
Companies typically have departments to manage this operation. A lot of times, most companies invest in their own trucks to better manage the process from their own ends. This investment is in addition to working with independent trucking companies to meet up with the shortfalls in truck availability.
As you can imagine, if a cement company in Benue needs to truck its product from Benue to Lagos, the truck will be fully loaded from Benue, but return to Benue empty. This is grossly inefficient.
Logistics managers also have problems of tracking the goods. Since they do not control all the fleet available to them, they must track each truck. A lot of times, some of the goods in transit get stolen (or reported as stolen). As the managers have no means of verifying, they accept the incidents as fate.
CEOs of consumer goods companies would rather not have to invest so much in that space, that is why third-party truckers come in handy. However, these third-party trucking companies are replicating the inefficiencies of the company-owned trucking system. The companies still have no visibility to the location of their goods per time. Companies still do not have local insights to what consumers think about their products in locations outside their corporate head office vicinities. These are the problems that technology-driven logistics look to address.
Lori Systems in Kenya brought this trucking business to limelight (not saying that they are the first to start the business in Africa), after they won the Startup Battlefield in Nairobi, Kenya. Since then, we have seen investments in many other similar or variations of startups including Trade Depot and Kobo360.
Delivery Science is one of the startups I will profile today. Delivery Science helps large organizations with a mobile driven platform to manage and monitor their distribution assets – people, products, customers and logistics smarter. Delivery Science brings a unique value to organizations – data gathering and aggregation. It “connects field to office”. The Data aggregation platforms allow for real-time collection and aggregation of market share, customer satisfaction, and quality-of-service information. This information was previously unavailable to organizations. They just distributed their products and hoped that consumers loved them. The platform also allows organizations to track field officers through its fully interactive map.
Truckit is trying to assist truck drivers and owners to optimize their trucks. It also offers services to smaller vehicle owners including minivans. Truckit appears to be playing the retail game, which is long and tough to win. It is trying to create an Uber for trucks by encouraging individuals to put their vehicles and trucks on the platform, while they match these trucks with loads from the supply base that they have built.
Trade Depot, on the other hand, is positioning to be the “engine of retail in emerging markets”. Through its platform, it can provide Secondary Distribution, which is the direct-to-retail distribution for the informal retail space, thereby helping FMCG companies achieve better retail coverage and demand discovery by providing simple tools to retailers, supported by Trade Depot’s field sales teams. It also provides Networked Distributors that leverage real-time integration between your back-office inventory systems and the stock held by your 3rd party logistics providers and in distributor warehouses for effective demand planning with accurate stock level information. Salesforce Automation – through its Retail CRM, Trade Depot uniquely delivers an optimized route-to-market approach for field sales teams, enabling businesses to flexibly plan and monitor sales routes and in-store execution for sales representatives and Finally, Trade Depot provides Trade Insights, Trade Intelligence and Retail Insights from millions of trade transactions in categories. Trade Depot runs targeted campaigns, prices products competitively, delivers the best brand mix to retailers and distributors and eliminates out-of-stock situations.
Trade depot seems to provide an end to end view on products, from factory to the performance of the product in stores, while giving the manufacturer the unique insight into its product performance in the market place, as well as working with the manufacturer to improve product perception and sales.
Kobo360 on the other hand focuses on the hard problem of logistics. It currently has over 5,900 trucks in its fleet, serving more than 450 customers and has moved over 55.6m kg of goods. Kobo360 facilitates insurance for the goods in transit, while giving real-time updates on the location of goods at every point. Kobo360 is taking over the logistics hassle from the manufactures. It manages the truck drivers, collects payment and ensures the safe delivery of the goods to their destinations. Kobo360 also allows members of the public (individual investor or pool of investors) to invest in a reliable truck with a seed investment of N14m per truck. This will ensure the continuous expansion of its fleet, while making money for the investor.
Back to the beginning, consumer and industrial goods companies are facing real challenges and these 4 companies and many more are working to solve these problems. Manufacturers can rest assured that their goods will get to their destinations; if anything goes wrong, they are insured. Additionally, these manufactures get unique on-the-ground insights about their products and how to improve their value offerings (previously unavailable to these companies). It is indeed a good time to be alive.
Next week, I will write about God is Good Motors, and how they are leading innovation in interstate travel and package delivery. I will also write about other incumbents in that space.
GSM firms set to rake in billions from data guzzling #ENDSARS Protesters
The #ENDSARS protests and its aftermath has lingered throughout the month of October leading to a massive guzzling of data.
The #EndSARS protest is expected to be a massive boost for the revenues of GSM/telcos in Nigeria. The protests and its aftermath has lingered throughout the month of October leading to a massive guzzling of data by protesters and those relying on the internet to follow the protest online.
Nigerian youth started a protest to end police brutality three weeks ago calling for the end of the notoriously brutal Special Anti-Robbery Squad (SARS) of the Nigerian Police Force. The protest which began on Social Media ended up in the streets of major cities across the country catching the attention of the federal and state governments, eventually forcing them into accepting the demands of the protesters.
