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NIGERIA
A new business climate |
Read our exclusive interview
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 nigeriaN BAG MANUFACTURING CO.LTD
Manager:
Chief Sikiru A. Oluwo
Managing Director
Contact:
Eric Moore Road
Iganmu
P. O. Box 589
Apapa
Lagos
Telephone +234 1 583 6784
+234 1 583 1650-6
Facsimile +234 1 583 1464
+234 1 583 1533
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Setting New Standard for Sacks
In over two decades of operation, BAGCO has grown to become the largest woven polypropylene sack manufacturing company in Africa. Producing over 100 million sacks annually, BAGCO has an enviable wide range of clientele, including Chevron.
BAGCO has the size and capacity to meet he needsof large institutional consumers anywhere in the world, even where demands are in millions and on a regular basis.BAGCO propylene sacks are manufactured to international standards. They are not affected by most chemicals, including hydro-carbon oils.
Besides, BAGCObags are:
. Insect infestation resistant
. Water rresistant
. Rot resistant
. Non toxic
BAGCO nags are also come customised on demand. Fabrics con also be produced to contain extremely fine products. With production done using the latest revolutionary hi-tech machinery, BAGCO bags has great advantages, including:
. Maximum cloth cover
. No side seams
. No tape twisting
. Can stand 3.5 metres when filled
Join the wide range of BAGCO sacks user both within and outside nigeria and experience our international touch.
Strategy
 Historical Perspective
nigerian Bag Manufacturing Company (BAGCO ) was incorporated in
1964, and made history eight years later when it produced the first woven polypropylene sack in nigeria.
BAGCO has since revolutionised nigeria’s packaging history and grown into the nation’s premier supplier of sacks.
The original concept of BAGO was to gear its production basically to meet the requirements of Flour Mills of nigeria Limited (BAGCO’s parent company) when it started experiencing difficulties getting adequate supplies of cotton bags to pack flour.
Consequently, after extensive research, it was established that a
"breathing" woven polypropylene tubular sack was eminently suitable for flour packaging and much less expensive than cotton sacks.
Construction of the factory started in February 1972 and the plant was commissioned in November 1972. The start-up stage was completed the following year with only 40 looms and an installed capacity of 10 million sacks (based on the parent company’s projected requirements).
The product showed such potential that BAGCO increased its paid-up capital in 1975 from N500,000 to N2M and embarked on an accelerated expansion programme.
The accelerated growth of the company’s weaving operations and diversification into the production of polyethylene film and bags where completed in 1978 and the company installed a generating plant to provide constant power supply.
Today, BAGCO has attained an enviable size which makes it not only the largest woven polypropylene sack manufacturing Company in Africa, but also the largest single plant in the world with an installed production capacity of over 100 million sacks per annum.
Location
BAGCO is located at Eric Moore Road, in the Iganmu industrial complex. Ever since its inception, the Company has maintained its present site with an acclaimed reputation for cleanliness. In 1985, the BAGCO was second in the Manufacturer’s Association of nigeria (MAN) cleanliness award Lagos State. The following year, the Company clinched the Lagos Mainland Local Government award certificate as the Cleanest Industrial set up for 1986.
Products/Marketing Strategy
By pioneering the manufacture of woven polypropylene sacks, BAGCO’s contribution to nigeria’s economy has been and continues to be immense.
Our woven product range is in sacks of capacity 5,10,20,25,50,100 and up to 1,250 kilograms.
Our polyethylene product range includes transwrap film and liners up to
700 layfalt by 1250mm lentgh and in thickness from 30 to 250 microns.
BAGCO’s production philosophy is simple - we believe in a PROFESSIONAL approach with three major aims - GOOD QUALITY , GOOD SERVICE and GOOD VALUE .
Because of our size, we are ideally suited to supply the needs of the large institutional consumers who need millions of quality of bags on a regular basis. These customers include large flour millers, feed millers, sugar and salt processors and fertilisers companies.
We also supply the needs of the nigerian farmers during the h harvest by gearing our production towards general purpose grains sacks in large volume to meet t he peak seasonal demands.
Our flexible approach also allows us to give excellent service value to the smaller consumer and we believe all customers are important irrespective of size.
At BAGCO, marketing is a consultative function where the customers wish is ever our command. With expert knowledge provided by BAGCO officials, the customer’s names his sack needs and we, on our part, produce to suit such needs.
Raw Materials Sourcing
Currently, BAGCO imports polypropylene granules, which constitute about
80 per cent of its principal raw materials. Other additives such as threads, inks and lubricants constitute the balance of 20 per cent and are obtained locally.
