How this Nigerian started a food processing business with little capital

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Kasope Ladipo-Ajai (31) is the co-founder of OmoAlata Food Services, a company that processes and packages soups, spices and ‘peppers’ for flavouring local Nigerian dishes. Launched in 2012, the company supplies 25 retailers in Lagos – including the Spanish supermarket chain Dia – and just signed a contract to supply Spar stores. The goal is eventually to export to foreign markets.

Ladipo-Ajai got the idea for starting the company while working for four years at Virgin Nigeria (a now defunct airline). During this time she often travelled to developed markets and would visit retailers that stocked Nigerian foods and flavours. She was surprised to discover, however, that many of these Nigerian spices and mixes were actually produced in Ghana.

“The population of Ghana is less than a fifth of Nigeria’s and I was taken aback, wondering why Nigerian food was being made or packaged in Ghana,” Ladipo-Ajai recalls.

“The reason is Nigeria doesn’t have the best reputation – it is known for cutting corners. So it is difficult to export our food because it usually fails the tests of developed countries. In fact, some Nigerians take food to Ghana and export from there, just to get it out.”

She realised that there was an opportunity to start a Nigerian food-flavourant company that could meet international standards and eventually export. So, at age 27, she quit her job at the airline and used her savings to start OmoAlata with a business partner.

Today the factory produces between 500 and 700 packs of flavourants a week – with 1 litre retailing for ₦1,000 (US$3.20). Ladipo-Ajai also sees an opportunity in manufacturing Nigerian sauces.

But how did she and her partner manage to get a food processing company up-and-running with no industry experience and only their savings?

The internet holds the answers

When she was starting out, with little understanding about how to process food and only her savings as capital, Ladipo-Ajai turned to the internet.

“First of all I went online to check out companies that were already doing this and inspected their packaging – what it looks like and what information is on it. I realised I needed to know more about nutritional facts and so I went to the FDA website for the US and Canada, looking up the rules and regulations about packaging foods… I had to go there because the Nigerian body doesn’t have that much information,” she notes.

“Honestly, the biggest help for me was the internet. Everything is on the internet.”

Industry players can advise

Ladipo-Ajai could not afford to pay for a professional formulator to develop her flavours. However, she contacted food caterers, and asked them about their favourite blends. She then tried different samples with them until the mix was perfected.

“And I can say to other small businesses you can never get your product perfect from the beginning. You have to adjust as you go.”

Caterers were also able to advise her on how best to source the large quantities of fresh produce she needed. “I asked them where they sourced their tomatoes, which markets were the cheapest and how I could get in contact with farmers if I needed to,” she recalls.

Market research with friends and family
While large multinationals might have budgets to conduct comprehensive product testing, Ladipo-Ajai had to make do with what she had: her friends and family.

“We had to research whether people would actually buy this product, so we started producing little packs and giving them out to friends and family for them to sample. We then got feedback on whether they would buy it.”

Working capital needed to get to market

Setting up a food-processing company can be capital intensive. Luckily, some family members who owned suitable premises allowed Ladipo-Ajai and her partner to set up a factory there. The biggest cost was buying industrial food-processing equipment.

Ladipo-Ajai says that it is vital that start-up entrepreneurs in this industry have money left over for working capital. It can take a while to introduce a new product to the market and earn revenue.

“Stores simply won’t take a new product and pay for it upfront. So once you have spent money on the factory, you need to make sure that you budget in your working capital. You can’t spend all your money on the factory setup and production and not have working capital because you will fail.

“I think a lot of small businesses fall into that trap. They don’t budget for working capital and then you get stuck and basically their investment dies because they don’t have money to sustain it – especially if they have put in everything they have or used a loan.”

She adds that it helped that her business partner was still employed and earning additional income.

Making contingency plans

According to Ladipo-Ajai, some tough experiences have taught her valuable lessons. For example, a few years ago she held a three-day promotion on the online market platform DealDey, where customers could buy two products and get one free. She received far more orders than she anticipated, and then her processor broke down. It wasn’t long before she was dealing with angry customers wondering why they hadn’t received their orders yet.

“I learnt that when you are trying anything new, you have to prepare for the worst, because for some reason it is always at those times that things go wrong,” she says.

“We have since grown from that and now always have a ‘plan B’. For example, we have two or three delivery guys on standby just in case the one has an accident. We prepare for stuff like that because otherwise it can really destabilise you.

“And because you are a new brand people are not yet sure about you. So you don’t want their first experience with you to be so bad that they never come back… So don’t bite off more than you can chew.”

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