Unfortunately, the protest was taken over by hoodlums as they went on a rampage burning police stations, public and private property as well as going on a looting spree. Nigerian soldiers were also accused of shooting at peaceful protesters at the Lekki Toll. Despite the sad turn of events, social media played a major role in garnering support for the demands of the youth as thousands of images, videos and hashtags were shared by millions of users locally and globally.
Unlike previous protests in Nigeria, the #EndSARS protest kept its momentum going with the help of social media applications such as Twitter, Instagram, Facebook, and most notably WhatsApp. Images of protesters, videos, hashtags were shared by millions of Nigerians using these platforms, pushing the boundaries of what is real or fake. As people shared videos and images in support of the protest, so did they guzzle up internet data.
According to one report, “in the first 14 days, #EndSARS and its related hashtags saw 18 times more mentions than the August 4 Beirut explosion over the same period, with 173 billion impressions (and climbing) for the campaign dwarfing the 29.3 billion impressions for the Beirut blast” depicting just how huge the impact of social media was to the fueling of the protests.
Who gains financially?
Whilst the protesters can boast of a considerable measure of success throughout the protest, internet service providers, particularly telcos stand to gain more financially than anyone else. According to data from the NCC, Nigeria has about 149 million internet subscribers and is one of the fastest-growing in the world. GSM Companies have posted some of their best profits in 2020 despite the COVID-19 pandemic that has hampered economic activities globally and including Nigeria.
Airtel Africa reported during the week that data revenue from its Nigerian operations rose 38% to $257 million (N97.6 billion) for the period between April and September 2020. This translates to a revenue of N16.2 billion monthly. MTN, Nigeria’s biggest telco reported revenues from Data of N241.6 billion up 57% in the 9 months ending September 2020. MTN rakes in about N26.8 billion monthly in data revenues alone.
These figures are largely backed by increased reliance on internet data to drive work from home activities during the lockdown. Airtel CEO Raghunath Mandava confirmed this in his statement following the results. “In these unprecedented times, the telecoms industry has emerged as a key and essential service for these economies, allowing customers to work remotely, reduce their travels, keep them connected and allow access to affordable entertainment.”
On the money: GSM Giants, as well as other Internet Service Providers, are poised to reap even more from the increased reliance on data to drive social activism and awareness. As millions of consumers share more videos and images, the need to download and save on their devices or in the cloud will continue to line up billions more in cash in the bank for service providers.
Guinness Nigeria Plc jostles to improve from its insipid 2020 financial year
In the 2021 financial year, the task before the company is to drive its strategic objectives to bring the company back to profitability.
Guinness Nigeria Plc has started its 2021 financial year with a loss, just like the company did in 2020. However, this time, the value of the loss adds up to N841 million for the opening quarter. In 2020, it was N370 million, which set the tone for what eventually degenerated into a truly horrible and uninspiring financial year. A year that saw loss position in the aggregate 12 months period peak at N12.6billion.
Apparently, all that could possibly go wrong with Guinness, did go wrong. From what in retrospect, turned out to be an over-ambitious outlook at the start of the year, to the effects of not giving immense attention to controllable costs, rise in inflation with its resultant pressure in decreased consumer spending, and the crippling effects of the unprecedented COVID-19 pandemic; no company could have asked for worse.
However, the horrendous performance was not peculiar to Guinness Nigeria alone. The results from its competitors, such as the International Breweries Plc, and Nigerian Breweries Plc, amid appalling industry figures recorded, proved that 2020 has been a tumultuous year indeed for all companies operating in the brewery manufacturing sector.
The analysis of FY 2020
How poor was the 2020 FY performance of Guinness Nigeria and what can be inferred from its Q1 2021 reports? For a company in the habit of declaring dividends especially after the N5.5billion profit in 2019, how did the company move from that profit margin to a loss of N12.6billion just 12months after?
- Profit declined by 129.1% from N5.5billion Profit after Tax in 2019 to N12.6billion Loss after Tax in 2020. This Steep decline was evident in all arrears from top-line to bottom.
- Gross profit down by 16.9% to N33.33billion in 2020 as against N40.13billion reported in 2019
- Revenue plunged 21% to N104.41billion in 2020, from N131.5billion generated in 2019.
- Cost of sales did show some improvement, moving from the N91.4billion expended in 2019 to N71.1billion in 2020 – a 22% decrease.
- Administrative cost continued the rising trajectory to N14.3billion in 2020 from N9.9billion in 2019.
- Finance cost rose to N4.5billion from N2.6billion in 2019, while finance income declined from N750.9million to N301million in 2020.
Speaking on 2020 results, Mr. Baker Magunda, Managing Director/CEO, Guinness Nigeria Plc said,
“The last quarter performance of fiscal 2020 was significantly impacted by restrictions due to COVID-19, exacerbating the already challenging economic environment. Closures of on-trade premises (bars, lounges, clubs, and dine-in restaurants), which represents the major part of the consumption occasion for our products and bans on celebratory occasions, impacted sales.
