South African consumer goods giant Tiger Brands last month announced that it has bought a 63.35% stake in Dangote Flour Mills (DFM), one of Nigeria’s largest flour and pasta producers.
Last year Tiger Brands made its first two acquisitions in Nigeria when it bought biscuit manufacturer Deli Foods and secured a 49% stake in UAC of Nigeria’s food and beverage businesses.
But what was Tiger Brands’ motivation for paying just over 30 billion Nigerian naira (more than 190 million US dollars) for a stake in DFM? The company didn’t respond to How we made it in Africa’s requests for comment, but an official statement provides some insight.
“Nigeria is a key strategic growth market in West Africa, the second largest African economy and one of the fastest growing economies in sub-Saharan Africa. With an estimated population of 160 million and projected average real GDP growth forecast over the next three years of approximately 7% per annum,” says Tiger Brands.
Tiger Brands also believes the transaction will add scale to its existing Nigerian businesses and allow it to take advantage of the market opportunities in Nigeria’s food sector.
“DFM is a market leader in both the flour and pasta market segment of the Nigerian consumer food sector with strong branding, production and distribution capabilities,” reads the statement.
DFM started its flour milling business in 1999 as a division of the Dangote Group. It is currently the second largest flour milling company in Nigeria with a market share of around 30%; its share in the pasta market is approximately 40%.
Tiger Brands is also confident that it can use its experience in the food sector to further develop and grow DFM.
Over the past few years Tiger Brands has increased its footprint in the rest of Africa. In addition to Nigeria, it currently has operations in Cameroon, Ethiopia, Kenya and Zimbabwe.
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