The first phase of NNPC petrochemicals programme is now completed and this will reduce our foreign exchange requirement drastically and add to savings already made over the past few years.
The establishment of a central reclaims operation made these savings firstly where all factory scrap is recycled back into first quality material i. e. Every kilogram of material purchased by foreign exchange is turned into a finished product and nothing is wasted.
A second major saving has been made by the development within the Engineering Division of spare parts manufacturing section. This section produces the numerous mechanical machine spares imported and not saves foreign exchange but also reduces the delays experienced during importation.
Attributes
Woven polypropylene sacks are rot-proof and suitable for packing food items. By their very unique construction polypropylene sacks are easy to stack have high strength and non-toxic in nature and they allow food and agricultural products to breathe. Also BAGCO sacks cab be closed by conventional methods used with jute sacks.
Process
Polypropylene granules, BAGCO’s major raw material are exuded into a cast film which is then slit into individual tapes, stretched to give orientation strength, and then wound on precision winders.
The next step is weaving of these tapes where fabric is woven in the form of a continuous tube. This weaving method has great advantages over sacks produced by flat looms. BAGCO uses the revolutionary high-speed circular weaving process is that side seams, which constitute a major weakness in conventional sacks (because they break open easily), have been completely eliminated.
Also, this method of weaving gives a maximum cloth cover with minimum materials. All our bags can be produced to pack extremely fine products. The final stage is sack production. The fabric is cut to specific length; the base of the sack is folded and then sewn. Sacks can be printed in two colour prints. The finished products are then baked.
Quality Control
Our Quality Control is meticulous. Granules undergo numerous testing stages before extrusion. The tapes are tested to determine their texture and strength before weaving. Before fabrics are converted to sacks, they also undergo the same rigorous and meticulous checking. But of course, what else did you expect from a company as through as BAGCO?
Training
The Company places a high premium on training BAGCO’s In-Plant Training has so far accounted for 95% of its middle level manpower needs. External training programmes are also conducted to meet new challenges in the industry. In compliance with the nigerianisation policy, nigerians hold major top management positions. Over the years, our expatriate work force has dwindled mostly to technically biased areas and currently, the learning process is a continuos one and the company is not relenting its efforts in this regard.
Welfare/Employment
By 1978, the total work force of the company was 838 comprising 826 nigerians and 12 expatriates. At the time, 13 nigerian all the expatriates held managerial and senior technical position. Another 40 nigerian held supervisory appointments.
Today BAGCO has 1,100 staffers employed in various capacities. At peak production BAGCO will require about 2,500 employees. Welfare facilities of the company include a full-staffed in house clinic, highly subsidised management and staff canteens, and the award of secondary and university scholarships to deserving children of past and present employees.
Why Woven Polypropylene?
Chemical resistance
Most chemicals, including hydrocarbon oils do not affect polypropylene.
Insect Infestation Resistance
Unlike most natural fibres, insects cannot infest polypropylene tapes.
Water Resistance
Polypropylene is unaffected by water and moisture vapours
Rot Resistance
Polypropylene sacks, unlike the one made from natural fibres, are rot proof
Flame Resistance
Polypropylene does not burn easily.
Strength and Weight
BAGCO sacks are stronger than jute and other conventional sacking materials.
Breathing
BAGCO sacks allow the contents to breathe because of their woven construction.
Non-Toxic
BAGCO sacks are manufactured from polypropylene resin which carries FDA
(USA) approval.
Closure
BAGCO bags can be closed by conventional methods used for jute bags.
Why Circular Woven?
BAGCO sacks are produced on the revolutionary high speed Circular weave unit. This gives great advantage over polyolefine tape sacks produced by other weaving techniques.
There are no side seams as a result of circular construction. Experience has shown that side seams in sacks can be areas of weakness. |
Flat untwisted tapes
The uni-directional weft insertion and absence of reed beat-up allows fabric to be produced with no tape twisting. This gives maximum cloth cover with minimum materials, and fabrics can be produced to contain extremely fine products.
Printing
BAGCO sacks can be supplied printed on one side, in one or two colours with customers specific design details.
Stackability
BAGCO bags can be stacked up to 3.5 metres height. The woven construction makes the stack stable and unlikely to collapse.