“Demand was also impacted by reduced consumer income, unemployment concerns due to the shutdown of a large number of businesses, and increases of VAT and excise throughout the year.”
Magunda further explained that, “Distribution was impacted by the ban of inter-state, and in some cases intra-state travel. Although, Management worked diligently with regulatory authorities to minimize the impact, this hampered our distributors’ ability to restock and have our brands available for purchase.”
The analysis of Q1 2021
In the 2021 financial year, the task before the company is to drive its strategic objectives to bring the company back to profitability. The Chairman, Mr Babatunde Abayomi Savage, recognizes that this would be no stroll in the park, as he affirmed that despite predictions that the coming year will be challenging globally due to the new normal, “we believe we have experienced our full share of the impact and are now geared to go back to profitability.”
The opening quarter for 2021 (July-September) saw improvements in sales volumes on the back of eased restrictions from the COVID-19 necessitated lockdown.
- Revenue posted is N30.02billion, 11.64% increase from the N26.89billion recorded in the corresponding period of 2020.
- However, Cost of sales worsened by 21.1%, increasing from N18.9billion in Q1 2020 to N23.01billion in Q1 2021.
- Marketing and distribution expenses, as well as administration expenses, showed marginal reduction, depicting management interest in controlling these variables.
Generally speaking, results for the opening quarter show signs of improvement, but the tax component was the primary factor responsible for masking the progress obtained in Q1 and eroding promising signs.
With the gradual re-opening of its previously closed company buildings in Benin City, and the shift in focus from the largely underwhelming lager segment to investing more in spirits, it will be interesting to see how this impacts volumes and revenue in subsequent quarters, despite the apparent economic conditions.
Why Treasury Bills at 2% is actually a good thing
While the current prevailing rate of 2% might not be good news for investors, the low rates could be better for the Nigerian economy.
Latest stop rates from the Nigerian Treasury Bill auction held last week revealed some of the lowest rates for the nation’s T-Bills market in recent times. The 91-day bills had stop rates of 1% and the 182-day bills was also 1%. For the full year, the 364-day bills had an equally low rate of 2%. This is actually a good thing, as investors will become more creative, amongst other benefits.
If you were a frequent Treasury bills investor in the pre-COVID-19 era, you will most likely agree that one of the favorite markets for risk-averse investors, has taken a major dip over the past year. In 2019, the rate was as high as 13.029% – enough to give you a fighting chance with the equally high rate of inflation, as opposed to a savings account offering around 4%.
However, while the current prevailing rate of 2% might not be good news for investors; theoretically, the low rates could be better for the Nigerian economy.
Double digits risk-free rates impede development
At the very basic level, having a risk-free investment that yields a guaranteed interest rate of about 15%, means that investors can put in their funds and fold their hands. Therefore, the option of making less risky investments become less alluring, as the lower rates can easily be mitigated by the relative safety of the principal (and return!) – something many businesses cannot boast of today.
Put simply, why should business owners risk employing people and possibly make losses, when they can invest in Treasury bills? After all, they too are exposed to the same inflation rate.
Unsurprisingly, this has contributed its own fair share in impeding the growth of the nation. Think about the percentage of the income of Nigerian financial institutions like banks that are from Treasury Bills. Conservatively, Nigerian PFA’s also have a significant percentage of their funds in Treasury bills – doing little and gaining little. It is always about the “cheapest to deliver.”
No society can effectively spur development with only safe investments, as it comes with its own benefits like creating more jobs, building the stock market, and ultimately strengthening the industries in the country.
‘Model’ economies have really low risk-free interest rates
Some of the largest economies like the US, Japan, and Germany are known to have some of the lowest rates for risk-free assets. Whilst their rates cannot also be isolated from their equally low borrowing costs, the facts are crystal clear.
From a demand and supply standpoint, at 15%, it means that what the government is willing to pay to get capital is high. This makes it even more expensive for the government to fund infrastructural development.
From a private sector standpoint, it is by taking risks that angel investors emerge, companies get seed funding, and further development is enhanced. Without this development, very few jobs will be created. Interestingly, most of the countries with the highest amount of venture capitalist investments have some of the lowest rates for risk-free assets.
How investments should be done
There is an old investment strategy known as “Carry Trade.” The way it works is simple – you borrow at a low-interest rate, convert the borrowed amount into another currency, and invest in assets that provide higher rates of return in that currency. If Treasury Bills offer such high rates, “foreign investments” of this nature will not aid in the overall development of the economy. As long as the exchange rate is stable, investors get to make a killing with no value-added. This is just one of the many lapses of investing in high risk-free assets.
With the rates low, people can now invest the way investment should be done. Investors will now be forced to be creative. Consequently, this will birth even further infrastructural developments. For example, with this rate sustained, mortgage-backed securities and other forms of infrastructural funding can now take place.
Though, it is not without its own limitations, keeping the free money low is always a better option.