Usage
BAGCO sacks are in use all over nigeria. They are used to pack various kinds of products such as flour, semolina, yeast, animal feeds, marble chips and powder. BAGCO sacks are also used in the packing of springs, nails, bolts and nuts, salt, sugar, alum, starch, cocoa cake and powder, frozen fish, fertilizer, agricultural products (rice, wheat, guinea-corn, yam flour, etc.) carpet wraps, ventilation screens, shoe packing, chemicals, textiles, and synthetic fibre baling and general over-bagging.
Remember when you buy a BAGCO bag, you are buying the result of over 25 years worth of research and Development plus many years of worldwide experiences in the sacking industry.
INTERVIEW WITH
CHIEF SIKIRU OLUW0W MANAGING
DIRECTOR OF nigeria MANUFACTURING COMPANY LIMITED (BAGCO)
May 21st, 1999.
1) Chief Oluwo, your company celebrated its twenty-fifth anniversary last year. Could you give us a brief background of your company for our readers?
Chief Oluwo: Yes, nigeria Bag Manufacturing Company is a subsidiary of Flour Mills nigeria Limited . In the 60s, Flour Mills was using cloth bags to bag flour and they used to import the bags in those days. Eventually they decided to manufacture these cloth bags in nigeria. They actually planned to set up the nigerian Bag Manufacturing Company around 1967 but due to the advent of the Civil War they had to suspend the plan. In 1970/71, the idea was reactivated and in 1972 they started building the factory. I joined BAGCO in October 1972 as the Chief Accountant & Company Secretary. The initial capacity of the plant was 6 million bags/year to meet the requirement of Flour Mills. Around 1972 the idea surrounding the BAGCO bag changed ; it was decided that polypropylene should be used for the bags instead of cloth. At that time, polypropylene had been around for about 10 years in the world of technology and Fairbarn Lawson was one of the first companies to manufacture the woven polypropylene bags. BAGCO bought the technology from them and the first machinery in 1972 ; We started producing the first polypropylene bags in November 1972.
Around 1974/75, we noticed that our reject bags were being used to bag other products, so we decided to install a reject plant where all reject sacks are reclaimed. In 1974/75 we started making bags for bagging beans, rice, and locally produced grains. We soon found out that the reaction of the bags in the market was negative. So we searched for a way of convincing the local market traders. They thought that the bag would generate heat and destroy their goods. We visited many of the markets with a view to assuring the traders of the safety of the polypropylene bags. The market women and other traders were using jute bags and these bags were allowing insects to get into the bags. In order to convince them, BAGCO bought grains from the traders and packaged them in the BAGCO polypropylene bags, asking the traders to keep them in their shops. If the grains became infested BAGCO agreed to bear the loss. If the grains remain untouched, BAGCO would be given back their money. At the end of the trial, their product was in good condition and the content had not been affected by moisture or heat. This earned their confidence and they were happy to have these bags. From the local market point of view, we were able to reach the farmers. By
1978/79 we had gained control of the market of the jute bags and we started expanding. From around 6 million bags a year, we expanded up to 20 million bags a year in the late
70s. By the early 80s, I took over in 1985 as Managing Director and we were producing about 45 million bags then. Today, we have the capacity to produce 120 million bags a year and from our subsidiary in Kano, BAGCO North, we are producing about 40 million. We are the largest bag plant in Africa and probably one of the largest in the world. We have diversified our products now ; we make bags for agricultural products and for institutional packers who pack grains, cement, detergents, fertilizers... you name it, we can produce a bag for it. So, that is what BAGCO has been doing over the years.
2) So, you have diversified over the years through aggressive marketing.
Chief Oluwo : Yes, very much. Last year, we penetrated into the American market. Our product was accepted by Chevron, by United DC, packers of polypropylene granules. We were able to convince the American market that we could produce bags up to their standards. Price was not the problem. The only problem we had in this vein, was due to the inventory problem. I think that in the United States you pay tax on inventory. So companies do not really produce for stock. They make sure they get rid of their stocks before the end of the tax year. Distance was not their problem. They needed a supplier who supply on short notice and immediately. They wanted to be able to order
10,000 bags today and have the bags delivered the very next day. Of course, we could not work within such a time frame. They have to keep inventory in our own case. We are currently looking at resolving this problem by having a warehouse in the US where we would stock quantities of our sacks for clients who would come for them as and when needed. We believe this will enable us break through into that market more effectively. We have produced bags for the packing of PVC powders and also for polypropylene packers. Also, we have been exporting to the US quite a lot. I believe that we should keep that market; we are currently competing favorably against India in the American market.
3) On a domestic level, Mr. Amusu, Managing Director of Flour Mills, says that you are definitely the number one.
Chief Oluwo: Yes. We are the largest bag producing company in nigeria.
4) So what is your strategy to maintain this position in nigeria and increase your market share?
Chief Oluwo: through improved technology and better quality products. This is what we have been doing. We are always the first to bring in new products. Name it : cement bags, we started in 1982, when there was a shortage of paper for packaging cement. So, we introduced the cement bags but it was a disaster, it leaked. That was why the first advert on cement bags was very funny, we tried to change the impressions of the people that the bag leaked.
5) You seem to be very aggressive on all levels in your bid to maintain your market share?
Chief Oluwo: Yes, definitely.
6) BAGCO is number one in nigeria and also exporting to the United States, competing with India and other countries.
Chief Oluwo: Yes, and we are also breaking into other West African countries. We have business in Ghana, Togo, Benin Republic and Cameroon, We supply bags to these countries too. And we hope that we will continue our expansion program.
7) You said you had an American partner, United DC
…?
Chief Oluwo: No, it is not a partner. We supply bags to United DC. They pack for Shell , and other chemical producers.
8) You mentioned an expansion program. You started this program in 1997 and you achieved your goal in 1998 !
Chief Oluwo: Yes, but you see, our expansion program is a continuous one.
9) Could you tell us more about this program?
Chief Oluwo: In 1972, we started with 6 million, by 1978
,we were up to 20 million bags, by 1982, we had increased again to 40 million and when I took over in 1985, we were producing 45 million sacks annually and since then, virtually every two years, we think of more ways to expanded our program. This year alone, we imported three block bottom bag lines to further increase our capacity.
10) What are you doing to further break into the market in America?
Chief Oluwo: Apart from the idea of setting up a warehouse in the States, there is the possibility of having a wealthy agent based in the States, who will agree to act as our agent in America. But you need a lot of finance to cope with the importation costs.
11) How do you think that the incoming new government is going to affect BAGCO’s activities internationally?
Chief Oluwo: The problem we have in nigeria today is one of confidence; at the Bag Manufacturers’ Conference held yesterday, someone asked a question on what the new President needs to do to survive. What should be his first job. And the answer is that his first job should be to instill confidence on the International and local levels.
Because, when people trust you and have confidence in what you are doing, then you will have no problems. We need confidence, and the government should take the problems of the industry more seriously. The situation is killing us. Electricity is not stable, very unreliable, We have to use generators to sustain our activities as we cannot rely on the Government to provide NEPA to run our 18 extrusion lines. We used to buy diesel for 9 Naira per litre and now it is 29 Naira a litre. We have one of the biggest petrochemical plants in the world at Eleme, but it does not operate consistently and so we have to import most of our raw materials. This and other problems work against the industry, The Government has got to look into the system to make the environment suitable for the industry and investors.
12) Are you confident in the future?
Chief Oluwo: Most definitely. What we need is a benevolent leader who will lead the nation in the right direction.
13) You are the Managing Director of BAGCO and you have been since 1985?
Chief Oluwo: That is right.
15) Could you tell us a little about your own background
?
Chief Oluwo: After my elementary education, which is equivalent to what is called 11 plus in the UK. My parents were unable to send me to school as they were poor. I eventually went to a commercial school to study secretarial studies. In 1959 I decided to go to the UK to do the GCE examination at the North Western Polytechnic and then went on to study Cost & Management Accountancy at the Kingston College of Technology. I qualified in 1969 then went on to work for ICI in the UK as an Accountancy Assistant. In 1970, I was seconded to ICI in nigeria as an Assistant Chief Accountant and in 1972 I left ICI to join BAGCO as Chief Accountant and Company Secretary. In 1975, I became Alternate Director for Finance; in 1979, I became Commercial Director and in 1983, I was promoted to Deputy Managing Director. In 1985, I became Managing Director.
16) And what has been your best personal achievement since you became Managing Director?
Chief Oluwo: Personal achievement? You know we work as a team, and as a team, I would say that our achievement has been in the area of our continuous expansion program, the development of new products and making sure that we maintain our share of the local and international markets.
17) What is your final message to our 4.5 million readers?
Chief Oluwo: BAGCO will strive to maintain its leadership position and we will definitely find ways of breaking through to the American market. We need to have a share of that market.
Thank you very much Chief Oluwo for all your time.
Chief Oluwo: Thank you. |
© World INvestment NEws, 1999.
This is the electronic edition of the special country report on nigeria published in FORBES Magazine,
October 18 th issue.
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